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Sucking it out faster than you make it, Income distribution and gdp 2008

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I am reposting this at Dan’s suggestion as it relates to the recent post by Steve Roth.  I have edited it slightly along with a retitle to clean up some wording and hopefully have made it easier to read.  For those new here, my posts started with income inequality and a thought that we changed our economy as to how we would make money starting in the 80’s.   My one new thought is that the obvious political party to promote policy that addresses the issue noted in this post and it’s links still don’t fully get it.  Yes, Sanders, Warren etc are talking policy, but even they are not discussing the philosophy and processes of an economy that allows the massed to “get it”.   In simple terms it is the difference of references when talking about team work.  The apparent accepted reference being sports…competition, win.  The truth as I see it however, is that the appropriate reference for team work in a democratic society’s economy is that of a barn raising.  When is the last time you heard anyone use that reference.   Hell, even in my other outlet for relaxation, music, the concept of an orchestra or large band is dying and competition models are being applied.  In Trump’s words “Sad”.

But then again, we’ve lost the idea of the rat race.

Income distribution and GDP, it matters

Daniel Becker | December 28, 2008 9:00 am

 

US/GLOBAL ECONOMICS

I should title this: Yeah, it is just like 1929 you freak’n see, hear and speak no inequality monkeys.

I have this pile of income data sorted out from Saez’s work (the GDP is BEA). My thoughts regarding our economy is that income inequality (or equality) matters. It matters so much, that it is the all defining focus of government in a democracy. Every policy made should be judged against this goal of ever greater equality as we use the tool called “economy” for the betterment of our lives.

For most (even the tippy-top earners), the biggest share of income is not earned from money, but from labor, whether physical or cognitive. Because of this, there must be effort as reflected in our policy toward regulation and initiatives that continually work to equalize the share of income. I am confident, that just as Mike Kimel showed there is a low and high to top marginal rates correlating with GDP growth rates, the same is true for share of income. That’s my thoughts.

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Nick and Joe are doing their best to beat back Milton Friedman et al

Nick Hanauer, Joseph Sitglitz videos.

This is the latest presentation Nick Hanauer has made regarding the upside downness of our economy and the backward, selfish thinking that has gotten us here. In this one he is talking to his “plutocrat” friends:

We plutocrats need to see that the United States of America made us not the other way around. That a thriving middle class is the source of prosperity in capitalist economies, not a consequence of it. And we should never forget, that even the best of us, in worst of circumstances are barefoot by the side of a dirt road selling fruit.

He takes on economics and how it is used today by plutocrats to reinforce their positions:

…for thousands of years, these stories were called divine right. Today, we have trickle down economics. How obviously, transparently self-serving all of this is.

 

Then comes Joseph Stiglitz talking about the cause and fix for income inequality.  This is based on his latest book.     He lays the cause to the “supply side” economics and thus the results of politics and policy.  It was a “disaster”.

The financial sector in recent years has been more active in taking money out of corporations than putting money into the corporations.  The flow is going the other way.

It is nice to hear someone talking about the solution in a comprehensive way.  A way that reflects understanding society and its economy in the same manor we have come to understand the environment.

Wouldn’t you just love to see them together on one of the Sunday morning shows around at table with say Senator Warren and Sanders and on the other side the Koch brothers and say Paul Ryan, McConnell and Boehner?  Maybe a Chicago School boy or girl?  Let’s throw in Jack Lew or who ever is the latest to hold that position.  How about someone from labor and the US Chamber to balance it out?  Better yet, how about simply a table of Nick, Joe, Warren, Sanders, Labor and Robert Reich maybe also Paul Krugman.  Forget the fair and balance act.

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Sore-Losing Doesn’t Bode Well for Well-Considered Policy Choices on Taxes…

by Linda Beale

Sore-Losing Doesn’t Bode Well for Well-Considered Policy Choices on Taxes…

Romney and Ryan have apparently joined the GOP sore-losers ranks most ably demonstrated by John McCain’s bitter post-presidential candidate spin.  Romney betrayed the GOP’s disregard for ordinary Americans in a post-election talk with some of his major donors.

