DownWithTyranny!: Hillary Is Better Than Paul Ryan On Some Stuff… At Least There's That

When I woke up this morning, I saw a tweet by Joe Stiglitz that caught my attention-- part of a series regarding a new article he had just published, Europe's Austerity Zombies. The tweet struck a chord because of an historical tidbit I have been mulling over from Rick Perlstein's latest book, The Invisible Bridge. First the tweet: "France’s so-called socialist gov't is lowering corporate taxes & cutting expenditures-- a recipe almost guaranteed to weaken the economy." Now the Perlstein tidbit, which was referencing the catastrophic Nixon-Ford economic crisis and Ford's classic neo-liberal proposal to lower taxes-- and how Democrats in control of Congress responded:

His proposal that night for $16 billion in temporary individual and corporate tax cuts, what he thought of as a pragmatic reversal from his previous call for a tax hike, was dismissed as halfhearted by Democrats in Congress, who responded with a bill cutting taxes permanently by $22.9 billion. His right-wing Treasury Secretary William Simon counseled a veto.

Paul Ryan's has been steadily gaining among Republicans polled about the 2016 presidential nomination. He's never come in first in any poll I've seen, but he's no long at the bottom of the pack with Rick Perry, Ted Cruz, Bobby Jindal, Rick Santorum, Scott Walker and Marco Rubio. He's generally up at the top on the list with Jeb Bush, Chris Christie, Rand Paul and Mike Huckabee, none of whom have a coherent economic platform. Ryan does: Austerity. Democrats had better pay attention to economists like Krugman and Stiglitz if they want to be prepared to debate this atrocious economic plan-- unless they want to embrace it themselves. Obviously, Bernie Sanders will be a bulwark against it in any primary debates but will Hillary's Wall Street-centric campaign face it head on, or just dance around it and hope no one is paying attention?

The one thing most easily ascertained about austerity-- a descendent of "trickle down economics," is that it was widely adopted in Europe and that it has increased the gap between rich and poor and it has held back growth. As Stiglitz states flatly, "Austerity has been an utter and unmitigated disaster." The German right has been leading the way down the rabbit hole-- by denying reality.

Austerity has failed. But its defenders are willing to claim victory on the basis of the weakest possible evidence: the economy is no longer collapsing, so austerity must be working! But if that is the benchmark, we could say that jumping off a cliff is the best way to get down from a mountain; after all, the descent has been stopped.

But every downturn comes to an end. Success should not be measured by the fact that recovery eventually occurs, but by how quickly it takes hold and how extensive the damage caused by the slump.

Viewed in these terms, austerity has been an utter and unmitigated disaster, which has become increasingly apparent as European Union economies once again face stagnation, if not a triple-dip recession, with unemployment persisting at record highs and per capita real (inflation-adjusted) GDP in many countries remaining below pre-recession levels. In even the best-performing economies, such as Germany, growth since the 2008 crisis has been so slow that, in any other circumstance, it would be rated as dismal.

The most afflicted countries are in a depression. There is no other word to describe an economy like that of Spain or Greece, where nearly one in four people-- and more than 50% of young people-- cannot find work. To say that the medicine is working because the unemployment rate has decreased by a couple of percentage points, or because one can see a glimmer of meager growth, is akin to a medieval barber saying that a bloodletting is working, because the patient has not died yet.

Extrapolating Europe’s modest growth from 1980 onwards, my calculations show that output in the eurozone today is more than 15% below where it would have been had the 2008 financial crisis not occurred, implying a loss of some $1.6 trillion this year alone, and a cumulative loss of more than $6.5 trillion. Even more disturbing, the gap is widening, not closing (as one would expect following a downturn, when growth is typically faster than normal as the economy makes up lost ground).

Simply put, the long recession is lowering Europe’s potential growth. Young people who should be accumulating skills are not. There is overwhelming evidence that they face the prospect of significantly lower lifetime income than if they had come of age in a period of full employment.

Meanwhile, Germany is forcing other countries to follow policies that are weakening their economies-- and their democracies. When citizens repeatedly vote for a change of policy-- and few policies matter more to citizens than those that affect their standard of living-- but are told that these matters are determined elsewhere or that they have no choice, both democracy and faith in the European project suffer.

France voted to change course three years ago. Instead, voters have been given another dose of pro-business austerity. One of the longest-standing propositions in economics is the balanced-budget multiplier-- increasing taxes and expenditures in tandem stimulates the economy. And if taxes target the rich, and spending targets the poor, the multiplier can be especially high. But France’s so-called socialist government is lowering corporate taxes and cutting expenditures-- a recipe almost guaranteed to weaken the economy, but one that wins accolades from Germany.

The hope is that lower corporate taxes will stimulate investment. This is sheer nonsense. What is holding back investment (both in the United States and Europe) is lack of demand, not high taxes. Indeed, given that most investment is financed by debt, and that interest payments are tax-deductible, the level of corporate taxation has little effect on investment.

Likewise, Italy is being encouraged to accelerate privatization. But Prime Minister Matteo Renzi has the good sense to recognize that selling national assets at fire-sale prices makes little sense. Long-run considerations, not short-run financial exigencies, should determine which activities occur in the private sector. The decision should be based on where activities are carried out most efficiently, serving the interests of most citizens the best.

Privatization of pensions, for example, has proved costly in those countries that have tried the experiment. America’s mostly private health-care system is the least efficient in the world. These are hard questions, but it is easy to show that selling state-owned assets at low prices is not a good way to improve long-run financial strength.

All of the suffering in Europe-- inflicted in the service of a man-made artifice, the euro-- is even more tragic for being unnecessary. Though the evidence that austerity is not working continues to mount, Germany and the other hawks have doubled down on it, betting Europe’s future on a long-discredited theory. Why provide economists with more facts to prove the point?

This model of economic failure is what a deceitful and basically clueless Paul Ryan wants to import from Europe. Krugman's writing on Ryan over the years clearly indicates Ryan is incapable of understanding the palaver his staff gives him to parrot. THe American economy has very serious structural flaws and is in need of a serious overhaul. Paul Ryan's imported ideological nostrums designed to enrich the rich and further impoverish everyone else won't do the trick. As Neil Irwin explained in yesterday's NY Times, the benefits of economic expansions are increasingly going to the richest Americans. That's a theme of Bernie Sanders' campaign-- and it isn't something you'll ever hear from Paul Ryan… or Hillary Clinton.

[I]n the first three years of the current expansion, incomes actually fell for the bottom 90 percent of earners, even as they rose nicely for the top 10 percent. The result: The top 10 percent captured an impossible-seeming 116 percent of income gains during that span… One percent of the population, in the first three years of the current expansion, took home 95 percent of the income gains… [T]his shift indicates a failure of the approach that governments take to stabilizing the economy. The postwar consensus has been that central bank action to cut interest rates should be the key tool to fight economic slumps, and to the degree fiscal policy ought be used at all, it should be tax and spending policies that boost the economy in the aggregate, such as cutting taxes temporarily… “this trickle-down mechanism never quite trickles down far enough to create job opportunities for all individuals willing and able to work.”