"Austerity" is one of those funny things. People read the word "austerity," and they think "belt-tightening." They get a whole Depression-era righteousness - yes! We can spend less! - until it settles in that austerity is not that easy. This is why those Greeks were rioting. This is why protestors took over the statehouse in Madison. Austerity is not easy. It hurts.
That’s why yesterday I was glad to pitch a conversation about how the debt ceiling debate affected the U.S. The idea was to take a look at the world of Wall Street and finance after the debt ceiling debate. This debate didn’t just raise the debt ceiling. It set a major financial landmark in American history: we, as a country, have decided to be like Greece, Italy and all those other overspending countries. We have decided to cut our budgets. We are now officially entering an age of austerity.
I have talked to a lot of people on Wall Street about our economic situation. I’m going to tell you something you don’t want to hear: they say they won’t take this deficit-cutting talk seriously until they see the government cutting programs like Social Security, Medicare and Medicaid. It makes people mad - in fact, enraged - just to hear this. They tend to devolve into namecalling, personal attacks, and questionable assumptions about one’s parentage. Witness the reaction of one Elizabeth Fisher of Laconia, NH:
Elizabeth Fisher: I was really angry because she [and by “she” she means me] made it sound like investors are just waiting to see whether we’ll actually make the cuts to entitlements. And I’m 63, and I’m sitting here hoping there’s going to be enough left of the entitlements so that I can survive the rest of my life.
I totally understand you, Elizabeth Fisher of Laconia, NH. It sucks. Austerity sucks. At least you’re 63 and worried about entitlements lasting the rest of your life. I’m in my 30s - and even though a sizable chunk of my biweekly pay goes towards paying for these programs, I know they won’t be there for me when I’m 63. Or when I’m 50, for that matter. And I didn’t make it sound like Wall Street is looking for these cuts; they are.
You can blame Wall Street for wanting to see these cuts, but there’s no point. Wall Street isn’t gunning for your poverty. As @fbonacci said on Twitter, "Wall St hates the trend lines not so much the underlying programs." They just want to see Treasury bonds stay strong. For Treasury bonds to stay strong, the U.S. has to keep its credit rating. For the U.S. to keep its credit rating, the $14 trillion deficit has to be cut by $6 to $8 trillion over the next decade or so. Let’s think about the math there. $8 trillion American dollars.
How are you going to do that? You can end every war and de-fund the Pentagon and you still wouldn’t get there.
So we know it’s going to hurt like hell. It’s going to involve programs that have become part of the fabric of our society and things we’ve come to depend on. It’s going to involve education, Social Security, Medicare and Medicaid. That’s just the math.
That’s why austerity sucks - it’s not just belt tightening. It’s not just spending less. It’s the breaking of social contracts. It’s taking away what people thought they were promised. It’s having money taken out of your paycheck for 40 years and still having to scrape by because time has passed, the government authorized expenditures it couldn’t really afford, and your potential retirement money subsidized that.
But - here’s what drives me crazy as a reporter - did you say anything about it before? It doesn’t seem a coincidence that voter apathy, financial illiteracy, and government spending have all risen in tandem. As reporters, we’re trying to inform you so that you can be a fully functioning citizen. We tell you: here’s the debate. Here’s what people are saying on both sides. And too often, the response we get back is, “how DARE you tell me what those people think? La la la la, I can’t hear you!”
Well, take your hands off your ears. Read the business section. Read the political stories. Are you listening? We are not weaving tales. We are here to tell you what people are saying that’s going to affect your life. That’s our job. And when you shoot the messenger, you’re wasting your energy and mine. These are the terms of a participatory democracy: you have to participate. You have to read newspapers and listen to the radio. You have to try to understand the financial world, because you cannot live in this country and refuse to understand business and expect people to look out for your interests. If you don’t like how the government is spending, take it up with the government. If you don’t like where the financial system is going, tell your bankers.
But way too often, a lot of people - even intelligent people - prefer to live in an anaesthetized haze when it comes to anything with a dollar sign near it. They think business news is only for “businesspeople,” and Wall Street has only to do with with mortgage bonds or 401ks.
In fact, business and government are inextricably bound together, as the financial crisis showed. They have a permeable membrane between them, and people and money go back and forth with no obstacles. This has been true since Alexander Hamilton created the American banking system and the national debt.
So yes, I know you don’t want to hear it. But it pays to know that Wall Street hates your entitlements. So who do you complain to about that? Not me. Not journalists in general. Maybe someone who’s paid to do something about it.