While we’re always hearing about the bitter division in Washington D.C., there is—in fact—remarkable unanimity. Both parties favor deep cuts in government spending, at the local and national level.
The exact nature and depth of these cuts differ. But in all proposals, the deepest cuts come to the safety net, and to programs that put money in the hands of ordinary consumers.
“Austerity” is something that politicians, the ultra-rich and huge tax-evading corporations won’t share in. (If they share at all, it will be a tiny face-saving gesture.) Basically, whatever program is adopted will take trillions of dollars out of the hands of consumers.
This means, inevitably, a sharp drop in consumer spending.
Bipartisan Cuts
All sides, including Nobel-winning economists who have an unbroken string of wrong predictions on the economy, agree. The key problem is the deficit. We must fix that first. It is an emergency.
We can tackle the problem of jobs later.
Role of Demand
Jobs growth can come from only one thing: increased consumer spending, I.e. “demand.”
Plans for slashing Federal government spending range from $2 – $4 trillion. State and local spending is also being slashed. Most of these cuts will take cash out of the hands of consumers.
Reduced demand will destroy more and more private sector jobs. Less consumer spending means fewer goods and services purchased. Business will need fewer workers, so jobs will be lost.
The unemployed, once they run down their savings, will spend less. With a shredded government safety net, this will happen quickly. Businesses will shed more jobs.
This job destruction snowball comes on top of millions of government jobs—local, state and Federal—directly eliminated by spending cuts.
Accelerating Toward Depression
Sharply decreased consumers spending leads inevitably to Depression. Jobs, businesses will disappear. The economy will shrink. This may be happening now. Economists tend to correct their mistakes months or years after making them. Then, they authoritatively tell us what we’ve known all along—we’re jobless and suffering.
While we are undoubtedly speeding towards a Depression, it is difficult to say when it will hit full force. Some tactics may delay it.
Financial markets can create imaginary money and perhaps a mini-boomlet (preceding the big bust.) Economists will call this a recovery.
Also, it may take some time for consumers to exhaust their savings and credit.
And, businesses may make up for decreased domestic demand for a time by tapping foreign markets. But, in an international economy under the influence of international banks, foreign markets will also collapse.
Governments, big corporations and especially the financial sector are working together to destroy our economy. There is no significant opposition.