February 27, 2011

Austerity, Then & Now

At a very personal, selfish level, I don't really care how "austere" the government decides to become. I don't have any real skin in the game, other than the increasingly perilous adventure of trying to drive on California's potholed roads. America doesn't really have any public amenities which are threatened by greater austerity; for example, we don't have a real passenger rail system, or much of anything in the way of public transportation. The conditions of accommodations and facilities (bathrooms, etc.) in national and state parks are usually a complete disgrace, and so forth. The graffiti-strewn walls, the urban blight, the shitty, cheap, tawdry look of so much of what's been built in this country in the last 60 years, are all reflections of the people who live here, their aesthetic criteria, their social mores. It's how we live and we've all gotten used to it. The public realm in general in the United States is a vast wasteland, in fact, and is the emblem of our governing ethos; to wit, beauty and grace in life are "private virtues" which must be earned and purchased. You must amass enough money to buy your own sylvan enclave, or your house on the beach, in order to escape the crapscape (h/t: James Kunstler) of American life in general. Amazingly, the financial elites who own such an overwhelmingly large proportion of the wealth in this country, and can afford to insulate themselves from the trash heap, have enlisted the help of the some of the most disadvantaged (the Tea Party types and Southern Rednecks, not always the same people) to assist them in enforcing this way of doing things. Thus, the Tea Party has as one of its main platform planks the perpetuation of the "Bush tax cuts," as if such a top-margin benefit could possibly help them at all.

When the public realm is in such a catastrophic state, the key strategic move is to insulate yourself as much as possible from its effects. Although I'm eligible for Social Security now, I don't draw on it; I continue working. I'm too young for Medicare, and I'm self-employed, so I will never receive a penny in unemployment, welfare, public pension, or (currently) government-furnished health care. Thus, I read the weekly reports of new UE (unemployment claims) and even the unemployment numbers themselves (since I will never be counted one way or the other) with a great measure of personal detachment. In a way, none of this has anything to do with me.

I have a lot of company in this state of societal anomie, of course. Millions and millions of people, just like me. Working stiffs with no safety net all. As I said a few posts back, the sense of national "cohesion" in this country is in an advanced state of deterioration. We're kind of a mixture of a Hong Kong-style economy, with a manic desire for deregulation and anything-goes entrepreneurship, and a Greek-style approach to complete fiscal irresponsibility and mass tax avoidance. The same financial elites who own the government and manipulate the Right Wing booboisie (h/t: H.L. Mencken) with empty slogans and rhetoric favor complete deregulation, except when they blow themselves up and need hallucinated "money" to restore them to "balance," and otherwise advocate absolute minimization of any financial support for the country of which they are nominally a part.

Thus, what does "austerity" have to do with anything anymore? The financial elites are just as happy to borrow money on the "credit" of the Treasury as the so-called "liberals." The budget cutting antics of the Republicans are simply Kabuki theater. They know, and we know, and they know that we know, that the paltry reductions they are suggesting will do absolutely nothing to avert American bankruptcy. Their frivolous posturing, however, does impress some of the rubes in the cheap seats, who are too lazy, ignorant and ill-informed to perform the very simple math involved in assessing national income (about $2.2 trillion, the subtrahend), comparing it to national spending (about $3.8 trillion, the minuend), producing a difference of $1.6 trillion. Now let's do some more math: $100 billion/$1.6 trillion = 1/16 = 6.25% of the budget deficit. This is the House Tea Party contingent's big proposal, this is their extreme position, the one that may shut the government down.

Goldman Sachs, that company famous for doing God's work here in His Earthly Kingdom (God, I mean, not Lloyd Blankfein), recently prognosticated that a $50 billion reduction in federal spending would produce a 1% reduction in national GDP. Now, G-Sax is not exactly bearish on American prospects, since part of their scam is to encourage the endless funneling of money from the Federal Reserve into Wall Street, the better to "stimulate" the economy into "recovery." In a linear extrapolation, this would imply that $100 billion (the aforesaid 6.25% "slashing") would cause a 2% loss in GDP, or the current estimate of the entire growth for 2011 (revised downward recently, since the government has begun to notice that despite their rosy UE stats, no one is actually working). Let us continue this morning's math session. Assuming this same linear extrapolation holds for greater amounts of budget "cutting," what would be the effect on the economy of doing the only rational thing, living within our actual means? Well, let's figure it out. If $50 billion = 1%, then since $1.6 trillion is 32 times larger than $50 billion, G-Sax is implying that a balanced budget would result in a 32% fall in GDP. How much did the GDP of the United States fall during the depth of the Great Depression? Answer: 30%.

Such ruminations may suggest to you just how utterly phony this so-called American economic "recovery" actually is, and why despite all of the fake number crunching at the Bureau of Labor Statistics, the country has not actually produced any new full-time jobs for the populace in over ten years. We are sustaining the economy with the same false source of prosperity (massive debt) which fueled the run-up to the crash in 2007-08, only now it is the public sector which is pulling the laboring oar on the slave-galley ship of penury.

Thus, there won't be any austerity. There can't be, because the political class cannot face the ruinous consequences implied in their own austerity rhetoric. They'll run this scam in Washington as long as humanly possible, they'll use every trick in the book, they'll print money, ship it to England, and pretend that the "UK" is buying American Treasury bonds, along with the Federal Reserve, which is already printing money to "buy" bonds from Primary Dealers, who in turn often had just closed the purchase themselves a few moments before, pretending that this indicates bond-buying "interest."

Austerity, like prosperity in this country, will eventually become a "private virtue." It will be what we have left. Thus, 'tis best to cultivate an attitude of mind which anticipates such a state of affairs. The Zen of detachment, an austerity of expectation.

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