From the New York Times:
This winter has been especially austere. As part of the drive to cut spending, the Obama administration and Congress have trimmed the energy-assistance program that helps the poor — 65,000 households in Maine alone — to pay their heating bills. Eligibility is harder now, and the average amount given here is $483, down from $804 last year, all at a time when the price of oil has risen more than 40 cents in a year, to $3.71 a gallon.
and
As a result, Community Concepts, a community-action program serving western Maine, receives dozens of calls a day from people seeking warmth. But Dana Stevens, its director of energy and housing, says that he has distributed so much of the money reserved for emergencies that he fears running out. This means that sometimes the agency’s hot line purposely goes unanswered.
So Mainers try to make do. They warm up in idling cars, then dash inside and dive under the covers. They pour a few gallons of kerosene into their oil tank and hope it lasts.
In cold climates, people with outside oil tanks burn kerosene, because regular heating oil turns into a gel when it freezes, and clogs up the pipes. Kerosene doesn’t freeze. It’s also even more expensive than regular heating oil.
For older Mainers who live in drafty houses, that $483 isn’t going to go very far. It’s not even enough to fill up the tank once. A standard oil tank holds 275 gallons. Right now in Maine the cost of oil is approximately $4.00 a gallon.
From the Huffington Post:
How the cuts affect low income households varies by state. In Vermont, the effect will be minimal: State lawmakers are dipping into reserves to make up the shortfall from Washington’s cuts.
No such luck in Maine, which saw its allotment drop from $56 million to $38.5 million. Last year 64,000 Maine households received LIHEAP assistance, with an average benefit of $804. The quasi-state agency that manages LIHEAP will make sure no fewer people receive assistance, partially by shifting funds and partially by slashing the average benefit to $483.
John and Joan McAdams, a Maine couple in their 70′s, are doing this:
“At night we leave it down to 50 and during the day right now we run it at 60 degrees,” he said. “This is ludicrous. The wealthy can handle it. We haven’t got any money. I go to the food bank. All I get is outdated cans and a lot of spaghetti. There’s a rich versus poor situation in this country. It’s bad.”
He’s right. This is bad. This is the end result of the austerity we heard mentioned so proudly: older people freezing in their homes in what is considered the wealthiest country in the world.
Tags: austerity, Maine
Paul Krugman in his column today:
As I look at what passes for responsible economic policy these days, there’s an analogy that keeps passing through my mind. I know it’s over the top, but here it is anyway: the policy elite — central bankers, finance ministers, politicians who pose as defenders of fiscal virtue — are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.
The entire piece is well worth reading as he picks apart the arguments put forward by the deficit-fraud austerity hounds, and then…
But, in America, we do have a choice. The markets aren’t demanding that we give up on job creation. On the contrary, they seem worried about the lack of action — about the fact that, as Bill Gross of the giant bond fund Pimco put it earlier this week, we’re “approaching a cul-de-sac of stimulus,” which he warns “will slow to a snail’s pace, incapable of providing sufficient job growth going forward.”
It seems almost superfluous, given all that, to mention the final insult: many of the most vocal austerians are, of course, hypocrites. Notice, in particular, how suddenly Republicans lost interest in the budget deficit when they were challenged about the cost of retaining tax cuts for the wealthy. But that won’t stop them from continuing to pose as deficit hawks whenever anyone proposes doing something to help the unemployed.
So here’s the question I find myself asking: What will it take to break the hold of this cruel cult on the minds of the policy elite? When, if ever, will we get back to the job of rebuilding the economy?
Tags: austerity, unemployment
“These days, debt-fueled government spending doesn’t increase confidence. It destroys it.” – David Brooks, July 6, New York Times
“Not since World War II has an economic recovery been so hobbled by poor confidence.” – Robert J. Samuelson, June 12, Newsweek
“I also think the confidence issue is key. Public debt is now one of the top national concerns. If we spend the next few years making deficits worse than they are now, the national mood will plummet, and business people will definitely not gain the certainty and predictability they are hungering for.” – David Brooks (again), July 7, NYTimes.com
Get ready to hear the dumbest arguments yet against effective measures to bolster a recovery, address the unemployment crisis and spur economic growth. The Confidence Men are on the loose.
These self-appointed Keepers of the Flame of Conventional Wisdom are spreading a certain European contagion, an irrational exuberance for austerity that’s been noted frequently by economist Paul Krugman:
But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”
Krugman has been on quite a tear of late on these matters on his blog. See for example: Plan XVII For Europe, Arguments from Authority, and A Terrible Ugliness Is Born, among others.
Also on a tear, unfortunately, is the aforementioned European Central Bank president, Jean-Claude Trichet who comes at us again today from his alternate universe:
European Central Bank President Jean-Claude Trichet on Friday stepped up his warnings to governments to reduce their borrowing before they lose the confidence of electorates and financial markets.