Like his “47% comment” in which he disparaged those who don’t have to pay income tax (but generally pay payroll and other taxes) by asserting that they aren’t personally responsible and enjoying being dependents, Romney’s comment about the reasons he lost essentially blames the voters for taking bribes from the sitting president.   He suggested that Obama appealed to specific interest groups “the African American community, the Hispanic community and young people” with generous “gifts” like health-care reform, amnesty for children of illegal immigrants. See  Maeve Reston, Romney attributes loss to ‘gifts’ Obama gave minorities, LATimes.com (Nov. 15, 2012).

Young voters, Romney said, were motivated by the administration’s plan for partial forgiveness of college loan interest, the extension of health coverage for students up to age 26 on their parents’ insurance plans and free contraception coverage under Obama’s healthcare plan, which he credited with ushering greater numbers of college-age women into Obama’s coalition.
The extended insurance coverage, in particular, was “a big gift to young people,” he said, noting that they turned out as a “larger share in this election even than in 2008.”  Id.

Similar language was used to describe the reasons African Americans and Latinos voted in large numbers for Obama.

Such willingness to attribute defeat to political bribery goes a long way in demonstrating how out of touch the GOP is with what government should be doing.  There is some obligation for politicians to serve the people–thinking in the long term and not just for the short term, but considering what kinds of programs merit consideration because of the good they do for individuals and in turn for society. Romney’s deafness to this issue–and his view that taking care of the wealthy few is the only goal of tax policy (and probably spending policy as well)–justly helped in his defeat.  It is terribly important that federal officials recognize the staggering inequality now existing and growing in this country and its impact on all of our lives and the sustainability of the economy as well as the future of our democratic institutions. Romney didn’t get it.  Obama got it imperfectly.  Given a choice, a majority recognized the difference.

It is now time for the GOP to take off its blinders and get a better sense of how their economic policies and in particular their tax policies have been harmful to ordinary Americans and hence to the economy.

cross posted with ataxingmatter

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The (Truly Dangerous) Bull In a China Shop: The American Value of Supporting Gratuitous Insults of Other Countries’ Majority Religions

After expressing sorrow about the deaths, Mr. Romney told reporters on the campaign trail that the Obama administration had tried to appease Islamic extremists who should have been condemned instead. He said a statement issued by the American Embassy in Cairo before the deaths criticizing an anti-Islamic video was “akin to an apology” and a “severe miscalculation.”

“The first response of the United States must be outrage at the breach of the sovereignty of our nation, and apology for American values is never the right course,” Mr. Romney said, speaking at a campaign stop in Jacksonville, Fla. He added, “They clearly sent mixed messages to the world.”

Embassy Attack Fuels Escalation in U.S. Presidential Race, Peter Baker, New York Times, today

For the last few days I’d thought that all Obama had to do to wrap up this election was run ads showing clips of Romney’s bizarre interviewon last Sunday’s Meet the Press—e.g., “Well, the specifics [of the tax plan] are these which is those principles I described are the heart of my policy.”—maybe juxtaposed with clips of Romney’s speech to the Detroit Economic Club last February in which he identified some specifics, er, principles.  (Or is it principles, er, specifics?  Hard to tell, with such specific principles.)

And I still think that an ad of that sort would do the trick.

But I also now think that a precise, appropriate response by Obama to Romney’s weird statement would effectively end Romney’s election chances.  It is, after all, hard to imagine a more dangerous statement by a president, and therefore by a presidential candidate, than the pronouncement that America’s values—America’s values— include wanting Americans to deliberately offend the world’s Muslims. 

Romney apparently believes that it’s fine to risk American lives overseas (including, presumably, members of our military) by appearing to support such pointlessly offensive provocation.  Obama should point this out, even if the news media doesn’t.

But Obama also shouldn’t allow the detachment of those comments by Romney, which indicate pretty starkly that Romney doesn’t understand even the concept of diplomacy, from the implications of those comments in spheres beyond foreign policy and defense.  I’ve wondered for a while now why the Obama campaign hasn’t emphasized more Romney’s persistent habit of drawing conclusions based upon erroneous fact or upon no facts at all. 

The very essence of Romney’s candidacy, at least originally, was his claimed cool-headed judgment and problem-solving ability.  Yet time and again he appears unable to accurately or adequately assess basic facts and understand even the most obvious implications of those facts—and of his own statements and conduct.  What has been apparent to me for nearly a year now, and what this incident should now clarify for the general public, is that Romney is not prompted to action—whether in foreign policy, defense, the economy, or anything else—by anything other than immediate opportunism and his adopted ideology.  And that, even worse, he seems unable even to understand the implications of what he says, what he proposes and what he does.

