Austerity: Planned Poverty


Carl Gibson - Reader Supported News

If a math textbook that never underwent an official academic review and was proven to contain basic factual inaccuracies were nonetheless used by an entire school to teach math, wouldn’t it be fair to say that all of that school’s graduates were incapable of doing math? Wouldn’t it make more sense to just replace the math textbooks instead of inadequately preparing thousands of students for basic math in the real world?

The math behind austerity has been debunked. (photo: TPM Muckraker)

The math behind austerity has been debunked. (photo: TPM Muckraker)

As it turns out, the “fuzzy math” George W. Bush talked about in a debate with Al Gore is actually the math used by influential European Union leaders and EU governments like Greece and Spain in the midst of a crippling depression. Those leaders have cited the study “Growth in a Time of Debt” by Harvard Economics professors Carmen Reinhart and Kenneth Rogoff as their justification for cutting billions from essential government programs and causing millions of layoffs all over Europe. The Reinhart-Rogoff study, which claims that GDP growth slows significantly when a nation’s debt exceeds 90% of that country’s GDP, was also cited by Representative Paul Ryan in his austerity budget that called for even more layoffs and more cushions for the rich. The only problem is that this influential study has recently been proven to be fundamentally, totally wrong.

When 28-year-old Thomas Herndon, a grad student in the UMass-Amherst Economics Department, was assigned to replicate the data from an economic study – essentially to perform a peer review – he chose the Reinhart-Rogoff paper. Turns out that study had never been peer-reviewed, and Herndon found that the study’s Excel spreadsheet used to average GDP growth numbers from different countries was laden with errors. Along with several rows not being averaged in the spreadsheet’s final tally of GDP growth, economic data from Canada, Australia, and New Zealand was excluded. Those are countries whose debt exceeded 90% of GDP but still experienced periods of economic growth, disproving Reinhart and Rogoff’s initial hypothesis that high levels of debt hurt a nation’s economy. Even Stephen Colbert made austerity a laughingstock in his recent interview with Herndon.

Essentially, the austerity math textbook used by all of the world’s leaders who swear by the austerity method was debunked by a college student who gave the text its first peer review. As it turns out, firing lots of people doesn’t help the economy grow, since more people with fewer jobs means fewer people buying stuff. Income tax revenues go down because people’s incomes are down, sales tax revenues go down because people aren’t buying stuff, and social safety net spending goes up because fewer people have jobs. It should already be obvious to anyone that austerity doesn’t alleviate economic growth, but rather contributes to further economic malaise.

We’ve seen the consequences of austerity both here and abroad. In Europe, the endless layoffs in the public sector have contributed to record levels of unemployment, levels not seen since the Great Depression, with no relief in sight. Here in America, the recent sequester budget cuts have triggered furloughs in the FAA, making airports a nightmare as thousands of flights are continuously delayed. You can view a map here showing how many jobs the sequester has eliminated so far on a state-by-state basis.

The joblessness that is a direct effect of austerity has led to desperate situations for many Americans. While the “recovery” that took place between 2009 and 2011 benefited Americans whose net worth exceeded $500,000, the other 93% of Americans saw their mean wealth drop by roughly $6,000, according to Census data examined by Pew Research. As the youth unemployment rate hovers near 20%, college students are going hungry and homeless across America. When a Laney Walker supermarket closed in Georgia, the store had arranged for a local church to pick up all of the store’s food to give to the poor. But when the church never came by, the food was unloaded into the parking lot where hungry people gathered to take it back home to their families. However, the police were concerned about the potential for a riot, so they restrained the crowd of hungry people while all of the perfectly good food was thrown in a dumpster. It’s like the Hunger Games, except it’s non-fiction.

For most Americans, chronic unemployment is issue #1. Yet the 113th Congress and the Obama administration, hopelessly out of touch with the rest of us, continue to focus on cutting things that most of America depends upon. Obama is negotiating backroom deals with Republicans to find ways to gut Social Security and Medicare. And at a recent 90-minute Congressional hearing on the unemployment crisis, only one member of Congress initially bothered to show up. As the web site plainly shows, Congress votes in favor of whoever gives them the most money. Unemployed people don’t have enough money to hire lobbyists. Austerity hawks like the US Chamber of Commerce and Wall Street billionaires like Pete Peterson do.

On May 18th, unemployed people from all walks of life will be marching all the way from Philadelphia, Pennsylvania, to Washington DC demanding green jobs that will address both the climate crisis and the jobs crisis. It’s time for Congress to hear from those with the biggest need instead of those with the biggest wallets.


Carl Gibson, 25, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary “We’re Not Broke,” which premiered at the 2012 Sundance Film Festival. He currently lives in Madison, Wisconsin. You can contact him at, and follow him on twitter at @uncutCG.

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