Capitalism, Macroeconomics and Reality
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Capitalism, Macroeconomics and Reality

Understanding Globalization, Financialization, Competition and Crisis

James Crotty

The essays comprising this collection analyze the deep flaws in the methodological foundation of mainstream economic theory, and explain how these flaws make mainstream economics more ideology than sound social science. James Crotty develops alternative theories built on realistic assumptions that can explain most of the disastrous economic and financial developments of the past four decades. His work contributes to the collective creation of a solid theoretical foundation on which to build an understanding of the ‘laws of motion’ of capitalism in the post WWII era.
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Chapter 14: The Great Austerity War in the US: What Caused the US Deficit Crisis and Who Should Pay to Fix It?

James Crotty


We have reached what may be a crucial point in the evolution of the political economy of the United States. Rapidly rising deficits at both the federal and state and local government levels, along with prospective long-term financing problems in the Social Security and Medicare programs, have triggered a onesided class war. A somewhat disparate right-wing coalition composed of rich households, large corporations, smaller businesses, ideological conservatives (such as the Religious Right and, more recently, the Tea Party), and conservative politicians, has demanded that the deficits be eliminated primarily by severe cuts at all levels of government in spending that either supports the poor and the middle class, or funds crucial public investment in education, health care, infrastructure and technology. Simultaneously, the coalition has demanded huge tax cuts for wealthy households and businesses. These cuts would ratchet up political and economic pressure to further decimate government social and investment spending by creating even larger deficits. This is an example of the conservative “starve the beast” strategy that pushes for sustained regressive tax cuts under any and all fiscal circumstance in order to shrink government spending other than on defense and programs that enrich corporations.

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