The issue of austerity or public deficit spending/public debt is framed for the general public a.k.a. the little man as a moral tale. Why? Political economics always moralizes because (i) it has no sound scientific foundation at all, and (ii), the little man only understands soap operas and morality plays.
The current stagings go as follows:
• Bad cop/foe/Orthodoxy: Debt is bad, you have sinned, you have yourself and your government allowed to spend beyond your means, you jeopardize the future of your children, your attitude is irresponsible, there is no such thing as a free lunch, now you have to pay, we all have to tighten our belts.
• Good cop/friend/Heterodoxy: Public debt is entirely different from private debt, it pays for itself, it creates income, it increases employment, it builds public infrastructure, it produces private financial wealth and triple-A financial assets for savers, ultimately we owe the public debt to ourselves, public deficit spending and inflation-free money creation for a growing economy are the same things.
The little man is lost between these arguments because, taken one by one, each one makes good sense but on the whole, they contradict each other. Orthodoxy and Heterodoxy are irreconcilable. Obviously, the economic experts themselves cannot agree on what is true or false.
It is important for the little man to realize that there is NO such thing as an economic expert. Economics is a failed science and BOTH orthodox and heterodox economists have no idea how the profit- and price mechanism works. Contrary to their claim, economists are NOT scientists but merely political agenda pushers/useful idiots.
The absurdity of economics consists in the fact that economists themselves do not know which agenda they ultimately promote because the theories they cling to are all false. Neither Orthodoxy nor Heterodoxy has the true theory. Therefore, the economic policy guidance of BOTH orthodox and heterodox economists lack sound scientific foundations, BOTH are a hazard to their fellow citizens.
The discussion about austerity delivers the proof of the utter scientific incompetence of political economists. Neither Walrasianism, Keynesianism, Marxianism, nor Austrianism got the fundamental concept of economics, i.e. profit, right. To make the argument short, the axiomatically correct Profit Law for the economy as a whole is given as Qm=Yd+(I−Sm)+(G−T)+(X−M) which reduces to Qm=G−T for Yd, I, Sm, X, M = 0. The simplified macroeconomic profit equation says that the monetary profit of the business sector Qm is equal to the deficit G−T of the public sector. It holds, Public Deficit = Private Profit.
So, from the standpoint of simple self-interest, the one-percenters and their useful academic spokespersons should argue FOR deficit spending * and the ninety-nine-percenters and their academic spokespersons should argue AGAINST it. Curiously, just the opposite happens since Adam Smith railed at public debt.
Fact is that the measured increase in the relation between profit and wage income in the past decades has no other cause than the increase of public and private deficit spending.#1
Because neither Orthodoxy nor Heterodoxy has the true profit theory their economic policy proposals are counter-productive or regressive for the social groups/classes they speak for. Fact is that nobody has done more for the one-percenters than deficit spending heterodox economists who claim to ‘serve a progressive purpose’.#2
With regard to public deficit spending/public debt, it is Heterodoxy who has taken the little man for a ride.#3
#1 Profit and the decline of labor’s nominal share
#2 Intellectual deficit spending' and 'Austerity and the idiocy of political economists' and 'MMT: The joy of public deficit spending' and 'MMT and the magical profit disappearance' and 'Who or what exactly did Keynes save?' and 'Keynesianism as ultimate profit machine' and 'Profit and the collective failure of economists'.
#3 Mass unemployment: The joint failure of orthodox and heterodox economics
Related 'The unintended consequences of deficit spending' and 'Austerity and the idiocy of political economists' and 'The general theory of scientific incompetence' and 'MMT, money printing, stealth taxation, and redistribution' and 'MMT is ALWAYS a bad deal for the 99-percenters'.