The national financial situation has been cast into the spotlight again with Obama's latest budget proposal. As is customary, Republicans are infuriated and Democrats perceive it to be as strong as wet cheese. It is viciously opposed by middle-class stalwarts like Bernie Sanders (I-Vt.), but still Republicans insist on its inherent irresponsibility.
Flashback to last November: constant advertisement bombarding your senses. Through the news waves, Twitter, Facebook, TV, billboards, you were told that this was the guy for the job. Where is this enthusiasm today? In particular (and regrettably) I have in mind President Obama. Instead of sticking to his ideals — that he knows to be sound — he is jumping ship, and joining the bloody sea of austerity.
Here's why "expansionary austerity" is the biggest hoax around since the Mayans predicted the world would end. Well, you get my drift.
There's a difference between actual GDP and potential GDP. Austerity ultimately threatens our actual GDP. For instance, the latest "sequester" is prime evidence that cutting government spending means a sh*ttier economy. Everyone admitted it would be bad for the economy, yet here we are listening to the GOP go off about how we need to cut spending to be "responsible."
The U.S. is the world's strongest economy, strong enough to even lift up an entire nation (China) through our super demand. U.S. demand is such that China will surpass our GDP within a decade. We are, and will likely remain, the world's global reserve currency; other countries pay us to let them borrow our money. An inability to borrow would be the only cause for concern about the national deficit. Read this twice: there is absolutely no need for concern about the deficit right now. We even haven't met the most basic condition to make austerity even worth looking at.
So the whole world is essentially looking to the U.S. for economic strength. Across the Atlantic, David Cameron (prime minister of the UK) and Angela Merkel (the chancellor of Germany) are finding out the hard way that austerity is a gross myth. The UK economy has been at a level of sustained depression: they are only now forecasting that they will be avoiding a triple dip recession. But hey, at least they'll sleep well at night knowing they took the right "economic medicine." Even though the rest of the world has found no success with "expansionary austerity," it seems that if you want to be cool, you gotta do it.
The only depressing part about the global economic depression is the actions of our leaders. Despite continued pleas from the best economists (you know, the people who dedicate their lives to knowing the field better than politicians), it appears that President Obama will not champion his own Keynesian roots.
We could leave the decision to the people to decide which economic direction to take. But why would you ask a class of fourth graders how the functional groups of organic chemistry work? The economy needs to be left to the people smarter than we are, the so-called "wonks."
The real reason the economy can't get back on track? People don't have money to spend. Ask the businesses that left town.
Now I turn it over to a guy by the name of Joseph Stiglitz that knows how an economy functions better than I do: "What we need now is another round of stimulus to get out of the doldrums. We cannot rely on exports given the weaknesses in Europe ... I wish (German chancellor) Merkel could understand that," Stiglitz said. "Austerity leads the economy to perform more poorly. It leads to more unemployment, lower wages and more inequality. There is no instance of a large economy getting to growth through austerity."