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?
(Read the full story at Business Insider, but spoiler alert: no, he’s not.)