Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Austerity is Dead, Get Used to It

There is one clear lesson from the 2016 electoral season that all politicians must recognize if they want to win elections. It is: “Austerity is Dead, Get Used to It.”

Austerity as a political doctrine came of age back in the 1970s and 1980s amidst the wreckage of the European welfare states. The thinking behind austerity; as promoted by the likes of Maggie Thatcher was simple, cut government spending and you will have lower taxes and more economic growth.

That sort of worked back in the 1980s, especially in countries like the United Kingdom which had bloated and ineffective welfare states. Austerity appealed to many groups; including small government conservatives, libertarians, rich people that wanted lower taxes, cultural conservatives that hated welfare, and even some pacifists, to name just a few.

Austerity has Failed, Get Used to It

No country embraced austerity more tightly than the United States. It became the official dogma of both national political parties.

Leaders ranging from Ronald Reagan to Bill Clinton to George W. Bush to Barrack Obama to Donald J. Trump have run on the platform of cutting government. Two whole generations of Republican politicians have spent most of their time trying to cut back every facet of government save the military, prisons, and police. An entire generation of Democratic politicians dedicated themselves to fighting for tax cuts, and welfare reform.

Austerity has been our national political ideology for close to 40 years now and what has it gotten us? Crumbling highways, subway trains that do not run, closed hospitals, schools with leaky roofs, crowded airports, streets filled with potholes and homeless people, closed factories, 44 million people on food stamps, skyrocketing income inequality, an aging national infrastructure that no longer meets our needs, and a national debt of $20.172 trillion.

Out in the real America, where most of us live, austerity has failed miserably, and average people have had enough. They said so clearly and loudly last year, even though a lot of politicians failed to hear them.

Austerity was the Real Loser in the 2016 Election

There was one big loser in the 2016 electoral season; and it was not Hillary Clinton, it was austerity.

The clearest example of this was in the Republican primary where Donald J. Trump, who promised to spend $1 trillion on infrastructure and boasted of his love for single-payer health insurance on nationwide TV, easily trounced a dozen tax-cutting, austerity-minded movement conservatives. Trump even bragged that debt was good on the campaign trail, and voters listened.

Meanwhile, Democrat Hillary Clinton, an austerity-minded New Democrat, had trouble fending off a primary challenge from U.S. Senator Bernie Sanders (I-Vermont), an old-school socialist. Bernie ran on a platform of a massive increase in government spending that included single-payer healthcare, increased Social Security, $1 trillion in infrastructure spending, and a program of government-financed college tuition.

Clinton won the primary but went down to defeat in the general election. Many voters ignored her campaign which was completely silent about issues like benefit expansion, infrastructure, and education. Not even strong media support could sell the Clinton II austerity agenda to the American people.

More Evidence that Austerity is dead

Up on Capitol Hill, there is, even more, evidence that austerity is as dead as free silver and the gold standard. Back in 2013, when Bernie introduced his $3 to $6 trillion “Medicare for All” single-payer healthcare plan – no other Senator signed onto it.

When he reintroduced almost exactly the same bill on September 13, 2017, Sanders had a room full of co-sponsors. Fifteen fellow Democrats; including four probable presidential candidates, put their names to Medicare for All. Around 119 Democrats have signed onto a similar plan in the House.

Austerity, the dogma that cutting spending and tightening the budget is the only solution to economic problems is dead. Those politicians that continue to embrace it will find themselves a tiny minority that is completely ignored by voters.

Expect both parties to try to out-do each other with bigger spending proposals in the next few election cycles. Every politician will tout plans for greater spending and cite the benefits of Keynesian stimulus.

Austerity is dead and John Maynard Keynes is the economic sage of our age. Learn to love it; and Keynes, politicians if you wanted to get elected. If you don’t like it politicians start looking for a new job because you will need one.