With our economy and sense of social normalcy completely upended to combat the spread of coronavirus, it was only a matter of time before we’d hear the calls for austerity. They come in well-messaged colloquialisms like “time to tighten our belts” and “we must trim the fat.” Many will join in. But just as we have to do everything we can to suppress the spread of coronavirus, we have to do everything we can to suppress the spread of bad, reactionary ideas that follow it.
Make no mistake—austerity measures are the exact opposite of what we should be doing. They will only perpetuate the economic contagion caused by this pandemic, and will hurt the people who need help the most.
Workers, families, and small businesses around the United States are already in free fall. While some will be caught by the safety net previous generations have fought to protect, many others still can’t see the bottom. A record 180,000 Washington workers filed for unemployment insurance last week alone. That’s a 41 percent increase over the already-staggering 128,000 claims filed the week before. Projections released by the Economic Policy Institute on April 1 estimated 449,000 Washingtonians would be out of work by July. Given that we’re not even through the first full week of April and already careening to meet that three-month projection, Washingtonians are rightly anxious that things will get worse.
Calls for austerity are profoundly misguided when we face such enormous uncertainty in our health, our economic future, and our personal lives. Not only do we need to protect and expand services to aid those in need because of this crash, but calling for austerity amidst an economic crisis that has seen thousands already lose their jobs betrays a lack of understanding around how our economy actually works. Our economy didn’t begin to crash because things got tough for the rich and corporations at the top. It crashed because consumer demand collapsed when millions of Americans lost their wages, which led to businesses making less money, which led to layoffs, and so the cycle continues. Austerity cuts will only accelerate the collapse of consumer demand, and with it, our economy.
You can’t cut your way out of this negative feedback loop. The only way to break the cycle is by investing in programs and infrastructure that put more money in the pockets of workers and businesses to promote economic growth in our communities. To save our economy, we have to ensure the real job creators— middle-class Americans—have money to spend.
Arguments that the situation we’re facing is too large to address at a local level are just excuses to avoid common-sense action, and editorial boards calling for deep budget cuts demonstrate a fundamental misunderstanding of this economic principle.
This destructive approach would throttle state spending, undoing critical investments in social services that so many families depend on to make ends meet. Even if critical direct services were spared, the call for cuts to government infrastructure elsewhere, often recklessly suggested by pro-austerity voices, would mean the elimination of countless more good-paying jobs.
Instead, we need to boost safety net programs for families and increase financial support for small businesses, so when the quarantine inevitably ends Washingtonians can emerge ready to fully participate in the economy. We need to move forward with capital projects, and even consider making new investments in infrastructure, including clean energy or transit that would create thousands of good-paying jobs for the hundreds of thousands of workers who have lost theirs.
To be sure, this crash will leave a massive hole in state revenue, potentially shrinking funds by up to 15 percent. There’s no denying this will be devastating to the state budget, and we saw it Friday when the governor had to make $445 million in painful cuts to the operating budget passed by the Legislature just a month ago.
But in times of crisis, we have to be mindful of who is impacted most by our decisions and how the economy really works. We learned this lesson in the Great Recession. Years of unsustainable state budget cuts and shrinking the size of government across the board hurt thousands of Washington families, and it only perpetuated economic stagnation and promoted wealth inequality. Even a decade later, many critical state services like Temporary Assistance for Needy Families (TANF) still haven’t recovered.
It is paramount we take a different path this time. Because of our state's upside-down tax system, our lowest-income families pay an exponentially higher share of their income in taxes than the richest people and corporations among us. Now, as we’re facing this economic collapse, many are clamoring for workers, families, and small businesses to sacrifice even more.
Instead of asking them to pay the price for cuts, we should make the common-sense choice that would also be best for our economy: raise new revenue from the super-rich to invest in programs and infrastructure that will grow our economy and pull us out of recession.
Austerity is a knee-jerk reaction. When things are tight in your own life, you don’t want to spend money. But the economy isn’t a household budget where the balance sheet has to equal out at the end of every month. We can't squeeze growth out by fleecing programs for the lowest-earning participants in the economy, many of whom have now been deemed “essential.”
For the economy to recover and to thrive, we need to make investments that ensure maximum participation. Our response can cause a shrinking negative feedback loop, or a virtuous cycle in which the economy grows for everyone. Don’t be fooled by reactionary voices who would have you believe otherwise—we tried to shrink our way to growth in 2008. It didn’t work then, and it won’t work this time.
We have two choices before us: grow our way out of this crisis, or wither into it. We need to tax the rich to save our economy. Our lives depend on it.
Sen. Joe Nguyen represents the 34th Legislative District in the Washington Senate.