Someone posted this on another forum. Good stuff.
On Monday, the House finally passed a deal to raise the debt limit after weeks of wrangling with a cadre of reactionary, Tea Party-endorsed lawmakers. The measure, which will force some serious cuts to public spending, is expected to easily pass in the Senate. When it does, a painful second "dip" into recession becomes far more likely -- all the conditions are there....
We got into this recession when the American people lost not only jobs, but also $14 trillion in wealth during the crash, and pulled back on spending as a result. But we're stuck treading water, two years after the “recovery” officially began, in large part because of the age of austerity – due to cuts forced on us by this misguided and shortsighted view that large deficits are a cause, rather than an effect, of the downturn.
Last year, with the private sector economy continuing to slump, an analysis by Moody's Analytics found that almost one in five dollars in American consumers' wallets came from one government program or another. The public sector has already seen deep cuts, and that trend will only worsen with Washington's relentless focus on deficit reduction. Without those dollars, there will be fewer consumers demanding American companies' goods and services, and the private sector will continue to have little incentive to hire. That's our core economic problem at this time.
The American economy is heading into dark waters, but the coming "austerity recession" won't only be a result of the tireless efforts of a small band of conservative ideologues bent on dismantling the social safety net that emerged during the last century. It will also be a consequence of a crippling intellectual crisis among our elites.
Propaganda Trumps Research
For almost a century, the prevailing economic paradigm has held that when the private sector is in recession, and people aren't spending money, the public sector needs to step in and act as a “buyer of last resort,” running deficits to keep people working until the economy gets going again. While the fine details of “Keynesian” theory have been the subject of debate, in broad strokes, it remains the thinking shared by most economists across the political spectrum. But even as it remains the dominant economic paradigm, a network of deep-pocketed conservative donors has, to a large degree, successfully discredited that idea in the political realm, replacing it with the simplistic and ahistorical narrative that deficits "destroy jobs.”