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No policy is as self-defeating during recessionary times as the pursuit of a budget surplus for the purpose of containing public debt – austerity, for short.The economic case against austerity is cut and dried: An economic downturn, by definition, implies shrinking private-sector expenditure. A government that cuts public spending in response to falling tax revenues inadvertently depresses national income (which is the sum of private and public spending) and, inevitably, its own revenues. It thus defeats the original purpose of cutting the deficit. Clearly, there must be another, noneconomic, rationale for supporting austerity. In fact, those favoring austerity are divided among three rather different tribes, each promoting it for its own reasons.While Steinbrueck did not spell it out fully, his underlying message was clear: Even if austerity destroys jobs and hurts ordinary people, it is necessary in order to preserve space for democratic choices.Austerity's pervasiveness thus reflects an overarching dynamic that, under the guise of free-market capitalism, is creating a cartel-based, hierarchical, financialized global economic system.
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