How the Economic Quacks Promoting Austerity Will Increase the Deficit | Alternet
"There isn’t, in fact, a “long-term deficit problem.” So long as interest rates stay below the growth rate, as they are, debt-to-GDP levels eventually stabilize and even decline. But if we start reintroducing cutbacks just as the US economy is beginning to show faltering signs of recovery, all of the recent gains on the budget deficit will go by the wayside. Why? Because fiscal austerity deflates economic activity, causing tax revenues to plunge and social welfare payments – unemployment insurance, welfare, food stamps – to explode. The perverse impact, then, is that deficits get larger – precisely the opposite of what the “austerian” brigade desires, but which is happening in earnest in places like Greece and Spain."