I don’t see how his election hopes can survive his comments of yesterday and today. 

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Which (macro)-economists are worth listening to?

One could add a few names, and people did in comments.  One could also add a couple more thoughts  to Jonathon’s criterion, two of which could be admitting to mistakes and fixing parts of the model one is using if missed called, and a caveat around whether an economist could explain his/her model well and clearly after the biggest financial event in the world and history occurred (maybe not paying public attention?).

Jonathon Portes (micro) at  Not the Treasury View asks:

Which (macro)-economists are worth listening to?
This post relates to the ongoing blog debate on “the state of macroeconomics”, which I contributed to here, and which has drawn in a whole host of economics bloggers who know far more about modern macroeconomic theory than I do.  However, here I want to address a related, more mundane question, but one which is perhaps more relevant to most non-economists’ concerns.   That is,  when economists argue about the correct stance of policy, who should we (policymakers, commentators, and the general public) listen to?

This question was prompted by a recent exchange I had with Ed Vaizey and Simon Hughes on the BBC’s Daily Politics: I pointed out that not only was the government’s decision in 2010 to cut the deficit too quickly doing considerable economic damage, but that this was both predictable and predicted by economists such as Paul Krugman and Martin Wolf. Their response was essentially “how were we to know which economists to listen to? Others were saying the opposite”.

This is a fair question.  My answer to it is that policymakers and the public should listen to economists who fulfill two critera: first, they have made empirically testable predictions (conditional or unconditional – see Krugman here) that have proved, by and large, to be broadly consistent with the data; and second, they base those predictions on an analytic framework (not necessarily a formal model) that is persuasive.  In other words, getting it right alone is not enough; it should be possible to show your workings – to explain why you got it right. Otherwise, your predictions may be interesting, but they tell you little about how to formulate policy.  (bolding mine…Rdan)
My shortlist (apologies in advance to those I’ve omitted) of economists commenting on macroeconomic policy who I think qualify is something like the following:

  • KrugmanDelong and Wren-Lewis on fiscal policy when interest rates are at the zero lower bound;
  • Adam Posen on monetary policy when interest rates are at the zero lower bound;
  • Martin Wolf on private sector savings and public sector deficits (the financial balance approach);
  • Richard Koo on the implications of a “balance sheet recession”

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Bull In a China Shop

Romney said a Polish leader told him during his visit that his country’s economic philosophy is, “You don’t borrow what you can’t pay back.” The presumptive Republican presidential nominee used the line to draw an implicit contrast with President Obama, saying the world — and, by definition, the United States — should emulate Poland’s economic and societal transformation toward smaller government.

“Rather than heeding the false promise of a government-dominated economy, Poland sought to stimulate innovation, attract investment, expand trade and live within its means,” Romney said. “Your success today is a reminder that the principles of free enterprise can propel an economy and transform a society.”

Well, the big debate among political pundits today is, of course, whether Romney’s bull-in-a-china-shop performance will hurt his election chances, given that, after all, it’s economics issues that will determine the outcome of the election.  The consensus seems to be that it won’t.  I think it will—given that it’s economics issues that will determine the outcome of the election.

The state of the economy, and its immediate prospects, certainly will be a key issue in most voters’ minds.  But so will the apparent competence of Obama’s challenger—and the likely effect of the challenger’s policy proposals on the economy and on the larger panoply of budgetary (taxing and spending) policies on both the near-term economy and on the very nature of American society. 
The supposed raison d’être for Romney’s candidacy, at least as advertised to the general public (if not to, say, the Koch brothers), is his claim that he would be a more competent steward of the economy that Obama has been.  But although most of the public doesn’t yet know it, that claim is based less on his role as a private-equity game player (and stellar tax avoider or evader) and on his role as savior of the Salt Lake City Olympics than on his policy proposals: to significantly increase spending on the proverbial military-industrial complex and dramatically decrease both domestic spending and tax revenue. Contrary to the punditry’s meme, Romney hasn’t been unspecific about his proposals. He spelled them out clearly during the primary season, e.g., in a speech last February to the Detroit Economic Club, leaving only the simple math computations to be completed by the media and the Obama campaign, and some members of the high-profile media finally have begun to complete them.  But Romney has been in successful Etch A Sketch mode since wrapping up the nomination, and thus far has been able to make the public think that what matters is his competence level—and that he’s competent.

