QUEEN ELIZABETH DIES AT 96.

 

An era ends for the United Kingdom

Victoria Jones/PA Images via Getty Images

Queen Elizabeth II, the world’s longest-serving monarch, died Thursday at her royal estate in Scotland. She was 96. [Vox / Constance Grady] The queen’s family traveled to the estate after doctors expressed concern about her medical condition. Her son Charles is now king. [BBC] The United Kingdom saw major transformations during Elizabeth’s 70-year reign, from many of its colonies winning their independence in the post-WWII era to entering and exiting the European Union. [Reuters / Michael Holden] The queen also led her country through tragedy and scandals involving the royal family, including the death of Princess Diana and the sexual abuse allegations of her son Prince Andrew. [CNBC / Marty Steinberg] Her death begins 10 days of national mourning that will include gun salutes and visits from mourners, and will conclude with her funeral. [NBC News / Patrick Smith]

Lizz Truss is the new UK Prime Minister

 

Former foreign secretary Liz Truss officially became the UK prime minister Tuesday, taking over for Boris Johnson. [Vox / Jen Kirby] Truss, 47, defeated Rishi Sunak in a Conservative Party leadership election to replace scandal-ridden Johnson. [NYT / Mark Landler] Truss assumes leadership as the UK faces its worst economic crisis in decades, soaring energy costs, and the continued fallout from Brexit. [Washington Post / Ishaan Tharoor] In her first speech as prime minister Tuesday, Truss said she would take action this week to provide relief to families facing high energy bills. [USA Today / Kim Hjelmgaard]

Prince Philip, Duke of Edinburgh, dies at 99

 

Prince Philip, Duke of Edinburgh, died Friday at Windsor Castle. He was 99 years old and had been married to Queen Elizabeth II for 73 years. The pair had four children, including Prince Charles, who sits next in line for the throne. The royal family announced the duke’s death Friday on Twitter. [NBC News / Rachel Elbaum] The duke had been in poor health since the New Year. He spent much of February and March in the hospital, first being treated for an infection and later undergoing heart surgery. He was discharged back to Windsor Castle in mid-March. [CNN / Max Foster and Laura Said-Moorhouse] He leaves behind a complicated legacy; some credit him with helping to modernize the monarchy, though he often faced criticism in the press for remarks deemed insensitive or even racist. [NYT / Marilyn Berger] Prime Minister Boris Johnson canceled a planned celebratory public pint as pubs reopened Friday after yet another lockdown in Britain. “He took an ethic of service," Johnson said of the duke. "That he applied throughout the unprecedented changes of the post-war era. Like the expert carriage driver that he was, he helped to steer the royal family and the monarchy so that it remains an institution indisputably vital to the balance and happiness of our national life.” [BBC]

THE MEANING OF THE SEQUESTER: A LONG TERM DISASTER

Felix Vallotton


NY REVIEW OF BOOKS      Jeff Madrick

The sequester is dangerous, but not for the reasons we think. Contrary to what some alarmists predicted, there is little evidence that the automatic, across-the-board cuts to the US budget that went into effect on Friday are causing cataclysmic harm. The stock market has risen slightly to near record heights, and most economists agree that the $85 billion down payment this year on about $1 trillion in cuts over the next ten will not trip the economy into recession. Recent polls, meanwhile, indicate that a large part of the electorate has no opinion on the sequester, which is still poorly understood—making it perhaps less of a political liability for either party than some anticipated.
But what makes the sequester threatening is not that it will plunder the economy in 2013. Rather, it is that these arbitrary cuts are exactly the opposite of what the economy needs both in the short run, and—if the promised $1 trillion in further cuts over ten years is made—in the long term. In the coming months, it will make it difficult for the president to cut the unemployment rate from current levels around 8 percent, a fact that Republicans must enjoy since it reduces their chances of losing the House in 2014, and raises their chances of winning the presidency in 2016 if they can continue to cut spending.

