Paul Krugman tells it like it is:
The Unwisdom of Elites
The past three years have been a disaster for most Western economies. The United States has mass long-term unemployment for the first time since the 1930s. Meanwhile, Europe’s single currency is coming apart at the seams. How did it all go so wrong?
Well, what I’ve been hearing with growing frequency from members of the policy elite — self-appointed wise men, officials, and pundits in good standing — is the claim that it’s mostly the public’s fault. The idea is that we got into this mess because voters wanted something for nothing, and weak-minded politicians catered to the electorate’s foolishness.
In NZ this is the nonsense we hear all the time about the policies of the last Labour government. Working for Families. Interest free student loans. You know, policies that help ordinary people instead of just the top 5%. National and their media enablers like to call these “election bribes”, while studiously avoiding the biggest election bribe of them all, National’s unaffordable tax cuts.
So this seems like a good time to point out that this blame-the-public view isn’t just self-serving, it’s dead wrong.
The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious. And by trying to shift the blame to the general populace, elites are ducking some much-needed reflection on their own catastrophic mistakes.
Let me focus mainly on what happened in the United States, then say a few words about Europe.
These days Americans get constant lectures about the need to reduce the budget deficit. That focus in itself represents distorted priorities, since our immediate concern should be job creation. But suppose we restrict ourselves to talking about the deficit, and ask: What happened to the budget surplus the federal government had in 2000?
The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.
We don’t have big expensive wars to pay for, but we’re in line with the unaffordable tax cuts and the damage from the recession.
So who was responsible for these budget busters? It wasn’t the man in the street.
President George W. Bush cut taxes in the service of his party’s ideology, not in response to a groundswell of popular demand — and the bulk of the cuts went to a small, affluent minority.
Well gosh, what a surprise. Every time a right wing government gets in the rich get richer and the poor get screwed.
Skipping over stuff about America’s wars, and role in the financial crisis, which are less relevant to NZ, we get to:
Needless to say, that’s not what you hear from European policy makers. The official story in Europe these days is that governments of troubled nations catered too much to the masses, promising too much to voters while collecting too little in taxes. And that is, to be fair, a reasonably accurate story for Greece. But it’s not at all what happened in Ireland and Spain, both of which had low debt and budget surpluses on the eve of the crisis.
New Zealand being in line with Ireland and Spain in those respects. Krugman ties the fate of Ireland and Spain to the euro zone, another “elite vision imposed on highly reluctant voters”. That’s not relevant to NZ of course, we were just collateral damage of the crisis, petrol price rises, and tax cuts that we couldn’t pay for.
Does any of this matter? Why should we be concerned about the effort to shift the blame for bad policies onto the general public?
One answer is simple accountability. People who advocated budget-busting policies during the Bush years shouldn’t be allowed to pass themselves off as deficit hawks; people who praised Ireland as a role model shouldn’t be giving lectures on responsible government.
Can anyone think of a prominent New Zealand politician who “praised Ireland as a role model”? Anyone? You at the back?
But the larger answer, I’d argue, is that by making up stories about our current predicament that absolve the people who put us here there, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.
Hear hear. In all the discussion of our knackered economy, our record deficit, our borrowing $380 million a week, and so on, the only “solution” ever being proposed is a slash and burn budget. Cutting back on spending at every turn. Why no discussion of the obvious alternative? Reverse National’s unaffordable tax cuts. They did nothing to stimulate the economy and they’ve left us deep in a hole. Don’t let our own “policy elites” sell us a pack of lies while ignoring the tax cut elephant in the room.