No more, I suspect. In the Washington Post article I referenced above, a Romney aide named Stuart Stevens who is traveling with the candidate is quoted as telling reporters, “He has a tendency to speak his mind and to say what he believes, and whenever you do that, there will be those that disagree with you, and there will be those that agree with you.  That’s what he’s done in these situations. I think people like that. I think that this idea that you have to not speak your mind is something that’s not very appealing to people.”

One problem with this is that Romney has a habit of only rarely speaking his mind and, instead, of speaking what he thinks is the mind of the political constituency he’s targeting at the moment—and that on this trip he did both, and both revealed serious incompetence.  People find unappealing this idea that you have to not speak your mind.  But they also find unappealing this idea that you don’t know when it’s inappropriate to speak your mind, and that you don’t consider or don’t even recognize, the potential consequences of what you say and where, and in what context, you say it. 

I suspect that people will find it unappealing that if this candidate appears so lacking in judgment or so utterly self-interested that he either didn’t recognize or didn’t care about the obvious international implications of his comments, he is unlikely to possess the judgment to recognize the consequences of his decisions in economic policy—or to care about the broader consequences for the country.  His interests are narrow and they correspond to those of the Koch brothers and of the private equity set.  And, whether by design or unconcern or simple cluelessness, nothing else will matter to him.

In other words, you don’t borrow what you can’t pay back, except to increase military expenditures—in part to enable the wars that Romney seems to want to get us into or that he may accidentally precipitate, and in part as his preferred version of crony capitalism and Keynesian economics—and to ensure an ever-lower tax rate for the wealthy.  And Poland—which (surely) has a more progressive tax code than the U.S. does (what is Poland’s top tax rate, anyway?), and which probably has national universal health insurance, and which has a strong labor movement and surely more-regulated financial institutions than ours, and which didn’t experience a crazy housing and private-debt boom and bust in the last decade, and whose government likely spends a good deal on infrastructure projects—is a reminder that the principles of free enterprise can propel an economy and transform a society. 

Just like our country was, back in the era that Romney says was anti-free-enterprise.  Those high tax rates, and all that regulation of banks and industry back then, y’know.

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It’s not how rich we are, it’s how equal we are.

This is a 16 minute * lecture by Richard Wilkinson. It is posted at TED. I am posting it here, as I can not believe this information has not received more attention now that the US is awakening from the decades long delusion of prosperity which did not and as shown in the lecture could not lead to greater justice (which implies equality) via the model of economics we have been using.
The model known by many aliases (Chicago School, Friedman, etc) has resulted in the thought that people are drowning in debt and that we have privatized the profits but socialized the losses. These are inaccurate metaphors. They are the results of the language of the delusion we have been living for 3 decades and thus by definition can not capture the truth of our condition. As the science presented in the lecture shows, if our all encompassing concern should be equality, then people are not drowning, they are dehydrating.
The dehydration is the results of privatizing security in life and socializing the risks in life. We are not “drowning” in risk or losses. We of the 99% are lacking in the substance that reduces risk. One can certainly drown from too much water, but the natural risk in life is not having too much water, it is having too little. Thus is the realization of the delusional statement “drowning in debt” and “socialized the losses”.

The lack of reduction of life’s risks is the inequality, the social injustice…the diversion from the purpose expressed in the preamble to our Constitution. “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
The following concluding statement from a different lecture by Professor Wilkinson summarizes the TED lecture. As you watch the lecture keep in mind the 4 goals I highlighted of the preamble and consider that they were put into a document that created an government 223 years ago this year (based on ratification). I have a greater respect for the intellect and their insight into the human experience of those who wrote and ratified our Constitution.

“For thousands of years the best way of improving the quality of human life has been to raise material living standards. We are the first generation to have got to the end of that process. No longer does economic growth improve health, happiness, or wellbeing. If we are to improve the real quality of life further, we have to direct our attention to the social environment and the quality of social relations. But rather than continuing to tackle each problem separately, by spending more on medical care, more on police, social workers and drug rehabilitation units, we now know that it is possible to improve the psychosocial wellbeing and social functioning of whole societies. The quality of social relations is built on material foundations – on the scale of the material inequalities between us.”

