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The agony of Spain
“Deficit reduction” in the USA is identical with “austerity” in euro-zone nations. Here is what austerity (aka deficit reduction) has brought to Spain.
New York Times:
MADRID — On a recent evening, a young woman sorted through a stack of crates outside a fruit and vegetable store here in the working-class neighborhood of Vallecas as it shut down for the night.
The woman, 33, said that she had once worked at the post office, but that her unemployment benefits had run out. She was living (actually squatting) with some friends in a building that still had water and electricity, while collecting “a little of everything” from the garbage after stores closed and the streets were dark and quiet.
She is one of the people the U.S. religious right wing disparages as lazy free loaders who have adopted what wealthy Mitt Romney calls the "culture of dependency."
As Spain tries desperately to meet its budget targets, it has been forced to embark on the same path as Greece, introducing one austerity measure after another, cutting jobs, salaries, pensions and benefits, even as the depression continues to worsen.
Sound familiar? This is exactly what the budget cutters in the U.S. are doing. The difference is that the U.S. is monetarily sovereign. It controls its sovereign currency the dollar. The USA does not need to cut spending at all. But politicians and the One Percent are doing it anyway.
Spain is monetarily non-sovereign, just like you and me, and just like individual U.S. states, counties, and cities. Spain must live within its ability to tax, just as you must live within your ability to earn. Not so with the U.S. federal government.
Most recently, the Spanish government raised the value-added tax three percentage points, to 21 percent, on most goods, and two percentage points on many food items, making life just that much harder for those on the edge.
The value added (VA) tax is a consumption tax. It is designed to punish people who spend a greater percentage of their income on taxable items. The rich, like Romney, don’t worry about a tax on consumables. The rich spend most of their money on investments. No tax there.
At the huge wholesale fruit and vegetable market on the outskirts of this city, men and women furtively collect items that had rolled into the gutter.
“It’s against the dignity of these people to have to look for food in this manner,” said Eduardo Berloso, an official in Girona, the city that padlocked its supermarket trash dumpsters. Mr. Berloso proposed the measure last month after hearing from social workers and seeing for himself one evening “the humiliating gesture of a mother with children looking around before digging into the bins.” He said hundreds of desperate people had been regularly sorting through dumpsters before he took action.
Mr. Berloso prefers that people starve rather than be humiliated. The real reason he put padlocks on trash dumpsters is that the city of Girona depends on tourism. Mr. Berloso doesn't want tourists to see Spanish reality, caused by banker austerity.
The Caritas report also found that 22 percent of Spanish households were living in poverty, and that about 600,000 had no income whatsoever. All these numbers will grow worse as austerity continues to increase.
In America the U.S. Census Bureau last fall reported the percentage of Americans living below the poverty line in 2011 (15.1 percent) was the highest level since 1993. (The poverty line in 2010 for a family of four was $22,314.)
The U.S. Census Bureau report also said, “The past decade was also marked by a growing gap in the USA between the very top and very bottom of the income ladder. Stimulus money has largely ended, and state and local governments have made deep cuts to staff and to budgets for social programs, which will move families closer to poverty.”
Too bad. These lazy privileged people have adopted a “culture of dependency.”
Mr. Berloso’s locks on the dumpsters created an uproar across Spain, where sheer hunger (caused by banker austerity) is fueling more and more protests. A group of mayors and unionists in southern Spain, where unemployment rates are far above the average, recently staged Robin Hood raids on two supermarkets, loading carts with basic foods, and pressing stores to donate more food to the needy.
The dumpster locks help keep people from that “culture of dependency,” and move them toward the “self-sufficiency” of famine.
The unemployment rate is still lower in Girona than the rest of Spain as a whole, but it is rapidly rising. More and more families have no income. Of the 7,700 unemployed in Girona, Mr. Berloso said, 40 percent have now run out of benefits.
On a recent morning, Juan Javier, 29, who had come to collect milk, pasta, vegetables and eggs from one of the distribution centers, was one of the few clients who would discuss his circumstances. A former printer, he has been out of work for two years. “I would like to have a job,” he said, “and not be here.”
In a nearby soup kitchen, Toni López, 36, waited quietly for a free lunch with his girlfriend, Monica Vargas, 46, a beautician. The couple recently became homeless when they fell two months behind on their rent. “We have always been working people,” Mr. Lopez said. “The landlord was knocking on the door demanding the rent, so we said, ‘Here are the keys.’”
Meanwhile in the USA, politicians, funded by the 1%, are determined to cut federal spending. They are firing federal workers. They want to cut Social Security benefits and tax the ones that remain. They want to cut Medicare. They want to cut money for military salaries, and rely on drones.
Deficit reduction, wherever it is implemented, ALWAYS causes a downward economic helix, in which suffering is in inverse relationship to money. Those with the least suffer the most.
The richest 1%, with the help of the politicians, the media, and the compliant economists, have brainwashed the 99% into believing that federal financing is like personal, kitchen-table financing, where affordability is an ever-present issue. But for the monetarily sovereign U.S. government — unlike the governments of Spain, Italy, Illinois, Chicago et al — affordability never is an issue.
For the U.S. government, no amount of spending is “unsustainable.” The U.S. government does not need to “live within its means.” These are concepts appropriate to you and me — since we don’t have a sovereign currency — but they are not appropriate to a government having a currency over which it is sovereign.
The federal deficit is not too high; it is too low. Economic growth requires a growing federal deficit. One of the most basic equations in economics is:
Gross Domestic Product = Federal Spending + Non-federal Spending – Net Imports.
To grow GDP, and end the depression, we must increase federal spending and / or increase non-federal spending. This requires increasing the deficit. This is straightforward mathematics that the 1% hopes you never understand.
From 1919 to 1929, the U.S. ran either a surplus or a balanced budget. During that time, we had 3 recessions, culminating in the Great Depression — cured by spending for World War II.
Today, U.S. politicians, the media and the old line economists (all under the thumb of the 1%) want us to take more of that deficit-reduction medicine that already has destroyed so many lives around the world.
And like sheep marching into the slaughterhouse, we eagerly place our necks on the chopping block. In fact, many angrily attack anyone who dares to warn of the chopping block.
It’s happening in Spain and Greece and other euro-zone (monetarily non-sovereign) nations. The Spanish and Greeks are not victims of a “culture of dependency.” They are victims of their own governments. They never ate out of dumpsters until their corrupt leaders recklessly adopted the euro currency and became monetarily non-sovereign, which forced them into deficit reduction (unlike the USA, where deficit reduction is a purely political move).
The bankers said that Spain needed the euro currency, and Spain believed it. Now Spaniards are literally starving. This is serious, folks.
And it will happen in the USA if the masses continue to accept the deficit reduction lie, and insist on putting their heads on the chopping block of the One Percent.