Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster. Other countries succumbed to the old orthodoxy pushed by the financial wizards who got us into this mess in the first place.
Whenever an economy goes into recession, deficits appear, as tax revenues fall faster than expenditures. The old orthodoxy held that one had to cut the deficit - raise taxes or cut expenditures - to restore confidence.' But those policies almost always reduced aggregate demand, pushed the economy into a deeper slump, and further undermined confidence.
But, the administration's agenda is entirely different than Congress's. The White House economics team is trying to garner support for policies that will strap the faltering economy into a fiscal straightjacket and pound the green shoots into mush. All the railing against deficits is just empty blather backed by junk economics.
Rubin admits that the recession "would ordinarily be met with expansionary policy", but suggests that he has a better remedy than stimulus. Does that make sense? It was Keynesian counter-cyclical public spending (stimulus) that just produced positive GDP for the first time in 4 quarters, whereas, it was Rubin's deregulation of the financial system that pushed the global economy to the brink of disaster. There's no question of whose theory is more credible or likely to work. Even so, it's worth considering what Rubin has to say, because it clarifies the views of Obama's chief economic advisors Geithner and Summers. After all, the trio is joined at the hip.
The real goal is to slash spending to impose onerous austerity measures that will lay the groundwork for dismantling critical social programs, like Social Security, Medicaid and Medicare. That's why Rubin is working hand-in-hand with his allies in and out of the White House. It has nothing to do with what's best for the country. It's another looting operation spearheaded by the same band of Wall Street pirates who just blew up the financial system.
It's all right out of the neoliberal playbook, corporate America's sacred text.
Excerpted from Mike Whitney @ Counterpunch