With information such as this research and that of the 2005 World Bank paper on what produces wealth , considering our Constitution’s preamble, we should not be struggling looking for guidance as to what direction, what path, what solution we need for our self (our self as in We the People).
*I tried to embbed the video, but for some reason all that happened was all the code being published and not the video.
(Dan here, h/t to rjs for the embed…

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PSA: Mark Thoma, Schlesinger and Jack Otter Answer Questions about the Economy at 2:00pm today (EDT)

From my email (with formatting lost):

Ask the Experts: What’s Next for the Economy?

It’s a big week for the American economy. President Obama announced his plans to reduce the deficit on Monday, and Wednesday afternoon the Federal Reserve announces its new plan to boost growth. Do these proposals make sense? And what do they really mean for your money?

MoneyWatch editors Jill Schlesinger and Jack Otter will discuss in this week’s live “Ask the Experts” webcast. They will be joined by economist and MoneyWatch blogger Mark Thoma.
• Where should you be investing now?
• Will any jobs be created this year?
• Where can you find a job now?
• Has the housing market finally hit bottom?
• What will it really take to restart the American economy?

________________________________________
If you have questions, concerns, or comments send an e-mail to AskTheExperts@MoneyWatch.com, or join the webcast via our live chat feature.
________________________________________
Don’t miss Ask the Experts on Wednesday, September 21st, 2pm ET / 11am PT.

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Go ahead. Implement Austerity at your own peril

by Daniel Becker
(This is a long post. The time for sound bite debate to the demise of learned discussion is over for we are flirting with danger.)
Via a post at Financial Armageddon I learnt of a paper looking at the relationship of austerity implementation and social unrest. It is recent, dated August 2011.
Jacopo Ponticelli, Universitat Pompeu Fabra
Hans-Joachim Voth, UPF-ICREA, CREI and CEPR
Discussion Paper No. 8513
August 2011
Centre for Economic Policy Research
The Financial Armageddon article shows the first chart of the paper which presents: the relationship between fiscal adjustment episodes and the number of incidents indicating instability (CHAOS).
 
 
“CHAOS is the sum of demonstrations, riots, strikes, assassinations, and attempted revolutions in a
single year in each country. The first set of five bars show the frequencies conditional on the size of budget cuts. When expenditure is increasing, the average country-year unit of observation in our data registers less than 1.5 events. When expenditure cuts reach 1% or more of GDP, this grows to nearly 2 events, a relative increase by almost a third compared to the periods of budget expansion. As cuts intensify, the frequency of disturbances rises. Once austerity measures involve expenditure reductions by 5% or more, there are more than 3 events per year and country — twice as many as in times of expenditure increases.”
This is a rather disturbing chart. Certainly the recent events in England play into the subject of this paper. That WE are now setup for our version of austerity implementation, this paper should be put in the hands of all the staff members of congress and the president. If I had my own national news show I would have in the corner of the screen the above chart along with the google map of all the riot locations in London and in big letters: Cut SS, MC, Medicaid. Really? You want to go there?
There is more to this paper than just the apparent connection between austerity and upheaval. “Controlling for economic growth does not change our results. This suggests that we capture more than the general association between economic downturns and unrest.”
This is the most powerful statement of the paper. It implies that “Man” in all his glory is responsible for such social activity. It is not the “natural” course of economic activity that creates such volatile activity.  It is the economic policy implementedthat determines whether there will be unrest or not. Currently, the proposed austerity is based on an a priori of “we’re broke”. It is stated with the authority of natural cause. Mother Nature Economy did it’s thing and well…we’re broke. All we can do is rebuild after the storm. Yet, an economy is totally of human design. The republican who stated that the conservative movement was making reality was more correct than their fantasizing of control and power would allow them to realize. Thus I delve into this paper more after the jump.


