Credibility of Austerity Economics in Freefall Everywhere Except at the Journal

May 1st, 2013 · 5 Comments · budget policy, economy, financial coverage, journalism

By Arthur Alpert

Pity the poor politicians who edit the Albuquerque Journal.

It won’t be easy adjusting the narrative to fit the oligarchy’s new strategy, but soon they’ll do just that.

The newspaper’s narrative (or line or editorial agenda) matters because at the Journal, it dictates what gets published – syndicated opinion, Op Ed opinion and “news.” Or not.

Their problem lies with the “deficit crisis” and “austerity.” The latter is a fancy word for cutting government spending, mostly on services. It’s been the oligarchy’s answer to the heavy debt levels bestowed by the financial sector collapse of 2008.

Of course, austerity punishes the victims, not the perpetrators, but that’s not why there’s change afoot.

It doesn’t work.

Austerity has slowed the economies that sipped the hemlock, like the U.S. and it’s killing the chug-a-luggers.

Now, belatedly, the financial Establishment is noticing; the manager of PIMCO, the world’s top bond firm; President Jose Manuel Barroso of the European Commission; Blackrock, the influential investment bank and Martin Wolf, finance commentator for the Financial Times, have all decried austerity recently.

And the Wall Street Journal, whose reporters write stories the editorial page hates, has noticed.
Friday, April 26, the WSJ had three “austerity” stories.

The Page One account ran under this rubric:

“Still sputtering, Spain Turns Away from Cuts”.

On page 16, next to the cover story jump, WSJ editors ran “Europe’s Unemployment Problems Worsen”.

And on page 13, the WSJ reported Germany Chancellor Angela Merkel’s (surprising) suggestion some European countries need lower interest rates, liquidity, akin to the cheap money the Fed has injected here, over protests from the American Right.

Yes, austerity’s failure is big news and if you are a Journal politician-cum-editor, it gets worse – core elements of that very American Right are defecting.

Even the American Enterprise Institute!

AEI, whose experts include John Bolton, Lynne Cheney, Newt Gingrich, Paul Wolfowitz and Richard Perle, just published (April 24) Establishment economist John H. Makin’s “Austerity Undone”.

Here’s his précis:

“The US is on a sustainable fiscal path. Congress should focus on long-term tax and entitlement reform rather than short-term fiscal reform. And fiscal austerity in Europe — especially in southern Europe — remains too severe.”

Ignore the plutocratic mantra of “tax and entitlement reform.” What’s novel is his message – enough deficit reduction, please. And statements like these:

“As Europe proves, severe austerity can slow growth or lead to recession.”

The infamous Reinhart-Rogoff claim that big national indebtedness vs. GNP slows growth is “seriously flawed.”

“ US inflation is slowing and bond yields are falling, notwithstanding warnings….”

“American fiscal austerity has been moderate and probably, at the current pace of deficit reduction of about $300 billion per year over the next half decade, has proceeded far enough for now.”

Please re-read that last, where Makin characterizes our national policy thusly:

“American fiscal austerity has been moderate.”

Funny, but that’s not what the Journal has reported or opined. The Journal’s narrative has the Administration spending too much.

Funnier still, Makin is channeling Paul Krugman!

More on wild-eyed leftist Krugman below, but first here’s the journalistic point:

There’s been a near-total eclipse at the Journal of Makin’s subject matter, little real, complex economic theory and practice and minimal analysis of where politics and economics intersect.

Has the Journal ever noted that the major parties agree on the principle of deficit reduction, ever asked if that was wise or wondered (as I do) if what they share isn’t evidence that somebody’s behind a curtain pulling strings?

Not that I remember. No surprise; there’s nothing in the Journal narrative about Corporate America’s power over the parties.

No, the daily has done little but beat the drums for doomsday deficit scenarios in its “news” columns.

Beat the same drums in its editorials.

And lined up syndicated (and some local) columnists to beat the same tired drums in the opinion pages.

Finally, leaving no doubt it’s driven by a political agenda, our daily has never published a well-organized, full-throated counter-narrative to what the song of the drums.

Not a single major essay, I mean, hypothesizing that cutting deficits in a Lesser Depression is economic malpractice and that investing (taking on greater debt short-term) should revive the patient.

A column, that is, along the lines of Paul Krugman’s “refresher” on spending cuts in the Monday, April 29 N.Y. Times, which opens with the news that European hardliners are, at last, questioning “premature fiscal austerity.”

Krugman’s column is a double reminder. First, that while many American economists and even some business organizations agree we him (invest in jobs and the economy now, cut deficits later), the Journal won’t allow that thesis to besmirch its pages, except for a few letters.

Secondly, with the Europeans and even AEI edging away from austerity, the paper’s politician/editors soon will have to squirm into a new editorial stance to conform with the changing oligarchic wisdom.

It will be fun to watch.

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5 Comments so far ↓

  • Roland

    I keep waiting for the corporate media (including, of course, the ABQ Journal) to do an in-depth exploration of the decades of research that have been done on Keynesian economics. When I was in college, many years ago, Keynesian principles were the gospel in most economics courses. Much empirical research and quantitative data have been gathered over the years demonstrating how it works. Yet, our corporate media remain fixated on the “debt crisis” and they seem to assume that their audience is too stupid to be educated about alternative models for dealing with recession.

  • Gerard Bradley

    Actually, by the time I was in grad. school at the UNM economics dept. in the mid-1970s, Keynesian economics was in full retreat. The Chicago School was in the ascendent. The dominance of their ‘efficient market hypothesis’ in the speculation economy helped get us where we are today.
    To say nothing of an inability to copy spreadhseet formulas correctly a la Reinhart- Rogoff.

  • James D. Robertson

    If it is your intent to get some point or other across – why didn’t you do it? You went on and on and on about what? Tell you what – why don’t you and Roland take a nice lunch, talk it all over – get it out of your system – then come back and tell us something we common folk can relate to. Perhaps “ships and shoes and sealing wax and whether pigs have wings.” Or perhaps whether Brooks and Walz share the same sleeping accommodations. I’m going to leave you now – but I’ll check in every once in a while. I have a difficult time dealing with people who try to impress me with what they know. I prefer to be informed – not impressed.

  • Cheryl Everett

    I agree with Roland except about the corporate media assuming the public is “too stupid to be educated” about Keynesian and other alternative economics. What do I believe is that the corporate media hope the public is too apathetic to DEMAND alternative news and editorial coverage …. or, failing to find it in corporate media outlets, seek it out from other sources.

  • Nick Estes

    For the record, I’ve published at least 3 op-eds in the Journal over the past couple years explaining and defending Keynesian economics. Here is the latest: http://www.abqjournal.com/main/2013/03/28/opinion/us-borrowing-wont-hurt-nations-future-generations.html This one gave rise to a debate between me and Paul Gessing that you can watch on the Rio Grande Fdn website.

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