No one asks economists who preach austerity how much time they expect to spend in unemployment lines

[Better Believe It]

The 'New Normal' of Unemployment
Mainstream economists are preaching a decade of pain and historically high joblessness – as if no alternative policy existed
by Dean Baker
January 15, 2011

The American Economics Association held its annual meeting in Denver last weekend. Most attendees appeared to be in a very forgiving mood. While the economists in Denver recognized the severity of the economic slump hitting the United States and much of the world, there were few who seemed to view this as a serious failure of the economics profession.

The fact that the overwhelming majority of economists in policy positions failed to see the signs of this disaster coming, and supported the policies that brought it on, did not seem to be a major concern for most of the economists at the convention. Instead, they seemed more intent on finding ways in which they could get ordinary workers to accept lower pay and reduced public benefits in the years ahead. This would lead to better outcomes in their models.

The methods for generating demand are not a mystery. It basically amounts to the government spending more money until the private sector is again in a position to fuel demand. The fears of deficits and debt that the pessimists promote stem from a misunderstanding of basic economics. Deficits can be a problem when they crowd out private economic activity. In a severe slump like the current one, this crowding-out is not a realistic fear; there are vast amounts of idle resources. Furthermore, there is no reason that the debt needs to pose an interest burden on taxpayers in the future. The Fed and other central banks can simply buy and hold the debt, refunding the interest payments to the government.

If economists did their job, they would be pushing policies to get the economy quickly back to full employment. Instead, they just repeat lines about how "we" will just have to accept some rough times. Unfortunately, no one ever asks the economists who preach austerity how much time they expect to spend in the unemployment lines.

Please read the full article at:

http://www.guardian.co.uk/commentisfree/cifamerica/2011/jan/14/economics-economy

[midnight]

1. Why can't the fed just erase the debt?