 

There are two points that need to be understood if we are to apply the lessons of this social economic paper. Point 1:
“However, countries with very high levels of constraints on the executive show a weaker degree of association…Table 10 demonstrates that in countries with better institutions, the responsiveness of unrest to budget cuts is generally lower. Where constraints on the executive are minimal, the coefficient on expenditure changes is strongly negative – more spending buys a lot of social peace.”
So, some kind of governance that includes self determination is a mechanism for minimizing upheaval/unrest. I believe the American Revolution would be an example of upheaval in the face of “minimal executive” constraint. Finding that constraint of the executive is determinative does not mean such rights are exercised by the people to their benefit:
“The political economy literature on austerity suggests a paradox. There is no significant punishment at the polls for governments pursuing cut-backs (Alesina, Perotti, and Tavares 1998; Alesina, Carloni, and Lecce 2010), and no evidence of gains in response to budget expansion (Brender and A. Drazen
2008).”
I don’t know what to make of such findings. Certainly there must be more in the details of the studies sited. If such lack of response by the electorate is true, then we are in deeper trouble than realized.  
Based on this conclusion, the authors ask: 
“Why, then, is fiscal consolidation often delayed, or only implemented half-heartedly?” 
They suggest fear of unrest may be the reason and footnote the following: 
14 Alesina, Carloni and Lecce (2010) also suggest that implementation of budget measures may be harder if the burden falls disproportionately on some groups.
I would hate to think that austerity measures are not implemented simply because of fear of a reprisal that appears to be short lived with no political loss to those implementing the policy instead of not implementing austerity because research and experience prove it to be actually harmful in it’s results and even contradictory to the desired outcome of greater prosperity with reduced risk of living. If the politico is acting based on the former, it show’s no conviction of ideology and philosophy. If they fail to acted based on the latter, it shows a lack of character of inquiry and enlightenment. In either case, Naomi Kline’s work notes that austerity is always implemented with some form of force. In our country the force appears to be consolidation and control of the media combined with massive amounts of spending thus control of the debate and knowledge of the subject matter. Though the police state is in place thanks to Bush/Cheney and the expansion under Obama. 
Point 2:
“Further, we examine if the spread of mass media changes the probability of unrest. This is not the case. If anything, higher levels of media availability and a more developed telecommunications infrastructure reduce the strength of the mapping from budget cuts to instability.”
In their conclusion they flatly state: Contrary to what might be expected, we also find no evidence that the spread of mass media facilitates the rise of mass protests.
This suggests that cutting communications as some have done recently in an attempt to curb the upheaval is not a procedure that works in the long term. The focus of the complaint, materialized via upheaval will have to be addressed. It is not the ease of rallying the masses, the pep squad going viral that solely explains the materialization or degree of unrest. Though it may explain the reduction in strength of austerity implementation and resulting upheaval. I think the authors have stumbled upon the modern version of the printing press coming into existence and the effects it had.
The authors review current literature on the subject and find there is some confliction as to the effects of budget cutting. I’ll let you read it, but my take home is that it depends on what stage of national development the country is in as to the extent austerity will produce unrest, if the unrest is sustained post implementation and whether it promotes growth. They even site:
Giavazzi and Pagano (1990) and Alesina et al. (2002) find that cuts can be expansionary. Amongst the reasons suggested for this finding are a reduction in uncertainty about the course future spending (Blanchard 1990a), and a positive wealth shock as a result of lower taxes in the future (Bertola and Drazen 1993).3
I guess we know where the current meme comes from. Unfortunately the authors also note:
IMF interventions, on the other hand, often led to more frequent disturbances (Morrison, Lafay, and Dessus 1994).
Similarly, Haggard, Lafay and Morrison (1995) find that IMF interventions and monetary contractions in developing countries led to greater instability.
Recently, work by the IMF has suggested that austerity measures may be less expansionary than previously thought; they may well have the standard negative Keynesian effects as a result of lower demand (IMF 2010; Pescatori, Leigh, and Guajardo 2011).
Oh no! What is the IMF going to do now? I’m still praying for you Greece.
The author’s sum up the literature review with:
Remarkably, to the best of our knowledge, there exists no systematic analysis of how budget cuts affect the level of social instability and unrest in a broad cross-section of developed countries, over a long period.
Wouldn’t you think that such research would be considered key to one’s knowledge base before we start implementing policy that to date has been mostly tried and studied in 3rd world situations?  Wouldn’t you think that the advising 
