John Authers, the financial markets columnist for the Financial Times got it right: “The politics of the shutdown have been melodramatic and its possible effects overstated.” The paper’s editors called the episode “banana republic machinations.” Well, it’s over now; the troops will get paid on time and the national parks remain open. If the whole, hardly-nail-biting business accomplished nothing else it momentarily diverted attention away from the big budget fight coming up, the one that will probably shape the country’s economic and social reality for decades to come.
Actually, there will be effects from last week’s Congressional action. It will mean a lot fewer resources will be available to aid the needy and disadvantaged, and some more grease has been applied to the rungs on the ladder as the country tries to climb out of the Great Recession.
But now comes the real battle.
President Obama is being “pressed as never before to define what American liberalism means in the 21St Century,” Peter Baker wrote in the Sunday New York Times. A couple days earlier, columnist David Brooks wrote that “Democrats seem to believe that most Americans want to preserve the 20th-century welfare state programs” that he clearly doesn’t. According to Brooks, “the real argument is not about cutting a few billion here or there. It is about the underlying architecture of domestic programs in 2012 and beyond.”
Christopher Caldwell, editor of the rightwing Weekly Standard, spelled out the meaning of the Republican Party’s new economic blueprint very well.
“The real drama came from the budget for next year released by House budget committee chairman Paul Ryan,” wrote Caldwell. “It lays out what the US needs to do over the coming decades to avoid being crushed under the promises its welfare state has made” and, he continued, “Americans will have to give up their cushy retirements and a Medicare system…” And, instead of any tax increases to accompany the spending cut, he continued, there will be new relief for the well-to-do. “Mr. Ryan would cut the top rate from 35 per cent to 25 per cent, in hopes of ‘broadening the base’.”
“One suspects, though, that tax rises are going to be necessary to make any budget politically sustainable,” wrote Caldwell, “With the acuity that comes from anger, US voters see quite well what ‘broaden the base’ means, and they know why supply-side theory holds that it is good for job creation. It means lowering rates for the richest and increasing the number of people who pay income tax, and it fosters growth because it re-allocates capital from the classes that don’t start businesses and invent things to the classes that do.”
The Ryan plan would extract “savings” of up to $6 trillion over 10 years, mostly through reductions in Medicare and Medicaid. It would also mandate $4 trillion in tax cuts over the same period going mostly to those in the upper incomes brackets. One estimate has it that the Ryan plan would mean $200,000 in tax cuts for millionaires and immediately double the out-of-pocket healthcare cost for the average senior. Because the tax cuts will mean billions in lost revenue, the plan “slashes programs that protect the masses in the middle, education, healthcare reform, veterans’ benefits, public transportation, health and safety regulation, food and import inspection, Medicaid and Medicare,” says Unites Steelworkers union President Leo Gerard.
So, there you have it, a vision of capitalism’s social contract for the 21st Century. Thus the question for the new century is not whether a rising tide can be expected to lift all boats but whether most of the smaller boats will have to take on more water so that the biggest boats can remain afloat?
In an April 8 letter to the Times’ editor, David Berman observed, “David Brooks is right that Americans have failed to ‘confront the implications of their choices’ … We have, for example, started a trillion dollars’ worth of war and passed an almost trillion-dollar tax cut at the same time - one of the stupidest and most self-destructive choices in American history.
“But the only thing courageous about Representative Paul D. Ryan’s proposal is that it dares to suggest reviving the America of the 19th century, when the poor, the elderly, the infirm and the otherwise unfortunate solved the problems they might have posed by simply dying off.”
President Obama will lay out a long-term deficit reduction plan later this week that will take ‘a scalpel, not a machete,’ to programs like Medicare and education and try once again to extract more taxes from the wealthiest Americans, his senior adviser said Sunday,” Joseph Berger wrote in the Sunday Times. It’s hard to see why anyone would want to take even an Exacto knife to education funding, let alone a scalpel. But when it comes to education, a lot of Washington policymakers and pundits speak out of both sides of their mouths these days. Best judge them by what they do rather than what they say.
“We preserved the investments we need to win the future,” Obama said when the preliminary Congressional tempest was over.
“That’s not true,” responded economist Robert Reich. “The budget he just approved will cut Pell grants to poor kids, while states continue massive cutbacks in school spending - firing tens of thousands of teachers and raising fees at public universities. The budget he approved is cruel to the nation’s working class and poor.”
President Obama is “losing the war of ideas because he won’t tell the American public the truth: That we need more government spending now - not less - in order to get out of the gravitational pull of the Great Recession,” Reich wrote Sunday. “That we got into the Great Recession because Wall Street went bonkers and government failed to do its job at regulating financial markets. And that much of the current deficit comes from the necessary response to that financial crisis.
“That the only ways to deal with the long-term budget problem is to demand that the rich pay their fair share of taxes, and to slow down soaring healthcare costs.
