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Bill Black: Treasury Secretary Lew tells Europe to ease up on austerity while Obama makes major cuts at home

Story Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay. And welcome to an edition of The Black Financial and Fraud Report with Bill Black, who now joins us.

Bill is an associate professor of economics and law at the University of Missouri-Kansas City, a white-collar criminologist, and a former financial regulator, author of the book The Best Way to Rob a Bank Is to Own One.

Thanks for joining us again.

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.

JAY: So President Obama delivered his budget. What’s your take?

BLACK: Oh. Well, to really appreciate the full insanity, you have to go back one day to Tuesday, April 9, where President Obama–the same president, you might note–sent our Treasury secretary, the intrepid Jacob Lew, to Europe. And his mission was to convince the Europeans, stop doing this insane austerity, because you’re throwing Europe back into not simply a recession but Great Depression levels of unemployment.

So they have levels of unemployment in the periphery that are multiples of what unemployment was like during the Great Depression in the core European countries. And indeed, even in a place like France, unemployment today is higher than what it averaged in 1930 to 1938 in the heart of the Great Depression.

So good thing to do, right, because austerity in Europe has in fact been insane.

But, of course, the Europeans ignored Jacob Lew. And they ignored him first because they’re insane, the European leaders. They produced this disaster. And, of course, they could either admit they produced a disaster or pretend that there was no disaster. And unsurprisingly they decided to go with there is no disaster.

And so the finance minister of Germany, one Wolfgang Schauble, famously said to Jacob Lew, no one in Europe believes that austerity has any problem in terms of reducing growth. Now, of course, he didn’t use the word austerity, because austerity is a word that causes tens of millions of Europeans to go into the streets and protest. So they have a euphemism for this.

Anyway, Jacob Lew’s unconvincing on European leadership, no surprise. But part of the reason Jacob Lew is of course a terrible spokesperson against austerity is he’s one of the leading proponents of austerity. And I have a column explaining how when he was head of OMB under Obama, he produced all of this insane explanation for proposed budget that was going to inflict austerity on the United States, saying austerity was great for growth–in other words, the same insanity of Wolfgang Schauble. And Jacob Lew was also one of the leading people in the Obama administration pushing for the grand betrayal, which, in addition to being obscene on multiple levels, is an act of austerity as well. So they want to cut Social Security and Medicare and Medicaid and all kinds of social programs and increase taxes, and all of this while they’re simultaneously telling the Europeans, don’t do this; it’s producing a disaster.

So what do we have? We have complete incoherence, complete incompetence, massive hypocrisy, and a belief in budget magic, because what does the administration [incompr.] what did Jacob Lew go over specifically to tell them they should do? That they should practice austerity, but then they should have a goal, a target for positive growth. See? So if you substantively do things that are going to produce negative growth, but if you say, I’m trying to achieve positive growth, that acts like magic and it produces positive growth. That’s what Jacob Lew thinks. That’s what President Obama thinks.

JAY: Well, wouldn’t President Obama argue that the cuts to Social Security are further out? And in the shorter term he is increasing spending some. They have–you know, they’re adding program–he wants to have this national kindergarten program available to all. There is a program, $260 million in funding for science and technology, $100 million in funding for something called Promised Neighborhoods, $850 million for Race to the Top. I mean, there is some spending going on. So, I mean, isn’t that–.

BLACK: That’s the magic part. That’s the magic part. Right? So the magic part is: overall we can do austerity, including, by the way, Social Security–yes, much of it’s farther out, but it starts way too early and it’s a disaster in all of those forms, but net we’re having austerity. But the president thinks you can have austerity, but then if you have some good programs within it, like the ones you mention, somehow that takes away austerity.

That’s not how economies work. Those may be good programs, but you still have this small little thing called a recession, where you have inadequate demand, and if you adopt austerity in it, just as he went and sent Jacob Lew to warn the Europeans, you produce a disaster.

And so what you’re talking about–all of those programs, right, they all added up to a few billion dollars in the context of where we’re producing much greater overall austerity, so they’re going to be swamped by the austerity. And all of these things net produce a dramatically weakened recovery. And you’ve seen it in the job numbers, where essentially the entire reduction in unemployment can be explained by people leaving the workforce because they’re so discouraged.

JAY: Alright. Thanks for joining us, Bill.

BLACK: Thank you.

JAY: And thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

William K. Black

William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.