One of the most despicable yet effective attacks on public services and government spending made in the last two years of the budget crisis is the argument that spending cuts are necessary because public employees are overpaid. I am certain we’ll see at least a few such comments pop up in response to this post.

We’ve made the argument that this is just not so, that the overwhelming majority of public employees are barely hanging on to their middle-class status (if that), and that spending cuts are merely exacerbating the recession instead of helping resolve it.

Over the weekend Shane Goldmacher showed us the true impact of spending cuts on public employees. It is not a pretty picture.

Reporting from Sacramento – State worker Rochelle Johnson’s $38,000 salary never allowed her family to live in luxury. Then the furloughs hit, cutting her pay by 14%.

Now Johnson, an appointment scheduler at a California agency that reviews disability applications, finds herself at the mercy of payday lenders, utility companies’ patience — they shut off her power once already — and co-workers who share their lunch leftovers….

Carrie Ann and John Quintos of Chino work for California’s workers’ compensation insurer and earned a combined $70,000 before the furloughs. The pay cut made their $3,200 mortgage unaffordable.

Selling the house was impossible; they owed more than it was worth, so they rented it out and took a town house. But their tenants missed a payment and the couple, in turn, missed payments of their own. Then their car was repossessed in the office parking lot.

“It was the most embarrassing moment that I’ve ever endured,” said Carrie Ann Quintos.

The couple got the car back but gave up the town house. Now John lives with his parents in Moreno Valley; his wife and four children are with an aunt in Chino some 30 miles away.

“I don’t know how anyone can be expected to live like this,” said Carrie Ann.

These Californians are innocent victims of a malicious and virulent strain in our politics – a demand from those who have means and resources to make other people suffer so that they don’t have to pay another penny in taxes. “Beggar thy neighbor” was a common national policy response to the Great Depression. It was a complete failure.

The last thing California needs is fewer people able to pay their mortgages, able to service their debts, able to spend money at local businesses, able to pay their taxes. Government’s role in a recession is to provide countercyclical stimulus to flood the economy with money. Instead California, led by Arnold Schwarzenegger and with the full compliance of both parties in the state legislature, has decided on a pro-cyclical strategy of worsening the foreclosure crisis in one of the state’s hardest-hit regions (Sacramento).

It’s not just public workers, of course, but Californians of a wide range of backgrounds and occupations are financially and materially worse off because of budget cuts. Meanwhile, those who already had wealth and privilege are not being asked to sacrifice one bit to deal with the state’s financial and economic crisis.

As Simon Johnson has concluded the US is increasingly becoming a two-track economy. Perhaps it’s not news to John Edwards, but Johnson’s point is specific to the context of 2009, that the Wall Street bailouts and spending cuts that affect everyone else are producing a massively unstable and unequal economy that is almost certain to lurch into another crisis before much longer:

The two-track concept overlaps with, and builds on, long-standing issues of inequality in the U.S., but it’s also different.  Within existing income classes, some people find themselves in relatively good shape and others are completely hammered….

If you’re on the outside track, you are experiencing a version of Naomi Klein’s “Shock Doctrine”.  Some (former) members of the elite are in this category – this is another standard feature of emerging market crises and “recoveries”. But mostly, of course, it’s nonelite on the outside track and a more concentrated, reconfigured version of the elite on the inside.

This can lead to short-term growth – the speed of recovery in many emerging markets surprises many, from about 12 months after the crisis breaks.  But it also leads to repeated crisis, to derailed growth, and to a loss of income, status, and prospects for most of society.

California is becoming the poster child for this two-track economy, as we are now experiencing the shock doctrine in full swing. The successful attacks on schools, health care, transportation, public safety, jobs, and other vital services are producing a state that will almost certainly be suffering prolonged economic malaise. Economic recovery, the phrase that is forbidden to be discussed within the halls of the Capitol, is nowhere in sight. California was once the epitome of the American dream. There are few dreamers here now.

And yet there may be some hope that California’s political leadership, the Democrats in particular, might someday realize that strong public services are a winning political position. (Or they could just look to the results of the May 19th special election and the Binder Poll.) After years of deflation and depression, Japanese voters threw out the longtime center-right government of the Liberal Democrats for the Democratic Party of Japan in Sunday’s election.

The DPJ ran on a platform of reversing the Liberal Democrats’ massive budget cuts, promising to expand public services and hire more government workers. In a remarkable op-ed published in last week’s New York Times, incoming DPJ Prime Minister Yukio Hatoyama called for a new economics based on human dignity:

In the fundamentalist pursuit of capitalism people are treated not as an end but as a means. Consequently, human dignity is lost.

How can we put an end to unrestrained market fundamentalism and financial capitalism, that are void of morals or moderation, in order to protect the finances and livelihoods of our citizens? That is the issue we are now facing.

In these times, we must return to the idea of fraternity – as in the French slogan “liberté, égalité, fraternité” – as a force for moderating the danger inherent within freedom….

Under the principle of fraternity, we would not implement policies that leave areas relating to human lives and safety – such as agriculture, the environment and medicine – to the mercy of globalism.

Hatoyama now has an opportunity to put these ideas into action, thanks to a massive landslide election victory. Let us hope that it does not take California 20 years to go from crash to enlightened economic policy. We must not continue to let our government be used to produce human suffering, whether it’s that of a state worker of anyone else hurt by the cruel and exploitative budget cuts.