The Abyss that is Austerity

Recently, as I was driving across the Hoover Bridge in North Canton, which was named for a Herbert Hoover--but not the one who was President, I got to thinking about the one who was our 31^st President and the Great Depression. 

A lot of discussion and debate has gone on over the last three and a half years about the nation’s economy and whose fault it is/was.  We’ve all heard that our economy is the weakest it’s been since the Great Depression, which, of course, takes me back to Pres. Hoover. 

Most agree by now that Hoover mishandled the economic downturn from the start; he heard the now-familiar clamor—No new taxes!  We don’t have the money!  We all have to tighten our belts!  And he listened to the noise, cutting spending and helping to plunge the country deeply into the Great Depression. It wasn’t until Pres. Roosevelt began injecting governmental money into the economy did things begin to turn around (it wasn’t WWII that did it; that was later). Yes, it seems counter-intuitive at first, but history confirms the way out of deep economic problems is not to cut, but to spend.  And most economists agree that cutting spending now—what Congress and the President want to do, despite the lessons of history—will lead to the same disastrous results that we had the last time the economy was like it is today.

Economist Robert Frank of Cornell recently offered an example of what I’m talking about: Highway 80 in Nevada is in need of repair.  To fix it now would cost the state 6 million dollars. That’s a lot of money and money that the politicians in Nevada say they can’t spare.  If they wait two years—you know, when the economy magically turns around—it will cost Nevada 30 million dollars. That’s a lot more money.  What would you do? (I’ll mention that interest rates haven’t been this low for a really, really long time and Nevada, like Ohio and other states, has many unemployed).  By repairing the roads now, the state puts people back to work, who, in turn, contribute to the economy by purchasing goods and services, paying taxes, getting off unemployment, and the state saves lots of money in the long run. Regardless of your political ideology, the highway needs fixed; it’s not an option, like say, repealing the estate tax.

I truly believe that many people are frightened by our economic future and have been led to believe that if we just tighten our belts a bit more, if we just cut a bit more here, a bit more there, that in a short time, all will be better.  How? Productivity has never been higher as profits soar and many companies, sitting on hordes of money—some would say taxpayer money—still are implicitly encouraged to ship jobs overseas. So, there is no immediate incentive for employers to expand the work force. Yeah, a job is a job, but is the state of Ohio really well served by a bunch of eight dollar an hour jobs with no benefits and no future?  I don’t get it.  And neither did Pres. Hoover.  The difference now is that we have a historical precedence to learn from—the economy worsens when the government cuts spending. The looming question remains: have we learned our lesson?  Or, like lemmings, will we follow today’s leaders with their Hoover-like fixes off the bridge and down into another economic abyss?