"There are those, on both the left and the right of the US political spectrum, who would argue that Republicans have been pushing for austerity in the debt ceiling debate because, whatever its consequences for workers and borrowers, it serves the interests of business and the wealthy. But it doesn't serve those interests at all. Decades ago, America's rich were a true rentier class.
"They got most of their income from bonds and lived off their investments, and their main priority was keeping inflation low, regardless of anything else that happened. So austerity suited them nicely. The rich of today, by contrast, get much more of their income from their jobs and from the stock market, which means that they do better when growth is strong. And, while companies have figured out how to make money even during steep downturns - during this very weak recovery, corporate profits have rebounded strongly - overall corporate profits are below where they were in 2006.
"That's been reflected in the stock market, which, even before last week's precipitous tumble, was nearly 25 percent below its 2007 peak. In fact, the S&P 500 hasn't really budged in a decade. So, while corporate America has been doing well relative to everyone else, it would be doing much better, and investors would be much happier, if growth were stronger and unemployment were lower, even if inflation and government spending were higher. Austerity during an economic slowdown isn't just bad for the unemployed. It's also bad for business."
Read the New Yorker article.
