Drinking the Obama Kool-Aid, With a Twist of Hayek

The press has been hyping Obama’s recent economic proposals as part of a “21^st century liberalism” while simultaneously using a decidedly 20^th century conservative framework to explain them.  President Obama made rhetorical nods to an expanded role for government and substantial proposals around raising the minimum wage, but the New York Times channeled Hayek and Boehner in their analysis.  This ideological bias, inherent to even the most “liberal” of mainstream newspapers, does far more damage to progressive policies than it makes up for in fawning coverage of the president.

Richard Stevenson writes that Obama “made a case Tuesday night for closing out the politics of austerity.”  Stevenson almost immediately contradicts the point by saying that Obama’s anti-austerity plan involves cutting Medicare and raising taxes, representing an alleged shift away from “shrinking the government.”  Call me econ-impaired, but I believe G down, T up = austerity and shrinking government.  In fact, the goalpost has been moved so far to the right, that a president whose worldview, by Stevenson’s own admission, is defined by its “willingness to acknowledge and absorb… some of the very underpinnings of the modern conservative movement” including cuts to Medicare, is said to define 21^st century liberalism.

The NYT’s Annie Lowrey adopts a similarly conservative framework for her analysis of President Obama’s laudable plan to raise the minimum wage.  Lowrey labels the move “politically divisive” because of the “weakness of the recovery,” even though the overwhelming majority of Americans support raising the minimum wage and the increase in the total wage bill would almost certainly grow the economy despite potential declines in investment or expenditures from high income earners.  She continues by quoting an unknown UC Irvine economist who says raising the minimum wage might increase poverty (what!?) and then finishes it off by regurgitating the conservative propaganda term “job creator” (© 2009) without qualification.  The only man or woman who creates a job is the one who goes out and busts their ass every day to earn one.

The Times’ subtle but clear use of a conservative economic framework – deficits being more important than jobs, cuts to Medicare as “anti-austerity,” citations of fringe conservative scholars and the parroting of conservative language – undermines the ability of progressives to make real change for working people.  As long as right-wingers dominate the ideological terms of debate, no amount of Democrats elected to congress or soothing speeches from our 21^st century “liberal” president will be able to roll back the platinum-tinted tide of plutocracy.

Britain Triple Dippin’

The United Kingdom, amidst increasing austerity measures taken by the government, is heading toward a triple-dip recession following a 0.3% decline in GDP for 4Q 2012.  IHS Global Insight economist Howard Archer predicts UK GDP will not return to its 1Q 2008 level until the first half of 2015, representing seven lost years.  Even the IMF’s Chief Economist Olivier Blanchard is concerned, recently telling the British Chancellor that Britain should “reassess” its austerity policies – which is a little like John Blutarsky telling you to take it down a notch on the booze.

Source: The Telegraph (UK)

All of this points to the glaringly obvious Keynesian point that you don’t cut government spending and raise taxes in a recession!  Not only will fiscal contraction cut economic growth, it also inevitably fails to reduce public debt because lower GDP growth decreases incomes and tax revenues, which makes it harder to close budget deficits in the first place.  Britain’s National Institute for Economic and Social Research has predicted that “Britain’s debt to gross domestic product (GDP) ratio will be 4.85 percentage points higher by 2013 because of the spending cuts and tax rises introduced by the Coalition government.”

Although US growth has been sluggish by understandably high American standards (we are the richest/greatest country on the planet after all), the US has done far better than most of its European counterparts.

Source: Paul Krugman

Nobel Prize winner Paul Krugman points out that Europe’s austerity policies are largely to blame for this stagnating growth, and has loudly called for the US to implement additional stimulus to boost the economy.  It’s depressingly clear that Washington is not listening.