Glawe: U.S. remains ‘land of unequal opportunity’

Michael Glawe

A few events have occurred in the past couple of weeks that have breathed oxygen into the inflamed discussion of macroeconomic policy in the “Land of Opportunity.” The passing of Margaret Thatcher has, rather ironically (and perhaps serendipitously), coincided with the disintegration of the very-economic policies the Iron Lady championed.

First, a week ago, Olivier Blanchard, chief economist of the International Monetary Fund, warned conservative George Osborne, Chancellor of the Exchequer of Great Britain, that his austerity measures could further deteriorate the already-weak forecasts for Britain’s economy (which has already suffered from slashed budgets).

Second, the release of a new research paper by economists from the Political Economy Research Institute revealed numerous errors and slip-ups in one of the most widely cited and influential pro-austerity papers (Rep. Paul Ryan, Chairman of the House Budget Committee, has referenced it before). The study, “Growth in a Time of Debt,” performed by Carmen Reinhart and Kenneth Rogoff of Harvard, had supposedly found a “threshold” where growth became significantly stifled at a certain debt-to-GDP ratio.

Reinhart and Rogoff subsequently published a bestselling book based on their study, “This Time Is Different: Eight Centuries of Financial Folly,” profiting from their findings.

Fortunately, Reinhart and Rogoff were proven wrong. The Peri Group found rather trivial errors such as miscalculations in the Microsoft Excel coding and data exclusions that severely altered the results.

I am left wondering if the purchasers of the bestseller feel at all cheated.

Yet, the mendacious-austerity pushers remain dominant among Republican lawmakers, and the mendacity persists only as long as the Right denies the overwhelming evidence against their cause. Thus, the debate between Keynesian and Austrian economic policies has manifested as one of the greatest political battles of my generation.

Our representatives are currently faced with a pivotal choice: either we gut our government spending in order to reduce deficits and debt, or we can attempt to further stimulate the economy by boosting aggregate demand and reducing unemployment.

The choice is quite simple, actually: reduce unemployment by expanding the public sector job market and ensuingly reduce debt and deficits after we’ve neared full employment.

As I’ve written on numerous occasions, debt and deficits are not the sources of our economic woes — lack of demand is (which can be derived from unemployment). There is overwhelming evidence suggesting that cutting spending during a recession is harmful to economic growth. In fact, as the International Monetary Fund reported last month, austerity measures may even increase debt over several years (a weaker economy shrinks revenues).

Sadly, the fallacies continue because people have fallen victim to a mantra reinforced by pseudo-evidence created by economists desiring to appear unique and “out there” (I’m looking at you, Reinhart and Rogoff). This is dangerous, capricious and, most of all, ignorant.

So, how does the debate affect my generation? As long as the “freshwater economists” continue to exist, policymakers on the right will have excuses to gut our social programs. In turn, a weakening labor market will not allow my generation to enter the workforce with a job that suits our major and makes use of our skill set. Faced with student debt, we will be forced to take the job we “dream not of.”

This recession will haunt us not for a couple of years, but likely for the rest of our lives.

What’s even scarier is that, by slashing our spending, we leave behind those people who survive on programs such as the Supplemental Nutrition Assistance Program. Inequality of opportunity will worsen if we continue to roll back the social reform we’ve achieved during the past 70 years (How can people seriously believe in a private school voucher system and privatizing Social Security?).

Perhaps we have indeed entered into what economist Paul Krugman described as the Alice-Through-The-Looking-Glass realm, where “virtue is vice, and prudence is folly.”

As citizens of the United States, we take pride in the label “The Land of Opportunity.” But I ask, what opportunity? Children are born into an impoverished life, exacerbated by cuts to government spending they and their parents depend on and the possibility of escape remains a rarity.

Among the developed countries, the United States remains the “land of unequal opportunity” and there are those at the “top” who wish to keep it this way. In response, many of our representatives simply shrug their shoulders and say “That’s just capitalism at work,” without so much as a thought.

Perhaps public sector employees hold the same resentment that John Maynard Keynes once held for the British government he worked for. As the respected economist wrote in a letter to his lover Duncan Grant, “I work for a government I despise for ends I think criminal.”

Michael Glawe is a junior in mathematics and economics from New Ulm, Minn.