“Many countries in the industrialized world have reached the limits of fiscal expansion,” Mr. Trichet told a central banking conference. “Fiscal authorities need to look beyond the current cyclical upturn. There is no alternative to that.”
The central bank president has repeatedly argued that persistent budget deficits undermine public confidence, causing more precautionary saving and unnecessarily weakening demand.
In Mr. Trichet’s mental universe we’re now in a “cyclical upturn”, but demand is being hampered by a lack of confidence. In the view of this cut-spending-reduce-deficits-throw-the-stimulus-into-reverse-now crowd, businesses will snap-to and unleash a torrent of job-expansion investments once they have imbibed the magic elixer of confidence. But they’re abstaining until government spending is cut, deficits are reduced, austerity reigns, and additional pain and suffering are imposed on the lower classes.
It’s like blackmail. But it’s bullshit. It’s all a confidence game, as Ezra Klein noted.
When Congress reconvenes next week we’ll undoubtedly be treated to a constant chorus by the likes of Republican Senators Mitch McConnell, Jon Kyl, Judd Gregg and John Cornyn et al. repeating the refrain that we can’t extend unemployment insurance and we can’t help states with Medicaid support, or anything else because government spending is increasing the deficit, and the deficit is undermining the recovery, keeping businesses from hiring more workers, and growing so rapidly there’s the threat of public debt default (the “we are Greece” line). The austerity caucus — the Confidence Men — will argue, quite incredibly with straight faces throughout, that only by making the “tough choices now” to cut spending for things like unemployment insurance, Medicaid and support for state and local governments can we “restore confidence” (blah, blah, blah).
The anti-spending, deficit-reduction push is not motivated by a real desire to restore economic growth. Nor is it driven by a real desire to reduce deficits. To the contrary — politically, the Republicans would prefer a faltering economy, thinking they will benefit at the polls in November if they can help steer the economy back into the ditch. And the austerity they promote would more likely only add to the deficits.
But let’s go back to the assertions that the deficit is undermining the recovery, keeping businesses from hiring more workers, and growing so rapidly there’s the threat of public debt default.
What’s undermining the recovery is a combination of key factors, starting with the persistence of depressed aggregate demand and high unemployment. Add to that a sluggish private sector and anemic jobs growth. Making matters worse is the simultaneous winding down of the 2009 Recovery Act stimulus, the obstruction of unemployment benefits and every other program to help workers struggling to get through the recession, and the stubborn lack of bold jobs policy initiatives from the
White House.
So what’s keeping businesses from expanding and hiring more people? Do you think corporate executives and business owners are actually sitting around saying, “Gee, I’d love to expand and hire more people, but the federal deficit is really crimping my confidence”? Please. As they say, it’s the economy, stupid. As Paul Krugman writes in his column today:
… there are widespread claims that fears about taxes, regulation and budget deficits are holding down business spending and blocking economic recovery.
How much truth is there to these claims? None. Business spending is indeed low, but no lower than one would have expected given widespread overcapacity and weak consumer spending. Business leaders are feeling unloved, but giving them a group hug won’t cure what ails the economy.
If we want stronger business spending, we need to give businesses a reason to spend. And to do that, the government needs to start doing more, not less, to promote overall economic recovery.
Exactly. What is it that causes businesses to invest and spend to expand and hire? First and foremost is increased demand for their goods and services, as well as the availability of affordable credit. But also, there needs to be competition for those goods and services, so that businesses are motivated by wanting to not get left behind. And lastly, there must be increased demand and competition for labor. It’s the depressed demand for goods and services as well as labor that is still stifling growth. And only robust, sustained growth will allow debt-to-GDP ratios and deficits to improve.
So, what of the assertion by the Confidence Men that current short-term deficits are causing some imminent threat of a U.S. debt crisis, or even default? While some of the weaker economies of smaller nations are experiencing problematic debt issues, the simple fact is that the U.S. is not. The market for U.S. Treasuries continues to be robust, even as yields remain markedly low. The benchmark 10-year rate has remained about 3 percent, which means the U.S. is readily able to borrow at very low interest.
So, if none of the economic assertions promoted by the Confidence Men hold any water, what might be said of their assertion that austerity-imposition and spending-reduction would at least have the benefit of producing some increased sense of business confidence? Well, not much:
French Business Confidence Declines on Budget Cuts
French business confidence declined for a third month in June on concern that budget cuts across Europe may slow consumer demand.
The Bank of France said today that the country’s economy will expanded about 0.4 percent in the second quarter, compared with a previous forecast of 0.5 percent.
The Confidence Men are engaged in a confidence game, pure and simple. They have no real interest in either spurring economic recovery or addressing fiscal deficits. What they do want to do is attack all the social safety-net programs, from unemployment insurance and Medicaid to food stamps, Medicare and Social Security, not to mention public education.
