There’s a Reason Why Republicans Are So Behind This

There is an excellent article by Paul Krugman in the June 6 issue of The New York Review of Books entitled “How the Case for Austerity Has Crumbled.” Paul Ryan and other apologists for economic austerity in the U.S. have been using two studies to bolster their case: Carmen Reinhart and Kenneth Rogoff’s “Growth in a Time of Debt” and a 2009 analysis by the Italian economists Alberto Alesina and Silvia Ardagna. It appears now that both studies are discredited as a result of miscalculations and wild assumptions.

That, however, does not prevent Republicans from pushing austerity measures in Congress irrespective of the reasoning. Their motivation is simply that, once again, they are shilling for the rich:

It’s also worth noting that while economic policy since the financial crisis looks like a dismal failure by most measures, it hasn’t been so bad for the wealthy. Profits have recovered strongly even as unprecedented long-term unemployment persists; stock indices on both sides of the Atlantic have rebounded to pre-crisis highs even as median income languishes. It might be too much to say that those in the top 1 percent actually benefit from a continuing depression, but they certainly aren’t feeling much pain, and that probably has something to do with policymakers’ willingness to stay the austerity course.

There is a widespread attempt to make economics into a “morality play” to make the pain of austerity seem necessary to account for the wretched excesses of the boom times. Krugman recalls how Andrew Mellon advised Herbert Hoover to let the Great Depression run its course so as to “purge the rottenness from the system.”

But where does this rottenness come from? Certainly not from the lower classes who are just trying to survive in tough times. Granted that thousands of people bought into mortgages they couldn’t really afford, but who packaged these mortgages for sale to them and to dim investors who were not in on the joke?

In little Iceland, bankers who made the loans which in 2008 precipitated the country’s financial crash were sentenced to prison terms for fraud. Did we do as much? Why have we exonerated greedy bankers for causing this whole mess?

There is a price to be paid for the U.S.’s financial woes, and I believe that eventually we will turn to prosecuting some of the guilty parties. But, as usual, the most guilty parties will not only get off scot-free: They will have, in the long run, gained from their crimes.