Austerity Politics Descends on US States

Monday, 22 August 2011 04:44 By Richard D Wolff, | News Analysis
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Austerity Politics Descends on US States

New York Gov. Andrew Cuomo, right, talks with Sen. Kirsten Gillibrand (D-New York) prior to President Barack Obama's remarks on the economy at a General Electric plant in Schenectady, New York, January 21, 2011. Hamstrung by federal prohibitions against lowering Medicaid eligibility, governors of both parties are exercising their remaining options to propose slashing cuts in the health program in the fourth consecutive year of brutal economic conditions for states. (Photo: Drew Angerer / The New York Times)

Last week, Democratic Governors in New York and Connecticut repeated the austerity politics of Greece’s Prime Minister Pappandreou and Portugal’s Socrates. In doing so, they likewise imitated the austerity politics of their Republican and Democratic counterparts across virtually all 50 states. Austerity for labor and the public is everywhere capitalism’s Plan B. Even capitalists now see that capitalism’s Plan A failed.

You will recall that Plan A entailed a crisis-response program of bailing out the banks, insurance companies, large corporations, and stock markets to achieve “recovery.” The theory behind Plan A – we used to call it “trickle down economics” – was that recovery would spread from financial markets and financiers to everyone else. It never did. So now the same servants of capitalism who imposed Plan A are dishing out Plan B.

Governors Cuomo in New York and Malloy in Connecticut had very similar Plan B’s. They threatened the public employee unions and the people of their states in nearly identical ways. Either the unions accept new contracts with wage freezes and raised contributions to their health insurance plans (and other declines in their basic remuneration) or the governors would fire tens of thousands of unionized state workers. In Connecticut the state workers first voted to reject and then re-voted to accept that contract. In New York the state workers accepted on the first vote.

Let’s be really clear on what the two governors were doing. They were forcing a very painful either/or onto the mass of people who elected them. Each governor said: I will either fire many thousands of state workers and thereby impose drastic cuts in public services on the entire citizenry or I will subject tens of thousands of state employees to significant cuts in their wages and benefits.

Each Governor spoke and acted as if those were the only two choices even though that is blatantly untrue. Each Governor refused to even consider an obvious alternative Plan C: increasing taxes on corporations and the rich enough to avoid either public service or wage cuts.  Instead each governor snubbed his nose at the public by forcing unions to choose between two awful options.

The public employees unions voted to accept serious cuts in pay and benefits. That was in the face of the latest government figures showing US consumer price inflation now running at between 3.5 and 4 % per year. The contracts that state employees accepted in New York and Connecticut give them 0% wage increases in the first two years and less than 2 % per year increases in the last years of their contracts. In addition, New York workers accepted unpaid furlough days while both states’ contracts involved higher health insurance premiums and copays to be charged to state workers. These are serious reductions in state workers’ standards of living. They will thus reduce their expenditures, thereby hurting communities, businesses and other workers.

The states will thus learn the same lessons learned in Greece and Portugal and wherever austerities are governments’ Plan B’s. Austerities make difficult, painful, and unjust capitalist crises more so.

Corporations and the rich bankroll the parties and governors who design and impose Plans A and B while avoiding Plan C.

And so matters will remain unless and until corporations’ profits are no longer available to their boards of directors to enrich themselves and major shareholders and to buy politicians’ servitude. The best response to capitalism’s crisis, to its failed Plan A and to its unjust Plan B would be Plan D: to change how we organize productive enterprises in our society. Profits should be distributed by the democratic decision-making of all those who produce and depend on them, the workers and affected communities.

The twists and turns of this global capitalism system, painful as they are to endure, nonetheless also move it toward a confrontation with alternative D. The real question is whether the advocates and supporters of Plan D can be organized, mobilized and focused on achieving their goals in that confrontation.

Richard D Wolff

Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a Visiting Professor of Economics at the University of Paris (France), I (Sorbonne). His work is available at and at

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