And the sequester will be painful. Educational and housing subsidies will be cut, as will unemployment insurance and research spending. More than $40 billion will be cut from the defense budget, music to my ears, but not to those who will lose jobs at defense contractors. Above all, claims that economic growth down the road will be spurred by reducing the federal deficit through spending cuts are not credible.
Indeed, the real danger of the sequester lies in the misguided deficit-cutting mania that created it in the first place. Put in place by Congress with the president’s approval and encouragement in 2011, the idea of automatic sequestration came out of the same obsession with austerity measures that has put much of Europe into recession and prevented the US economic recovery from fulfilling its potential. Deficit reduction has wide support in Washington and its most active promoters are financed by some of the nation’s wealthiest citizens, who argue that it is a far better alternative than asking them to contribute more in taxes. We must cut deficits now, even before we have a full economic recovery, the thinking goes, to deal with rapidly rising healthcare costs that will drive up the government’s Medicare and Medicaid expenses beginning twenty-five years from now.

This approach to economic policy has no sound basis in either historical experience or current economic analysis. Washington’s austerity economics—the notion that you can induce economic recovery in a weak economy simply by cutting government expenditures—willfully ignores, denies, or declares nonsense the true lessons of the Great Depression, which demonstrated precisely the opposite. More or less since Adam Smith, economists had argued you must increase savings to increase investment, which in turn drove economic growth and produced rising incomes. One way to do this is to get federal deficits down as a percent of GDP. But in the 1930s, it was clear that government efforts to save money had not prevented the global economy from tumbling into severe depression. To the contrary, they helped create the depression of the early 1930s and then a second major downtown in 1937. This is around the time that John Maynard Keynes had the dramatic insight that it wasn’t savings that led to investment but the other way around: more government spending raises incomes and therefore savings, from which more investment is made.
It is true that Keynesian stimulus was derided by economists beginning in the 1970s. Only monetary stimulus—that is, cutting interest rates—was thought to matter. But now rates have been brought so low that they do far less than hoped. And in truth there has been a growing recognition that monetary policy is not by itself adequate to assure a strong economy. Meantime, a “new” Keynesianism developed among some but by no means all mainstream economists, who support the view that modest government stimulus is sensible. But this general approach is a pallid version of the original and still holds, I think too strongly, that reducing deficits is necessary to assure adequate savings.

We need not go back to the Great Depression to understand the dangers of austerity and deficit mania. In our own time, the abysmal performance of austerity-bound European economies have demonstrated the same problem. Take the case of Britain. After the recent global economic crisis, David Cameron, Britain’s Conservative Prime Minister, and George Osborne, his absurdly overconfident chancellor of the Exchequer, repudiated Keynes’ central insight. Two years ago, with the British economy just coming out of recession, these men raised taxes and cut social spending in order to reduce the British deficit and, they claimed, enable newly confident businesses to use all that savings to invest and re-charge the economy. It was pure anti-Keynesianism. The chancellor promised that the budget deficit would fall nicely as a percent of gross domestic product. Thus, a path would be cleared for more capital investment by otherwise “crowded out” private companies.
None of that has come close to happening. Britain is now probably entering its third recession since 2009. With such slow growth, tax revenue is dismal, and the country’s deficit, excluding interest payments, remains the highest, by percentage of GDP, of any European nation. And what of all that promised investment that was predicted? Not only did a chunk of new savings fail to materialize, capital injections in the economy have been weak...
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These policies are an appalling intellectual failure. Yet our current leaders in Washington seem unable to learn this lesson, even in the face of such stark examples of Britain and other European countries. Though he backed the stimulus in early 2009, Barack Obama had already displayed a sympathy for deficit reduction policies before he took office, and he subsequently appointed the Bowles-Simpson commission to suggest ways to balance the budget as soon as possible. He did not accept their proposals, but the austerity advocates quickly gained the upper hand.
Many may wonder why it is so easy to renounce the remarkable Keynes. In part, it is because he so deeply challenged Smith’s Invisible Hand itself, that almost religiously held principle that markets themselves are self-adjusting as prices change to make demand and supply equal.

We all know that austerity economics rules in Europe, but it also rules in the US where the damage done will be considerable if less obvious. Even policymakers who are sympathetic to Keynesianism for the most part propose only moderate stimulus. As a result of Washington’s refusal to raise taxes to cut deficits, the government will not invest adequately in infrastructure, green technologies, public research, pre-k education, and in many other areas of critical need—all in order to meet spurious deficit cutting goals. It also finds expression in a greater willingness to cut needed programs, mostly for the poor, who will suffer as a result....

The economy would have been significantly stronger already had there been not been $1.5 trillion in earlier budget cuts. And it may yet improve once we digest the latest round of cuts. But let’s not mistakenly attribute future improvement in the economy to austerity policies. It will be in spite of them.