automatic stabilizers

Tuesday Evening News Roundup

Austerity really isn’t working out all that well in Europe.

William Black, scholar and economist, takes the Washington Post’s William Samuelson to task for advocating for austerity measures –

We have known for over 75 years that the key to recovering from a recession is to follow a counter-cyclical fiscal policy that will reduce unemployment. We have long exhibited the wisdom to adopt automatic stabilizers that increase government services and decrease taxes when a recession strikes.

What would have happened if Obama had adopted austerity as Berlin imposed austerity on the European periphery? It would have prevented any recovery, throwing the U.S. into an even more severe recession. Berlin’s austerity demands have thrown the Eurozone back into a gratuitous recession, increasing the budget deficit in many nations and plunging Greece and Spain into depressions. Europe has followed Samuelson’s and Ryan’s policy advice and the results have been disastrous. Samuelson’s and Ryan’s austerity policies violate economic theory, economic history, and a natural experiment in Europe with austerity that has proved catastrophic. Samuelson, however, makes bizarre odes to Irish austerity, emphasizing the necessity of “persuading ordinary citizens to tolerate austerity (higher unemployment, lower social benefits, [and] heavier taxes) without resorting to paralyzing street protests or ineffectual parliamentary coalitions.”

New York Atty. Gen. sues Bear Stearns (J.P. Morgan bought the remnants of Bear Stearns). It appears that Bear Stearns was selling toxic complex mortgage-backed securities and they knew it was garbage but sold it as “good as gold.” (more…)