Brown University professor Mark Blyth has written a book about why common-sense ideas of financial austerity -- most of which implicitly compare nation-state belt-tightening to household budgets -- are dangerously wrongheaded and regressive. The United States of America is not your mom, and its debt load is not your mom's checkbook with its quaint and useless single-entry bookkeeping scheme. Think of it more like Apple Computer or Chase: no one thinks that those BUSINESSES are wasteful and profligate because they borrow millions of (cheaper) dollars while having billions in hand -- because those are routine operational details that need to be made for legitimate business reasons. So why should the $17 trillion US government be forced to act like a welfare mom rather than the CEO of Apple? The author implies that many voters and politicians lack the business experience at scale to truly understand these matters, and therefore fall back on leaky abstractions such as household budgets. Because we can't get past the idea of public asset management being a good thing, we can't start having any reasonable conversations about WHICH assets and services will get protected in a recessionary cycle and WHY (hint: the very rich always get richer in recessions). Particularly hard-hitting about the "we're saddling our grandchildren with debt" canard.

This is excellent. Especially the question of why he's personally offended:

Why is it something that you find offensive? What is it about austerity that you take personally?

Part of it is because what I think the financial crisis is best seen as — and we’re still dealing with the aftermath of it, whether we like it or not — is that there’s a class-specific put option. Let me explain what I mean by this: A put option is a contract that’s very common in finance where essentially someone is selling insurance and the other person is taking the income for payments. At some point, they get to basically cash in the put. One way to think about this is, Europe’s been expanding up to the borders of Russia and there’s a country called Ukraine, and, essentially, that means that Europe is writing a put option, which Ukraine has now decided to cash in. Which is why, basically, Europe’s now on the hook for all the crap that is Ukraine. That’s a put option contract.

What has this got to do with the financial crisis and why do I feel passionately about it? Well, remember all those banks that got bailed [out]? In order to get bailed out you need to have assets, and my liabilities are the bank’s assets. The bank doesn’t give a damn about my condo because they’ve got an income stream coming from the mortgage. The assets and liabilities of the bank and the private sector sum up to zero, so when you bail that out, what you’re doing is you’re bailing out the private sector’s assets, which basically means the top 20 percent — if not about the top 10 percent, the top 1 percent — of the income distribution.

How do you pay for those bailouts? You pay for those bailouts with cuts. And who are the people that use government services? Well, it’s not the top 20 percent or above of the income distribution, it’s the bottom 70 percent and below. That’s what I mean by a class-specific put option. The people at the top get their assets bailed; the government says, Oh my God, look at all that spending! It’s out of control! We need to cut policemen and fire brigades and healthcare and various public services.

But what does one have to do with the other? Well, the people at the top who get their assets bailed, you’re not going to tax them, as Obama just found out with his college proposal. So what do you have to do? You have to take it from those who have very little already. I find this personally offensive because, although I’m an Ivy League professor today with a named chair and all the rest of it, the only reason I’m here is because of the British welfare state. I grew up in a single-parent home with my paternal grandmother on basically no money at all, and if it wasn’t for free schooling and free university… I don’t know where I’d be, but I wouldn’t be an Ivy League professor.

So what you’re doing is you’re bailing out the assets of me today so that a younger person of me down the income distribution doesn’t get to go to college like I did. That’s total bullshit.