Austerity will make this recession worse (with Mike Konczal)

Pitchfork Economics with Nick Hanauer

Civic Ventures

Business, Government, News, Politics

4.8 • 1.5K Ratings

🗓️ 5 May 2020

⏱️ 38 minutes

🔗️ Recording | iTunes | RSS

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Summary

When revenues and expenses don’t add up in times of crisis, governments often turn to budget cuts and other austerity measures to balance their accounts. But economists widely agree that the most valuable lesson from the Great Recession is that austerity made the recession worse and slowed down recovery. Mike Konczal joins the show this week to explain why, in a recession, stimulus is particularly powerful and austerity is particularly harmful. Mike Konczal is the Director of Progressive Thought at the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He is a columnist at Vox, a contributor to The Nation, and a contributing editor at Dissent. Twitter: @rortybomb @rooseveltinst Further reading: A forward-thinking policy response to the coronavirus recession: https://rooseveltinstitute.org/forward-thinking-policy-response-coronavirus-recession/ The stimulus plan that we need now: https://www.thenation.com/article/economy/coronavirus-stimulus/ With a uniquely fragile economy, stimulus is not enough: https://bostonreview.net/class-inequality-politics/mike-konczal-felicia-wong-uniquely-fragile-economy-stimulus-not-enough Portugal dared to cast aside austerity. It’s having a major revival: https://www.nytimes.com/2018/07/22/business/portugal-economy-austerity.html Worst recovery in postwar era largely explained by cuts in government spending: https://www.epi.org/blog/worst-recovery-in-post-war-era-largely-explained-by-cuts-in-government-spending/ What have we learned about austerity since the Great Recession? https://www.americanprogress.org/issues/economy/reports/2014/05/30/90621/what-have-we-learned-about-austerity-since-the-great-recession/ The United States is not ready for a recession, but it can be: https://www.americanprogress.org/issues/economy/reports/2019/09/27/475075/united-states-not-ready-recession-can/ Austerity is hammering state economies: https://www.americanprogress.org/issues/economy/reports/2012/06/21/11672/austerity-is-hammering-state-economies/ Website: http://pitchforkeconomics.com/ Twitter: @PitchforkEcon Instagram: @pitchforkeconomics Nick’s twitter: @NickHanauer

Transcript

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0:00.0	In tough economic times, governments need to make up for a crisis in the private sector by spending more.
0:08.0	The idea that the United States is up on a cliff where it might fall off is nowhere reflected in the financial data.
0:14.7	Our economic immune system tells us when things are bad, we need to stop spending.
0:19.4	And that just makes the economy worse.
0:22.0	Not everyone can save at the same time and this is Pitch Fork Economics with
0:38.3	Nick Hanauer, where we explore everything you wished you'd learn in Econ 101.
0:48.4	I'm Nick Hanauer, founder of Civic Ventures.
0:51.4	I'm David Goldstein, Senior Fellow at Civic. Civic Ventures.
0:57.0	So Goldie, one of the most interesting things about the circumstance that we're in with the pandemic and the giant economic
1:06.9	contraction that's going on, which is something that's happened to the country before,
1:11.8	and is that people's natural inclination during these sorts of circumstances is to hunker down, is to withdraw.
1:22.1	And the way in which that plays out is to withdraw. Right.
1:23.0	And the way in which that plays out in politics often, certainly it's the preference of places
1:28.8	like the Seattle Times is to cut the budget, right, to tighten our belts. And what's interesting
1:36.3	about that is that while that's the instinct for most people, it turns out to be
1:41.5	exactly the wrong thing to do.
1:43.4	It's the opposite of what you should do.
1:45.8	In a recession, what you should do is spend more collectively,
1:50.2	not less, and that can be the role of government and this is why austerity is such a terrible idea
1:57.6	even though it's sort of the principal idea of neoliberal orthodoxy.
2:03.4	Well, to borrow from COVID-19 itself, I think austerity is the economic equivalent of a cytokine storm.
2:14.0	Your body's own immune system overreacting,
	...

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