Wednesday, March 18, 2015

How Much Austerity is Illusory?

Before any nation succumbs to "future necessary" austerity, fiscal restraint gloom and economic slowdowns in general, it helps to remember that meaningful action now could still change everything. But first, consider where change might begin. Where money is spent by governments, how helpful is that spending in general? How much does political compromise or hidden tax strategies blunt the effect? How much is simply lost in translation to entities which already had the power and ability to take care of themselves? Inevitably, these groups stand between governments and those who could have put redistribution to reasonably good use. The process isn't just inefficient, it is often counterproductive. So why bother at all?

In a perfect world - should fiscal spending still be deemed necessary after the hard questions are confronted - what can these forms of management and organization contribute, which may be difficult or "impossible" to procure from other vantage points? If said activity is difficult to imagine elsewhere...why, exactly? Granted, if justice is at stake, public management may be better able to represent the whole. But are other determining factors of wealth provision - such as healthcare or building codes - culturally "written in stone"?

Of course, fiscal policy will remain a major component of economic activity - in spite of protestations to the contrary or the limited marketplace results of the present. However, the fact that fiscal spending has entered a period of relative retrenchment - partly the result of a supply side which is damaged from too many government favors - cannot be ignored. And without production reform, privatization of services in their present incarnation, would prove a huge mistake. In all of this, governments are losing their ability to provide the kinds of safety nets that populations need most - particularly in the U.S. It's not so much about where or how the money gets spent, but what is ultimately accomplished.

Austerity would not have to be an inevitable reality for any government, if debts and obligations were better understood by everyone, and provided for at the outset. Today's future austerity threats are a result of accounting obfuscations and the default gridlock which Washington now experiences. Even though monetary policy has proven capable of offsetting fiscal losses, the limited nature of both services and housing provisions continue to distort growth potential. Services growth in particular remains stymied by political opposition, where determination on each side effectively means that no one "gets their way".

It would be better to begin anew, with services that are capable of sidestepping both governmental redistribution patterns and the hard consumption definitions dictated by special interests in these circumstance - particularly for lower income levels.  As noted by Korpi and Palme in "The Paradox of Redistribution", "The greater the degree of low income targeting, the smaller the redistribution budget." Eduardo Porter, in "Patching up the Social Safety Net", says:
Unsurprisingly, the United States government provides one of the most threadbare social insurance nets among advanced nations The question is, as we age and put more demands on Social Security and Medicare, will our dependence on narrowly focused, narrowly financed programs unravel what social insurance we have left?
Only consider the efforts of Republicans to repeal Obamacare when they have scarcely concentrated on the supply side reforms which could greatly improve the marketplace. Many calls for a smaller government are simply the desire to move services towards personal preferences in programs and services, instead of actual improvements for Main Street. For the U.S., austerity would likely be the eventual result of gridlock when no one gets their way.

By now, it should be clear that large scale government is too inclined to favor special interests to be effective at managing programs for services. Likewise, state level governments are no panacea for today's services and effective asset formation. Not only have they extended many of the same privileges to special interests, but they are in tenuous positions regarding safety nets as well.

Long term economic growth needs to be explored one privately structured community at a time, so that small successes can be shared, and small failures can become the learning experiences that governments now need. Austerity need not be an inevitable future. Just the same, marketplaces need to make room for greater participation, so that politically defined austerity can give way to a better growth trajectory.

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