Tag Archives: austerity

Austerity has lost its truthiness

Media, Politics, , ,
I googled "austerity," and this was the first image that appeared in the results. (Thanks, The Independent.)
I googled “austerity,” and this was the first image that appeared in the results. Seemed appropriate enough. (Thanks, The Independent.)

Back in February, The Washington Post‘s Ezra Klein registered his frustration with the way that deficit reduction was covered in the media:

For reasons I’ve never quite understood, the rules of reportorial neutrality don’t apply when it comes to the deficit. On this one issue, reporters are permitted to openly cheer a particular set of highly controversial policy solutions. At Tuesday’s Playbook breakfast, for instance, Mike Allen, as a straightforward and fair a reporter as you’ll find, asked Simpson and Bowles whether they believed Obama would do “the right thing” on entitlements — with “the right thing” clearly meaning “cut entitlements.”

A few days earlier, Ron Fournier, the editor of the National Journal, wrote that President Obama was giving America “the shaft” by taking an increase in the Medicare age off the table. It is difficult to imagine him using similar language for a situation in which Republicans reject universal health care, or Democrats say no to a tax cut. Over the past couple of weeks, MSNBC’s Joe Scarborough has reacted with evident astonishment to Paul Krugman’s argument that the long-term deficit is not a problem we need to solve right this second.

The secret to the special treatment that deficit reduction enjoys in Washington, I think, is that it’s a rare policy area that lends itself to pox-on-both-their-houses politics. “It’s such fun for me to irritate the AARP and Grover Norquist in equal measure,” Simpson told Allen. “It makes your life worthwhile.” It also makes deficit reduction a safe topic for otherwise strenuously nonpartisan figures to issue strong opinions on. After all, they can’t be accused of being partisan, as both parties are standing in the way!

Klein’s disappointment came, of course, only two months before the ideological underpinnings of austerity itself were subjected to the same remedy they proposed for American and European governments: death by a thousand cuts. And thus, two additional months later, the case for austerity has now been severely damaged.

Which is why yesterday’s article in The New York Times caught my eye. Regarding the newfound optimism of many economists in the expected growth rate of the American economy, reporter Nelson D. Schwarz provides some context:

“It’s better than it looked,” Mr. Cowen said. “Technological progress comes in batches and it’s just a little more rapid than it looked two years ago.” His next book, “Average Is Over: Powering America Beyond the Age of the Great Stagnation,” is due out in September.

Certainly, there are significant headwinds that will not abate anytime soon, including an aging population, government austerity, the worst income inequality in nearly a century and more than four million long-term unemployed workers.

Since when did “government austerity” become an accepted consensus target of criticism, so obviously detrimental to whatever economy it affects that even The New York Times feels safe citing it as a “significant headwind” in a news article?

Well, since mid-April, when the Reinhart-Rogoff paper was in large part dismantled. On a very surface-y level, this can be seen as progress — a sign that the dense fog of austerity has lifted and been replaced with a healthy level of skepticism. But far more concerning is the ease with which “straightforward and fair” reporting incorporates whatever dominant perspective holds sway in government offices at the time, as if it were an uncontested truth.

In other words, if austerity (or rapid deficit reduction, to use the example from Klein’s article) was right back in February — when even the news media’s straight reporting sections treated its efficacy as a foregone conclusion — then it can’t possibly be wrong (or a “significant headwind”) now.

Something’s got to give — and not just the viability of austerity as an economic policy. The entire foundation of traditional journalism — objective reporting — rests on the notion that some sort of absolute truth exists and that reporters are bound to it regardless of prevailing political ideologies. But when such a premise is shown to be so clearly false — as it is here with austerity — then the viability of objective reporting itself appears vanishingly low.

The amorality of economics

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In an easily-digestible piece for The New York Review of Books, Paul Krugman explains why economic austerity became so mainstream so fast:

Everyone loves a morality play. “For the wages of sin is death” is a much more satisfying message than “Shit happens.” We all want events to have meaning.

When applied to macroeconomics, this urge to find moral meaning creates in all of us a predisposition toward believing stories that attribute the pain of a slump to the excesses of the boom that precedes it—and, perhaps, also makes it natural to see the pain as necessary, part of an inevitable cleansing process. When Andrew Mellon told Herbert Hoover to let the Depression run its course, so as to “purge the rottenness” from the system, he was offering advice that, however bad it was as economics, resonated psychologically with many people (and still does).

