New Mexico Mercury

A major upheaval took place recently in the world of economic theory. Yet while a sacred cow took a mortal hit, its legacy of social impoverishment and unrest continues unabated.

Why does something presumably as dense and dry as economic theory matter? Because for longer than most of us realize, elected officials have relied on the dominant, though not necessarily correct, school of thought to provide a rationale for the policies they put in place. In the congressional debate over health care, for instance, it was the fundamental argument for a "uniquely American approach" (code for the profit motive) that carried the day and left the U.S. as virtually the only developed nation without universal health care for its citizens (and New Mexicans near the bottom in terms of health care outcomes).

Every bit as crucial as the underlying philosophy of health care policy is that of the national budget. What has passed for economic debate in Washington since the financial crash of 2007-2008 has seen those pressing for spending cuts holding commanding sway against those who advocate for stimulation of the economy through progressive tax policies and investment in public infrastructure. The result, not only in our country but worldwide, has been the application by governments of what is commonly known as austerity. Under programs of austerity, spending in public education and health, transportation and communication infrastructure, building maintenance, emergency services - almost anything you can think of that we all rely on, now and into the future - is drastically cut, in the proclaimed interest of "balancing the checkbook."

Of course the flip side of austerity, seldom if ever mentioned, is that the absence of government spending in any area of our lives creates a funding vacuum, one eagerly filled by private corporate interests. Think of it as a two-step formula: creating scarcity where it formerly did not exist, and then making a killing by selling what used to be free. This is exactly what's behind the huge current push to gut Social Security and Medicare. Politicians dependent for election campaign funds on the same corporations licking their chops over the prospect of gorging on the vast sums that privatization would bring within their reach have become willing accomplices in the deception. Their unified chorus, amplified by corporate media, makes austerity sound like the only sane option. Meanwhile the vast majority of us pick up the tab for less democratic solutions. 

For years the pro-austerity juggernaut has relied on a study by Harvard economists Carmen Reinhart and Kenneth Rogoff to justify their argument. As a hint of what kind of money has been behind R & R's work (for those who pay attention to such things), on April 5, 2011 a collection of 40 U.S. senators was gathered to listen to Reinhart & Rogoff sanctify the project to fleece the masses for the benefit of the corporate in-crowd. The key takeaway from the R & R sermon was that any country whose budget deficit levels reached 90 percent of its gross domestic product would necessarily experience negative annual growth in its economy. Thus, the need to reduce deficits by curtailing government spending (and line the pockets of the privateers). As the Center for Economic and Policy Research puts it, "this number (90%) was embedded in the Bowles-Simpson report that came to be the guidepost for debate on the deficit in Washington policy circles. It also has been used by top officials in the European Union and elsewhere as a basis for austerity."

There was at least one major problem with the R&R paper - it turned out to be flawed, if not dishonest. On April 15 of this Year University of Massachusetts economics doctoral student Thomas Herndon dropped an international bombshell by posting his finding that R&R had botched their study on several fronts. Seeking to replicate R&R's study as a class project, Herndon found not one but a series of crucial errors in their work, serious enough to invalidate their conclusion that high budget deficits necessarily stall economic growth.

Herndon's revelation of Reinhart's and Rogoff's blunder has brought a flurry of - no, not apologies for featuring in the destitution of millions globally, but denials and tortured restatements across corporate media, led of course by the privateers and banksters in control of the editorial page of the Wall Street Journal. There are few as desperate as a thief who senses the jig is up.

The most important point about this story is the fact that it is not common knowledge among us Americans. Sadly and alarmingly, cheerleading for the narrative spun by the powers that be has become so prevalent in television, radio, and print - dominated by media corporations invested in the ideology of profits über alles - that it has become widely accepted that the suffering of the commoners must not only continue but increase. The need to seek out better, less compromised information sources has never been so crucial on a wide range of issues, none more important than how we decide to utilize our shared resources.