Column, 645 words

Austerity Will Leave Us Crying ’96 Tears’

But America's wealthy don't seem to mind.

Sam Pizzigati

Aging baby boomers may remember a 1960s rock band that sported an all-time great name. That band — Question Mark and the Mysterians — may now have a worthy rival on the name front. Make way for Reinhart-Rogoff and the Austerians.

Harvard economists Carmen Reinhart and Kenneth Rogoff don’t make smash records. They write learned economic papers that make champions of austerity happy — and help smash the life prospects of average working families.

Austerians preach the absolute necessity of whacking away at government spending. We must, they solemnly intone, discipline ourselves to reduce government deficit and debt, no matter the pain austerity may bring us.

And austerity does bring pain. People lose access to basic services. People lose jobs. People even go hungry. But some people — extremely rich people — don’t mind austerity at all.

These affluent Americans don’t send their kids to public schools. They don’t visit public parks. They never ride public transit. These wealthy folks don’t need public services and resent having to pay taxes to support them.

Austerity works for these wealthy Americans. Cutbacks in public services generally won’t inconvenience or complicate their daily lives. And if austerity should create some unanticipated discomfort, they can always get their friends in high places to intervene — as Americans saw recently when lawmakers rushed to undo air traffic controller budget cuts that had rich travelers cooling their heels in airports.

Austerity cutbacks, notes Center for Economic and Policy Research economist Dean Baker, promise even greater payoffs — for the rich — down the road. Any cut in programs like Social Security, he points out, “opens the door for lowering tax rates on the wealthy in the future.”

If social commitments can be chopped, Baker writes, “then the wealthy can look forward to being able to keep more of their income.”

All this may help explain why pollsters have found, as economist Paul Krugman points out, that rich Americans “by a large majority” consider budget deficits “the most important problem we face.”



America’s wealthy make their preference for austerity equally plain to the politicians who seek their favor. These politicians want to be helpful to their deep-pocketed patrons. But they also have needs of their own. They need “evidence” they can use, Dean Baker reminds us, to show the general public that “austerity serves the general good and not just the rich.”

Three years ago, Harvard’s Reinhart and Rogoff supplied that “evidence,” via an academic paper that purported to show a grave danger whenever government debt hits 90 percent of Gross Domestic Product.

This paper rushed to the “top of the charts” in elite public policy circles. Austerians worldwide cited the paper as an unassailable justification for cutting government spending quickly and deeply.

Reinhart and Rogoff made no meaningful move to discourage the austerians. They basked instead in their global celebrity — until a team of unorthodox economists at the University of Massachusetts exposed their paper as essentially a sloppy scholarly fraud.

This Massachusetts work has just gone viral. Reinhart and Rogoff’s spreadsheet snafus have even become fodder for late-night TV comics.

End of story? Not quite. We have much more here than a spectacularly failed attempt to make the case for a doctrine that suits the sensibilities of the richest among us. We have still another indication that inequality corrupts every corner of contemporary societies, even our ivory towers.

The peers of Reinhart and Rogoff, the scholars who hold the nation’s most prestigious endowed chairs in economics, never subjected the Harvard pair’s findings to any serious scrutiny. The unraveling of their bogus case for austerity started with the digging of a skeptical grad student.

The lesson in all this? In a staggeringly unequal society, as Paul Krugman sums up, “what the top 1 percent wants becomes what economic science says we must do.”

The rest of us, of course, don’t have to listen.

OtherWords columnist Sam Pizzigati is an Institute for Policy Studies associate fellow. His latest book is The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class.

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  • maquih

    I agree with most of what you write, however, I have some hope that actually austerity isn’t good for the wealthy either. While in the short run, corporate profits can be increased by breaking the backs of unions and workers, in the longer run, everyone will lose out from a smaller less productive economy. At least that’s my hope. Hopefully, the leaders of this country will realize they are hurting themselves as well and start to unwind the conservative crackdown of the past 20-30 years. Otherwise, it would take a major chaotic shakeup of the socio-political landscape to make things better.

    • Roanhouse

      i think you confuse wealth with being well off. Wealth has no need for citizenship. Its more or less something you do just for general state protections. But Wealth allows you to change the rules and you really don’t have to work, you only work because you either have a passion for something as in a cause, or you do a job as a hobby.

      Well off or “rich” people still have to work to make a living or they loose what they have.

      Clarification again Wealthy is where your money generates more than enough income from intrest or dividends to equal more than a typical salary of a well off rich person. You are the 1% when you make more in dividends than you do in salary or “stock options”

      They have 65% of the stocks in the united states with the top 10% that comes to 75% of the stocks.

      • ohiobob

        well said

      • maquih

        I’m not confusing anything and I don’t see what the distinction between then mega-rich investor class and the still needs to work rich class has any relevance to what I said.

        • Roanhouse

          “It doesn’t matter if most voters don’t benefit, they all believe that someday they will. That’s the problem with the American Dream, it makes everyone concerned for the day they’re are going to be rich.”

          • maquih

            I’m sorry, I still do not follow. I am fully aware of income and wealth inequality in this country. I am also fully aware of middle-class citizens voting against their interest.

            I guess I don’t appreciate when someone writes that I am confused and then goes on to spout well-known mainstream facts that have no bearing on what I was saying.

  • Jack

    Taxes are legalized theft to pay for people who are unable to motivate themselves.

    • Count Bubba

      You seem like you’ve really given this some thought.

    • Roanhouse

      It seems you like the idea of a Feudal state. Now pay the private land owner 50 dollars for driving on his private highway. I guess you never read history or went to a school in a state that funded them huh?

    • marvin nubwaxer

      your mama on social security?

    • gitcherdawgoffmylawn

      Your statement is idiotic.

    • ohiobob

      your an idiot. do you drive on public roads? are you protected by your police and fire department? you OBVIOUSLY went to public school…..and do you by chance believe we should have any kind of military what so ever? lol

    • Jon Newman

      Sure bro, Next time your house is fire you will be grateful for that “theft”

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  • Ndee -Jkid- Okeh
  • Jon Newman

    They still drive on public roads.
    They still use public police if they are robbed.
    They still use public fire-fighters if their house on fire.

    Make them pay before using any of those services.