All eyes are on the U.S. Congress as politicians bob and weave to avoid a full-blown government shutdown before the September 30 deadline. However, are these now too common debt-ceiling fights actually necessary and have the drastic spending cuts even benefitted the economy? Kevin Drum answers these questions and breaks down the bluster behind the push for austerity in the September/October 2013 Mother Jones cover story, "It's the Austerity, Stupid: How We Were Sold an Economy-Killing Lie."
Drum examines how at the height of the recession politicians, bankers, and academics used the 2010 Reinhart-Rogoff study declaring increasing debt during a recession a recipe for economic disaster to justify austerity measures. From congressional conservatives to President Obama-who declared in his 2010 State of the Union address that when "families across the country are tightening their belts," the federal government should do the same-everyone preached the austerity gospel, even while big banks received a government bailout. The only problem is that new research by a trio of UMass Amherst economists, Thomas Herndon, Michael Ash, and Robert Pollin, changed everything. They found that the 2010 results were based on a basic Excel error, and that, in fact, "Recessions can hurt, but austerity kills." As Drum notes, given widely-felt budget cuts, "Austerity is working out fine for the 1 percent...but the rest of us are paying a high price." Whether Congress recognizes this fact before September 30 remains to be seen.