By contrast, Keynesian economics rests fundamentally on the proposition that macroeconomics isn’t a morality play—that depressions are essentially a technical malfunction. As the Great Depression deepened, Keynes famously declared that “we have magneto trouble”—i.e., the economy’s troubles were like those of a car with a small but critical problem in its electrical system, and the job of the economist is to figure out how to repair that technical problem.

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Slate.fr nabs a post-victory interview with François Hollande

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François Hollande

Fairly comprehensive stuff. A few highlights:

On France’s relationship with Germany:

L’existence d’un couple «Merkozy» a été critiquée en Europe. Quelle est votre position sur ce couple franco-allemand?

Autant je crois au moteur franco-allemand, autant je conteste l’idée d’un duopole. La construction européenne repose sur une relation France-Allemagne équilibrée et respectueuse. Les couples Schmidt-Giscard, Kohl-Mitterrand,  et même Chirac-Schröder ont prouvé que les différences politiques n’empêchaient pas le travail commun. Mais ces dirigeants veillaient à conjuguer la démarche intergouvernementale avec le processus communautaire, c’était la meilleure façon d’éviter que nos partenaires éprouvent le sentiment d’être écartés, ou pire encore soumis.

Cet équilibre a été modifié ces dernières années. Le rapport franco-allemand a été exclusif. Les autorités européennes ont été négligées et certains pays, notamment les plus fragiles, ont eu la désagréable impression d’être en face d’un directoire.

On Barack Obama, and speaking English (and he couldn’t resist a jab at Sarkozy):

Justement, vous allez rencontrer Barack Obama pour la première fois au G8 de Camp David les 18 mai et 19 mai. Une première question, qui pourra vous sembler anecdotique: Mister Hollande, do you speak English?

Yes I speak English, more fluently than the former President. But a French president has to speak French!

Au-delà de la plaisanterie, est-ce que vous pensez que c’est important que le chef d’Etat français parle la langue commune de la diplomatie internationale?

Il a besoin de la comprendre et de pouvoir avoir des échanges directs avec ses interlocuteurs. Mais je suis attaché à la langue française et à la francophonie.

Lorsque je participais à des sommets de chefs de partis en Europe, il a pu m’être désagréable d’entendre des amis roumains, polonais, portugais, italiens parfois, parler anglais, mais j’admets que sur le plan informel, les contacts puissent s’établir dans cette langue. Je défendrai néanmoins partout l’usage du français.

On a nuclear Iran:

Quelle est votre position sur la crise liée au programme nucléaire iranien?

Je n’ai pas critiqué la position ferme de Nicolas Sarkozy par rapport aux risques de prolifération nucléaire. Je le confirmerai avec la même force et la même volonté. Et je n’admettrai pas que l’Iran, qui a parfaitement le droit d’accéder au nucléaire civil, puisse utiliser cette technologie à des fins militaires.

Sur ce sujet, l’administration Obama semble plus souple, plus encline à la négociation, que le gouvernement français…

Les Iraniens doivent apporter toutes les informations qui leur sont demandées et en terminer avec les faux-semblants. Les sanctions doivent être renforcées autant qu’il sera nécessaire. Mais je crois encore possible la négociation pour atteindre le but recherché.

All in all, Hollande’s triumph may signal a rocky future for Europe, especially in French-German relations but even extending beyond that to a more general backlash to the politics of austerity. As some have noted, Hollande’s victory may in fact suit the Obama administration just fine, at least on economic issues. If his election — and the rising hopes of leftists around Europe — can somehow hold back the tide of plummeting stocks and rising bond yields until at least November 6th, he may prove very useful to Obama’s reelection chances. Furthermore, his economic philosophy is, in many ways, closer to that embraced by the United States than Sarkozy’s pro-austerity administration has been. Foreign policy, however, may be a slightly different story.

