Words&Dirt

“It’s always amusing to see people who think themselves the center of the universe. Take the recent spread of the Blight [references follow for readers not on those threads and newsgroups]. The Blight is an unprecedented change in a limited portion of the Top of the Beyond––far away from most of my readers. I’m sure it’s the ultimate catastrophe for many, and I certainly feel sympathy for such, but a little humor too, that these people somehow think their disaster is the end of everything. Life goes on, folks.

At the same time, it’s clear that many readers are not paying proper attention to these events––certainly not seeing what is truly significant about them. In the last year, we have witnessed the apparent murders of several Powers and the establishment of a new ecosystem in a portion of the High Beyond. Though far away, these events are without precedent.

Often before, I have called this the Net of a Million Lies. Well, people, we now have an opportunity to view things while the truth is still manifest. With luck we may solve some fundamental mysteries about the Zones and the Powers.

I urge readers to watch events below the Blight from as many angles as possible.”

––A Fire Upon the Deep, by Vernor Vinge, loc. 9978-93

“A financial crash coupled with a collapse in housing values led to a deflationary depression. High unemployment, lagging wages, and the damage to banks deepened the downturn. The unwinding of borrowing against deflated assets was a further drag on recovery. In a debt deflation, low interest rates were not enough to restore prosperity. Obama’s Recovery Act curbed the rate of collapse but was not sufficient to break the deflationary cycle.

Not surprisingly, all these factors worsened the government’s fiscal picture. With earnings and other economic activity down, tax receipts fell. Emergency outlays rose, including unemployment compensation, food stamps, Medicaid enrollment, and the one-time stimulus. This widened the federal deficit, which was relatively high to begin with because of the Bush administration’s two wars and two huge tax cuts. But paradoxically, the economy needs more deficit spending for several years if it is to escape the deflationary trap.

As a description of historical events, this understanding of a debt deflation reflects a broad consensus on the cause and cure of the Great Depression. Yet as applied to today’s economic challenge, the same analysis is far outside the political mainstream. Key figures in both parties, influential commentators in the press, and most business leaders have a diametrically different story. In their narrative, the economy’s biggest problem is a not depression and debt deflation but public deficits. They view deficits not as an effect of the prolonged downturn but as the cause. Hence, the primary task of public policy is not to produce an economic recovery but rather to reassure financial markets by acting to cut the deficit.

The large deficits and the increasing ratio of debt to GDP are seen as depressing business confidence and risking inflation. Get the economy on a certain path to a lower debt ratio and confidence will return. Supposedly, if we fail to sharply cut the deficit, foreigners will stop lending us money, the dollar will crash, and the economy will drown in the burden of its debt. As politics, deficit reduction is superficially compelling because voters tell pollsters that they think deficits are too high, and commentators contend that rising debts are the emblem of irresponsible partisan deadlock. As economics, however, the austerity cure is deeply perverse.

Yet a well-funded austerity lobby dominates the debate. Deficit hawks in both parties have called for a ten-year program to steadily reduce the deficit and ratio of government debt to GDP. The two parties are divided over whether deficit reduction should be based entirely on cuts in public spending (the Republican view) or whether it should also include tax increases (the centrist Democratic position). But both have dutifully put forth multiyear plans that typically cut the deficit by at least $4 trillion over a decade. The intriguing question is how the bad economic advice of the austerity lobby became the prevailing view.”

––Debtors’ Prison: The Politics of Austerity Versus Possibility, by Robert Kuttner, pg. 49-50