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'Austerity' policy: Low-paid foot the bill

By Sally Kohn, Special to CNN
updated 10:05 AM EST, Wed November 30, 2011
Activists prepare in London for Wednesday's public sector strike, billed as the largest in decades, over huge budget cuts.
Activists prepare in London for Wednesday's public sector strike, billed as the largest in decades, over huge budget cuts.
STORY HIGHLIGHTS
  • Sally Kohn: Austerity policies in Europe failing: Britain on brink of recession, Greece very weak
  • She says people worldwide fed up with pro-big business policies that hurt working families
  • Kohn: Deficit reduction by slashing public and social programs helps the rich
  • Kohn: Austerity policies dismantle what gave the middle class stability in U.S. and Europe

Editor's note: Sally Kohn is a political commentator and grassroots strategist. You can find her at http://sallykohn.com.

(CNN) -- When I hear the word austerity, I immediately think of nuns -- plainly dressed, in austere living quarters, with stern expressions. It's an odd admission coming from a secular Jew who has never set foot in a Catholic school, but not a surprising one given that severe fiscal policies are being meted out on suffering nation-states like swift slaps of a ruler on a wrist.

It's as though profligate countries such as Greece, Italy, the United Kingdom and the United States went on a decades-long bender and are just now being reined in by the moral fiscal authority. Never mind that in most civilized societies, we've long decided that spanking our children is an unacceptable form of punishment, not to mention ineffective. Spanking nation-states is becoming a global fad.

Yet not only are austerity plans failing to rescue wayward nations, they're causing even greater harm.

The United Kingdom was the first country laid across the lap of fiscal austerity. Conservatives in Britain argued that government deficits could be solved by slashing public spending quickly and severely. They got what they wanted, including a particularly drastic set of cuts affecting the country's poor and unemployed. But despite the cuts, Britain's economy has not recovered.

This week, Britain announced it was lowering its economic growth estimates yet again and the multinational Organization for Economic Cooperation and Development (OECD) projects Britain will enter a recession next year. In other words, England was the pilot test for austerity measures, and the pilot test has failed.

Sally Kohn
Sally Kohn

England has been roiled by frequent protests against its austerity cuts. Starting Wednesday, 2 million public sector workers in Britain will strike in opposition to the failed austerity agenda, which has not created economic growth but has created enormous hardship for public sector workers already struggling in a down economy. As with the Occupy Wall Street protests in the United States, people around the globe are fed up with pro-big business government policies that systematically help the rich while hurting working families.

Sure, government spending is to some extent part of the problem. But the larger issue is the lack of revenue as governments around the globe have cut the taxes of big business and the rich, creating revenue holes that the recession only made worse. Now, at a moment when poor and working families are unquestionably bearing the brunt of the suffering, austerity measures further cripple the middle class while bolstering the 1%.

Consider, for instance, the Republican austerity plan for the United States economy, advanced by U.S. Rep. Paul Ryan, chairman of the House Budget Committee. About two thirds of the "savings" he outlines comes from proposals to slash food stamps, Medicare and Social Security. But three fourths of that money would go not to paying down our government's deficit but to giving bigger and bigger tax breaks to the rich.

Similarly, politicians in Greece and Europe could have focused their ire much sooner on the banks that made risky loans in the first place, not just pleading with them to take a voluntary "haircut" but forcing a significant scalping, through loss write downs. The banks that made the bad bets and undercapitalized their risks were initially asked to take a 20% write down on losses. Finally, last month, German Chancellor Merkel extracted a 50% write down deal. But that still means the Eurozone is insulating the private banks and wealthy investors from the rest of their irresponsible lending. All along, Greece's middle class public sector workers have been forced to shoulder more than their fair share of the pain.

Walking off the job in Britain
Massive worker walkout in Britain

In Greece, more than 30,000 public sector employees face termination. For remaining public sector workers, wages will be cut from 20% to 30%, salaries have been capped through 2014, pensions cut and employee out-of-pocket contributions increased and the retirement age increased. Taxes were raised, but mostly sales taxes that disproportionately affect poor people -- as opposed to raising taxes on the prosperous rich. And still Greece teeters on the edge.

The alleged "deficit crisis" is merely a fig leaf to cover the long-standing neoconservative agenda to gouge public sector unions and poverty alleviation programs and further game politics and the economy to help big business and the rich.

The economic elites in power argue that such gains for the super rich will "trickle down" to the rest of us while simultaneously destroying everything that created middle-class opportunity and stability in Europe and America for decades.

Just as its predecessor "structural adjustment" -- imposed by the International Money Fund and World Bank on developing countries seeking loans -- was a ruse to force those nations to turn their natural resources over to multinational conglomerates, "austerity" is a ruse to burden the middle class and benefit the rich.

The prominent 16th century nun St. Teresa of Avila once said, "Pain is never permanent." Arguably, the pain of budget deficits is not. As unfunded wars draw down and economies recover, consumer spending grows along with tax receipts and the deficit falls.

But the pain of budget cuts is definitely permanent --- police officers and bus drivers from Rome to Roanoke have been laid off at a time when finding another job is almost as impossible as digging in your own pocket and finding the money to pay for the vital services lost to cuts.

Long after we've forgotten the excuses about budget deficits and government spending, the pain of deep public sector cuts will drag down individual communities, countries and the world economy -- like the sting from a ruler smack that won't stop hurting.

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The opinions expressed in this commentary are solely those of Sally Kohn.

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