the proof of effectiveness from these advising economist? Even medicine has acknowledged there is a difference between men and women other than genital development. The review of literature is clear. Start cutting and you will piss people off such that they express it ultimately in violent means though if you can ride it out the violence abates and prosperity looms until it doesn’t because people just plain have no money. The word for today is: Demand. Use it in a sentence as it relates to this discussion.
We can think that there are other issues involved when people protest, but the authors make it clear, austerity brings out the greatest number of people. For those considering how to handle the masses when the austerity gets implemented:
“The simple correlations suggest that these co-movements do not extend to all indicators of unrest equally – riots, revolutions, and demonstrations decline as expenditure rises, but assassinations and strikes seem – at a first pass – uncorrelated. Similarly, output growth seems to correlate negatively with assassinations, riots, revolutions, and demonstrations, but not with strikes.” 
And: “This suggests that unrest reacts particularly strongly to budget cuts and growth when unrest levels are already high.”
Go ahead, implement at your own imperil. In case you think this connection of unrest/upheaval is related to how they measure it, the authors checked that variable: “We conclude that the way in which we measure unrest does not matter for our main finding.”
Looking at the relationship of austerity policy involving taxes: 
Higher taxes and lower expenditure are associated with more unrest, but the relationship is not significant. Tax increases have a positive sign, but the effect is not significant at standard levels of rejection (column 2). It is also small – a one standard deviation rise in the tax/GDP ratio increases unrest by less than 0.01 events. Overall, we find that improvements in the budget balance raise the level of unrest (column 3). As the results in columns (1) and (2) make clear, this reflects the impact of expenditure cuts, and not of tax increases.
And:
We find the same results as before – expenditure cuts wreak havoc, tax increases do so only to a small extent and insignificantly. Overall, the budget balance matters for predicting unrest.
Just to make sure no one gets this wrong: A change in budget balance predicts unrest if the balance is reduced via cuts. Kind of makes it difficult to accept that the masses want something for nothing. In fact, I would suggest “entitlement” as it has come to mean something for nothing is the wrong word to apply to government programs of which people pay for willingly via taxes and don’t get riotous if they are asked to pay more.
If we wanted to avoid the upheaval of austerity implementation we should consider: 
In all specifications, the effect of GDP growth on unrest is negative. In contrast to the results for expenditure changes, the effect is not tightly estimated, except in the case of demonstrations, when it is also large – every 1% increase in GDP cuts the number of demonstrations by close to 0.4 events.
See, do something that actually improves the economy and people don’t protest! Wow, who’d a thunk it? Of course improving the economy such that people do not protest would mean having implemented something which produces an actually experienced improvement in the peoples lives. Something like real rising wages paralleling productivity rise and thus rising wealth. Unlike say, debt driven consumption only to have financing go away and then told to suck it up.
They look further at the connection of spending cuts vs economic growth and find:
In contrast, if expenditure changes are negative, they matter a great deal for unrest, driving up CHAOS by 0.19 incidents for each standard deviation of expenditure cuts. Next, we repeat the exercise for output changes. Increases in output do much to cut unrest (col. 3), with a one standard deviation increase in output (3.77%) reducing CHAOS by 0.2 incidents on average. In contrast, declines do not set off major disruptions to the same degree. Overall, the results in table 12 confirm that the relevant identifying variation for expenditure changes comes from cuts; for output changes, it comes from positive growth, not recessions.
This paper kind of makes you think about our current governance of Wall Street/Corp influence and apparent dominance of policy choices to the exclusion of polls showing people want no cuts in programs referred to as entitlements and instead have the budget balanced via tax revenue enhancement. Wonder what happens when virtual people known as corporations do not experience austerity yet have persuading influence over We the people’s choices via money into the election process.? I guess we are going to find out. As I have heard in the past: tort is the free market response to lax governance of the market. Is upheaval the same free market response to unresponsive policy toward the people?
My concern is that the initial response by those supporting and promoting austerity will be the furthering of the police state we have been developing since 9/11. Only it will also be fired up (pun intended) domestically. It is the response we have experienced in the past with the civil rights motion and even back to the labor movement. It appears that a police response is always the first response to protest as protest is interpreted as potentially criminal regardless of what the Constitution reads. Yet here we have a paper suggesting that all of it can be avoided. Combining this paper with the 2005 World Bank report on what creates wealth in a developed economy it appears to me that we have  in our hands the answer to what appropriate economic policy should look like for our current situation. 
I asked September 2008 if we could please broaden our discussion regarding the crisis. That has not happened. The discussion is still disjointed, segmented and narrow. Now I’m imploring that we broaden the discussion. Pleading!

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