- Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- In the latest episode of the “Pitchfork Economics,” Roosevelt Institute Director Mike Konczal said government austerity causes leaders to slash budgets when spending is most needed.
- Senate Majority Leader Mitch McConnell handed giant corporations $US2 trillion relief in the Tax Cuts and Jobs Act two years ago; now, he’s worried about spending too much on the stimulus packages.
- Spending during a crisis mitigates the effects of a recession, but many politicians still believe trickle-down economics – where the wealthy will stimulate the economy – will resolve a downturn.
- Visit Business Insider’s homepage for more stories.
The word “austerity” hasn’t taken hold in popular discussion here in America the way it has in the United Kingdom. So let’s define it before we go any further: in the latest episode of the “Pitchfork Economics” podcast, Mike Konczal, a director at the Roosevelt Institute, says austerity is the movement by government leaders “towards retrenchment, towards spending less, and putting less demand in the economy for goods and services when the economy is not near full employment.”
In other words, austerity simply means slashing government budgets just at the moment when government spending is most needed. Proponents commonly describe their reasoning in simple, straightforward terms like “tightening our belts” or “running government like a business,” and it’s sold to the people as a necessary measure in times of crisis.
The problem, Konczal explained, is that an austerity mindset of cutting government programs, investments, and offices is “counterproductive” when a recession hits because it smothers consumer demand at a time when the economy is already hurting, which “makes the situation worse” and prolongs the downturn.Plenty of studies bear out Konczal’s argument. Recessions last longer and recoveries are slower to take effect when leaders slash government budgets. Recoveries are more successful, inclusive, and sturdy when government invests in the economy during an economic downturn.
So why, in the middle of this pandemic, is Senate Majority Leader Mitch McConnell warning that “we need to be as cautious as we can be” when considering additional stimulus measures? Is he really that concerned about balancing the budget? McConnell’s record makes it abundantly clear that he’s an anti-government trickle-downer, of course. He’s the kind of lawmaker who’d step square on the back of a poor constituent in order to hand a fat tax cut to a CEO.
In fact, McConnell’s love of tax cuts puts the lie to all his austerity talk. Just two years ago, McConnell had to make the choice between sensibly budgeting to strengthen America’s future or handing a $US2 trillion check to corporations and the wealthy at the expense of our future. He happily chose the latter.
I know the year 2017 feels like decades ago, but bear with me: In December of that year, Mitch McConnell fought like a wildcat to pass President Donald Trump’s massive Tax Cuts and Jobs Act, which cut taxes for the wealthy and lowered corporate taxes from 35% to 21% – the biggest such decrease in American history. McConnell and his allies sold the tax cuts as engines of growth which would trickle down from the wealthiest Americans to everyone else. They even promised that the average American household would see a $US4.000 raise trickling down from the top. (I don’t know about you, but I’m still waiting for my $US4,000 check.)
The point of this ancient history from pre-coronavirus times is this: McConnell and Trump had their opportunity to prove that they cared about responsible governance. They controlled both houses of Congress and the White House, and they chose to hand $US2 trillion of our money away to the people who needed it least. But when Congress passes a $US2 trillion dollar stimulus bill during the biggest economic crisis our nation has seen since the Great Depression, McConnell clucks his tongue about deficits and starts to play the old austerity game.
That’s the brutal lie behind austerity politics: $US2 trillion for corporations and the wealthy is considered an investment in the economy while $US2 trillion split between corporate bailouts, small business loans, unemployment payments, and one-time $US1,200 checks for average Americans is considered a bridge too far.
The big lie promoted by administration officials during the campaign to pass the Trump corporate tax cuts was that they would eventually pay for themselves. (They did not, though some Trump staffers are still dying on that hill.) The irony is, as Konczal argued, money spent in the form of a stimulus will absolutely pay for itself through a speedy recovery and an abbreviated economic crisis.
In current American two-party politics, there are only two preferences: Either you want to invest money in America’s neighbourhoods, or you want to hand money to the wealthy and powerful under the smokescreen of austerity. There’s no middle ground. Choose wisely.