It’s a shameful sham.
Tags: austerity, Jobs, recovery, unemployment
The Republican minority in the United States Senate is determined to impose severe fiscal austerity on the country, at a time when doing so is certain to create more drastic hardship and push the economy back into another deep recession.
On the irrational grounds that it’s time to pull the plug on efforts to stimulate economic growth, citing mysteriously invisible “market fears” of a non-existent “debt crisis” in the U.S., Senate Republicans have succeeded in blocking extended unemployment insurance, COBRA health insurance subsidies for unemployed workers, and fiscal aid to cash-starved states. In doing so, they have begun implementing by default the kinds of austerity measures the IMF has notoriously imposed on less-developed nations, and which countries like Germany and England are now pursuing at the expense of their own prospects for economic growth.
Never mind that it was Republican pseudo-economics and incompetence that led to the housing bust, the financial crisis and the Great Recession. Never mind that Republicans were, as a result, roundly and soundly defeated in the two most recent federal elections. With 41 votes in the Senate, Republicans can block any measure using the filibuster threat. And that’s what they’ve done with extended unemployment insurance.
As a result, an estimated 1 million long-term jobless workers have stopped receiving any unemployment compensation since Congress failed to extend the programs before Memorial Day. And they are joined by another 40,000 long-term unemployed every day.
Also at risk are continued funding for employment assistance for needy low-income families, aid to states to help with Medicaid payments, support for food stamp benefits and aid for local schools, police and firefighters. Despite the urgent need, it appears that the administration’s proposed $50 billion in fiscal aid to states and municipalities is stalled.
Employment numbers recently have been bolstered by temporary federal Census hiring. But, starting this month, many of the more than half-million Census workers will begin seeing those jobs end. With unemployment already persistently near 10 percent, hundreds of thousands of federal, state and local workers including many public school teachers will likely swell the ranks of the unemployed thanks to the Republican austerity hounds.
Nearly a month ago I wrote that we had reached ‘A Dangerous Crossroads’:
Ominous signs emerged last week that a threat to undermine an economic recovery is afoot, and that threat has particularly severe consequences for America’s 15 million unemployed.
Before voting on an already scaled-down jobs and jobless aid bill, House Democrats succumbed to pressure from conservative Blue Dogs and nervous moderates and weakened the bill further, eliminating some of its core provisions.
This is the worst possible time to start dismantling the fiscal pylons that have thus far stabilized the economy and allowed for the beginnings of a recovery. As Christina Romer, chair of the President’s Council of Economic Advisors, has reminded us — think 1937. In response to a policy pivot that emphasized short-term deficit reduction and lower spending, the still-weak economy headed back into a second severe recession.
That the short-term deficit argument was, temporarily, accepted then is understandable. After 1932, under the New Deal, unemployment had been steadily declining for four straight years and GDP growth had been averaging 9 percent annually. That is far from the case today. Recent GDP growth of about 3 percent is less than half that needed for sustained recovery. And unemployment has not shown any sustained, measurable decline. To the contrary, we’ve had 15 million unemployed each month for nearly a full year.
In ‘Pseudo-Economics Become Sado-Economics’ we warned that, without actually deciding to do so, Congress had begun to:
…reduce or eliminate portions of the unemployment safety net. Tens of millions of Americans are already sliding from the middle-class into poverty. The phony deficit hawks are doing the Republicans’ bidding. If the economy slides backward, they will blame the Democrats and attack even more jobless aid programs. I fear that, feeling their mean-spirited oats, they will soon target the added Tiers of emergency federal unemployment benefits.
In his column today in The New York Times, titled “The Third Depression”, Nobel Prize-winning economist Paul Krugman writes:
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression [after the Panic of 1873 - ed.] than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
Krugman goes on to note how it appeared in 2008 and 2009 that we had learned the lessons of the last depression, lowered interest rates, supported the credit markets, and provided needed stimulus to at least partially offset severely depressed demand. The economic downturn would obviously depress revenues, but larger short-term deficits were rightly seen as necessary to stabilize the economy and keep it from getting much worse.
But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.
In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.
The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.
Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions.
But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.
So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.
And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
A chilling thought, indeed; particularly for older workers with families — like me — who are now unemployed.
Something bothered me, though, in that next-to-last paragraph. It was the phrase “how you show leadership” that struck me as insufficiently incisive. Because, as I watched the Senate Republicans block the majority from voting to extend unemployment insurance last week, I saw them chortling and laughing and slapping one another on the back. And I thought, there’s something more going on here.
So, if I may, this once, be allowed to re-write Krugman:
“It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show your superiority, and impose your authority even as the minority.”
Tags: austerity, unemployment