“And that, at a deeper level, the increasingly lopsided distribution of income and wealth has robbed the vast working middle class of the purchasing power they need to keep the economy going at full capacity.”
“This President owes an explanation to the American people why, at a time when the nation’s critical needs are going unmet at both the federal and state levels, when 50 million people are without health insurance, record numbers in poverty, 14 million people are unemployed - millions for more than a year - and Governors are balancing their budgets on the backs of teachers, firemen, police, health and safety workers, etc, he thinks the right policy is to slash federal spending even though the wealthiest Americans control 40 percent of the wealth and just got hundreds of billions in tax cut gifts,” wrote Scarecrow on firedoglake.com.
“It’s wrong, stupid, cruel, mindless. In short, it’s a mistake. Moody’s Mark Zandi just explained that giving the Zombies what they demand would cost up to 700,000 jobs,” continued Scarecrow. “If you give them 2/3 of that now, we’ll lose about 465,000 jobs just this round. Yet Obama did not bother to contradict Mr. Boehner, who told the media this package will ‘help create a better environment for job creators.’ In which alternate universe? Is anyone watching Ireland, Portugal, the UK, where these same austerity policies are hurting their economies?”
The problem is that the President has, in the words of economist Paul Krugman, succumbed to reinforcing “his enemies’ narrative.” In it, the central problems facing the nation are not unemployment, people losing their homes by the millions, cutback in education or increasing child poverty rates. It’s the federal deficit, and shredding the social safety net and increasing the precariousness of the elderly is something to be celebrated not lamented. All under the trappings of “bipartisanship.”
Actually there is little bipartisan about it. There are sensible people among the Democrats trying to limit the damage and there may be a sensible Republican or two tucked away in a closet somewhere. However, those wielding both the machetes and the scalpels are on both sides of the aisle. Both parties were involved in the ill-fated Simpson Bowles commission that couldn’t come to an agreement or vote on a formal report but which keeps popping up like Dracula in the moonlight. It seems to have found its latest reincarnation as the bipartisan “Gang of Six” senators who were expected to announce this week that they have reached agreement on a Simpson Bowles-like debt-reduction package. The principle targets remain clear. They want to take a samurai sword to Medicare and Medicaid, and perhaps only a breadknife to Social Security. All in the name of “deficit reduction.”
So why were Reid and Obama so eager to celebrate [House Majority Leader] Boehner’s compromise with his conservative members?” asked Ezra Klein in the Washington Post this week. “The Democrats believe it’s good to look like a winner, even if you’ve lost. But they’re sacrificing more than they let on. By celebrating spending cuts, they’ve opened the door to further austerity measures at a moment when the recovery remains fragile. Claiming political victory now opens the door to further policy defeats later.”
At the moment, the economy is weak, observed Klein. “Giving into austerity will weaken it further, or at least delay recovery for longer. And if Obama does not get a recovery, then he will not be a successful president, no matter how hard he works to claim Boehner’s successes as his own. Clinton’s speeches were persuasive because the labor market did a lot of his talking for him. But when unemployment is stuck at eight percent, there’s no such thing as a great communicator.”
“After weeks of apportioning blame and predicting political blowback, members of both parties will now likely issue a round of celebratory missives congratulating each other for doing their job,” Alex Altman wrote last week on the Time magazine webpage. “In truth, neither party emerges from the episode looking good. Boehner spent months framing the budget debate as a crusade to cut spending, but in the end, it was abundantly clear that for some of the social conservatives in his conference, dollars and cents were less important than ideological fault lines like abortion, health-care reform and global warming. Democrats, meanwhile, didn’t inspire confidence in their ability to haggle. They conceded a vital ideological battle from the get-go, allowing that spending cuts - rather than further investments - are the proper way to juice a flagging economy, a point on which economists are bitterly divided.) Some suggest the GOP’s policy prescriptions will cost hundreds of thousands of jobs). In the end, they also handed Republicans some $6 billion more than their opening bid. This doesn’t augur well for the party’s ability to win the bigger fights down the road.”
Berger’s story in the Times said David Plouffe, Obama’s senior adviser and former campaign manager, “sounded a conciliatory tone at points, arguing that ‘what’s clear on deficit reduction, like anything in Washington, if we’re going to make any progress together - whether it’s in education reform, job creation, deficit reduction - the parties are going to have to come together to find common ground. And that’s what happened this week’.”
After what we saw last week that was not at all reassuring.
Or, as BlackLiberalBoomerToday.com put it: “And I’m left wondering exactly what will be the next episode in this budget battle that we supposedly won? How much ‘better’ will it get for the Democrats next time? Because somehow, when I hear both Reid and the President talking about how this is the ‘biggest spending cut in history’ like this is something to be proud of? Seriously? Are you effin’ kiddin’ me?”