By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives.
The Washington Post leads the pack when it comes to generating what scientists term a “moral panic” about budget deficits. As part of that effort they generated the series of myths that Paul Ryan was “serious,” “courageous,” and “expert” about “solving” the “deficit crisis.” The newspaper’s theme is that anyone who doesn’t fall for their effort to create a moral panic is not “serious” and should be ignored. The paper runs a column by Robert J. Samuelson that is devoted to generating a moral panic about the deficit. Like Ryan, his central targets are imposing austerity and cutting Social Security, Medicare, and Medicaid.
Samuelson’s latest column claims that President Obama and Governor Romney are lying to the nation because they have not sufficiently embraced the moral panic as the transcendent campaign issue that will determine America’s future. Samuelson demands the candidates implore the American people to urgently adopt austerity and attack Social Security, Medicare, and Medicaid.
We have known for over 75 years that the key to recovering from a recession is to follow a counter-cyclical fiscal policy that will reduce unemployment. We have long exhibited the wisdom to adopt automatic stabilizers that increase government services and decrease taxes when a recession strikes.
What would have happened if Obama had adopted austerity as Berlin imposed austerity on the European periphery? It would have prevented any recovery, throwing the U.S. into an even more severe recession. Berlin’s austerity demands have thrown the Eurozone back into a gratuitous recession, increasing the budget deficit in many nations and plunging Greece and Spain into depressions. Europe has followed Samuelson’s and Ryan’s policy advice and the results have been disastrous. Samuelson’s and Ryan’s austerity policies violate economic theory, economic history, and a natural experiment in Europe with austerity that has proved catastrophic. Samuelson, however, makes bizarre odes to Irish austerity, emphasizing the necessity of “persuading ordinary citizens to tolerate austerity (higher unemployment, lower social benefits, [and] heavier taxes) without resorting to paralyzing street protests or ineffectual parliamentary coalitions.”
Samuelson shares Berlin’s belief in the redemptive power of suffering – by others. He doesn’t even feel a need to explain why any rational government would adopt a policy in response to a severe recession which it knew would cause “higher unemployment, lower social benefits, [and] heavier taxes.” He admits that Berlin (and Dublin) knew that austerity would make the recession far more severe. He doesn’t think that adopting austerity programs known to be self-destructive requires justification or even explanation. Insanity is normal in Samuelson’s world.
Samuelson is most amazing, however, in explaining how the victims of austerity should react to a response to a recession that will make the recession worse. Samuelson’s world of insane economic policies requires the victims to be political masochists. Samuelson demands that the victims of austerity suffer in silence without protesting austerity or using their democratic rights to form coalitions to reverse the insane economic policies. Samuelson is not afraid of “ineffectual parliamentary coalitions” – he is terrified of effectual coalitions that would end the economic insanity of responding to a recession with a pro-cyclical policy of austerity.
Samuelson, in a column decrying politicians who make misleading statements, suggests that Obama make the following statement to voters about ending the U.S. deficit.
“Can’t we just tax the rich even more? Unfortunately, this won’t work either. Third Way — a liberal group, mind you — estimated the effects of top income tax rates of 49.6 percent and 41 percent and a top capital gains rate of 38.8 percent. The budget still doesn’t balance….
“Third Way” is not “a liberal group” – and Samuelson knows it. It claims to be a “moderate” group, but that self-description is misleading. “Third Way” was created by, and is run by Jonathan Cowan, a Pete Peterson devotee. Peterson is a conservative, Republican billionaire who has spent 20 years using his money to create groups that will spread the moral panic about deficits in order to attack Social Security, Medicare, and Medicaid. Samuelson is a Pete Peterson devotee and journalist quoting Cowan’s group’s paper. Cowan is a fellow Peterson devotee and journalist. Third Waypublished a paper lauding Ryan’s proposals to end public health insurance and denouncing Brad de Long and Paul Krugman’s refutation of Peterson’s faux moral panic.
Samuelson deliberately misled his readers in a column devoted to denouncing Obama and Romney for misleading voters. It remains impossible to compete with unintentional self-parody.