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So, about yesterday’s French presidential election

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Paul Krugman:

What is true is that Mr. Hollande’s victory means the end of “Merkozy,” the Franco-German axis that has enforced the austerity regime of the past two years. This would be a “dangerous” development if that strategy were working, or even had a reasonable chance of working. But it isn’t and doesn’t; it’s time to move on. Europe’s voters, it turns out, are wiser than the Continent’s best and brightest.

What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.

Rosecrans Baldwin:

France and America have a long history of mutual loathing and longing. Americans still dream of Paris; Parisians still dream of the America they find in the movies of David Lynch. It will take time for both countries to adjust to a new leader, a new image. For our part, we may even learn what a real Socialist is.

But the French will have it worse. They may not miss Nicolas Sarkozy now; they may never pine for him to return. They will, however, feel his absence. The temperature will drop. When an object we love to hate is removed, then love is lost, too.

The New York Times takes a broader look at the future of austerity:

In broad terms, the French vote unsettled center-right governments across Europe, while their center-left adversaries felt emboldened, hoping that the triumph of one socialist leader presaged a wider resurgence.

But the real nub of the ideological and fiscal contest lay in the continent’s traditional driving axis between Berlin and Paris, with Mr. Hollande promising to rewrite the austerity-driven pact struck between Mr. Sarkozy and Chancellor Angela Merkel of Germany, whose own electoral fortunes are also uncertain.

And, on the French right, they are already complaining about the presence of foreign flags at François Hollande’s Bastille victory party:

Les scènes de liesse qui ont accompagné l’éléction de François Hollande ne sont pas du goût de certaines personnalités de droite. Au-delà de la défaite du candidat Sarkozy, certains membres de l’ancien gouvernement, mais aussi du Front national, ont dénoncé, lundi 7 mai, la présence de “drapeaux rouges et étrangers”lors du rassemblement pour célébrer la victoire du socialiste, la veille, place de la Bastille à Paris.

Sur France info, l’actuel vice-président du FN, qui fut le directeur de campagne deMarine Le Pen, Louis Aliot, s’est déclaré “surpris” par la présence “d’autant de drapeaux étrangers pour saluer la victoire de M. Hollande”. Et de poursuivre : “Ce sont les mêmes drapeaux étrangers que l’on a vus saluer la victoire de M. Sarkozy et [celle] de Jacques Chirac, en 2002.”

I was there at Bastille starting at 7:15 PM or so all the way until Hollande’s speech ended around 1 AM, and there were a lot of foreign flags. Granted, it doesn’t take much to rile the Front National, but it was an interesting sight nonetheless. It was an unforgettable experience, even though I thought I was going to get trampled in the crowd at several different points.

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The joy of Rupert Murdoch’s Wall Street Journal

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Yesterday’s online Wall Street Journal edition included a column by Daniel Henninger, its deputy editor of editorials. The article, titled “Memo to the Youth Vote,” begins by asking: “Why would anyone under the age of 25 vote for Barack Obama in November?”

This seems an unlikely question to ask. A Harvard poll released about a week ago revealed that Obama leads Romney among the young by 17%. So perhaps the more appropriate question would be, “Why would anyone under the age of 25 vote for Mitt Romney in November?” But even leaving aside this curious opening line, Henninger later uses economist Robert Lucas to critique Obama’s economic policies:

He then looked at the levels of U.S. social-welfare commitments, including the new Obama health-care entitlement, and ended with a simple observation: “Is it possible that by imitating European policies on labor markets, welfare and taxes, the U.S. has chosen a new, lower GDP trend? If so, it may be that the weak recovery we have had so far is all the recovery we will get.”

In what alternate universe has Obama imitated European policies on…any of these things? European tax systems are different, welfare is extremely different, and in general the labor markets are more rigid on the Old Continent than they are in the U.S. Going a step further, Obama’s stimulus package is proof positive that he differed strongly from his European counterparts, who have united behind the austerity-advocating trifecta of David Cameron, Angela Merkel, and Nicolas Sarkozy.

But Henninger doesn’t stop there. He then proceeds to discuss the disarray of European universities, never bothering to devote a single sentence to how this relates to the U.S., which has most of the best universities in the world. He finally closes by suggesting that, given high unemployment levels, young Americans may end up needing ObamaCare after all. Indeed they might, Henninger. That’s kinda the point of universal coverage.

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