OK, austerity has always been about the causality. The people who are trying their best to get us to cut more and more spending, somewhat less than their best to get us to raise taxes, and who are doing nothing to fix our fraud-laden financial system, or the worst period of dis-employment we’ve experienced since the Great Depression, have been making other people (never themselves) suffer, because they believe the theory that excessive public debt hurts economic growth, and that to get rid of it we must follow a plan of long-term deficit reduction. And I’m being very charitable when I opine that they believe in this theory, because the alternative is that they don’t believe it, but are just using it as an excuse to make other people suffer, and widen the wealth gap between themselves and the rest of the population.

Either way it’s important for the rest of us to demand that before we do anything more based on that theory, they should be forced to prove that it is the best theory out there about the causal relationship between public debt and economy growth.

Obama for America, the campaign apparatus with the very large e-mailing list and great segmentation techniques that exploited Romney’s weaknesses to help the President to eke out (yes, I know the electoral vote involved no “eking out,” but the popular vote was something else again) his re-election victory, is now trying to mobilize people who voted for the President to work against their own interests by supporting his deficit/debt cutting activities. So, I couldn’t resist the following commentary on their mobilization e-mail.

Like many others, I’m not worried about the so-called fiscal “cliff,” and the ravages to the economy that are likely to occur if Congress doesn’t do something about it before the end of the year. That’s because a lot of the impact can be cushioned in the short run by Executive Branch manipulations while negotiations continue to go on. But if measures aren’t taken to reverse the contractionary effect of the sequestration-induced changes, we’re looking at deficit cuts of $487 Billion over 9 months of the fiscal year.

By comparison, the American Recovery and Reinvestment (ARRA) of 2009 produced only $350 B in stimulus during its first year. And, if the full sequestration were allowed to proceed unmodified, then it would result in a “claw-back” of about 60% of the total ARRA stimulus.

Many Modern Monetary Theory posts and other writings on fiscal responsibility, including my own, focus on the myths of neoliberalism, pointing out why they are myths and developing an alternative MMT perspective in some detail. Off hand, and I may have forgotten something, I couldn’t think of a brief positive MMT narrative related to fiscal responsibility containing primarily the truths, rather than the myths.

So, here’s my version, revised after calling for and receiving comments from readers at New Economic Perspectives, Correntewire, FireDogLake, DailyKos, and ourfuture.org. Thanks to Tadit Anderson, Mitch Shapiro, Nihat, James M., Marvin Sussman, joebhed, Clonal Antibody, Ed Seedhouse, JonF, Lyle, Thornton Parker, Sean, Golfer1john, Rodger Malcolm Mitchell, econobuzz, Lambert Strether, maltheopia, Ian S., for contributing significantly to the critical evaluation of the earlier version.

With increasingly grave warnings of doom they try to make us believe that we are facing a national crisis that must be met with a bipartisan solution that will be impervious to the inevitable protests that will arise from most people when their solution causes suffering — as it inevitably will, since as MMT shows, deficit reduction and government surpluses, in the presence of trade deficits, and desires to save in the private sector will inevitably cause destruction of private sector financial assets. Since the elites are in a better position to protect their financial assets than other Americans, the burden of austerity and the resulting hardships and fatalities will inevitably fall on most of us.

As the chart shows the interest to GDP ratio is currently at a crushing 1.3 percent, near the post World War II low. However this figure overstates the burden somewhat. Last year the Federal Reserve Board refunded almost $80 billion to the Treasury. This was interest earned on government bonds and other assets it now holds. That leaves a net interest burden of 0.8 percent of GDP, by far the lowest of the post World War II era.

After going to one of the AmericaSpeaks community conversations Saturday, I’m even more confident that the deficit crisis being promoted by the Peter G. Peterson Foundation, AmericaSpeaks, the National Commission on Fiscal Responsibility and Reform, and the Obama Administration, as well of much the world’s global elite is a fantasy. There is no truth to it, and it is a dangerous fantasy, because if one believes it, then that can be a self-fulfilling prophecy. The austerity they recommend for the long-term can make the slow growth and difficult times they project come true. It can catch us all in a nightmare of their making. The “reasoning” behind their fantasy is simple enough.