The Great Betrayal – and the Cynicism of calling it a Grand Bargain

By William K. Black
(Cross-posted at Huffington Post)

Robert Kuttner has written much of the column I intended to write on this subject, so I will point you to his excellent column and add a few thoughts.

Kuttner wrote to warn that Obama intends to seek a “grand bargain” causing the U.S. to adopt the type of austerity program that threw the Eurozone back into a gratuitous recession.

Worse, Obama intends to begin to unravel the safety net (Social Security, Medicare, and Medicaid) to convince the Republicans to enter into this Faustian bargain.  Just as only a conservative Republican could visit “Red” China, only a Democrat can begin the destruction of the safety net.  The difference, of course, is that normalizing relations with China was a good thing while unraveling the safety net is a terrible thing.

Wall Street’s greatest desire is privatizing Social Security.  Wall Street stands to make scores of billions of dollars annually in additional fees should it ever buy enough politicians to privatize Social Security.  The Republican Party’s greatest goal is unraveling the safety net.  They always wish to attack the most successful and popular programs introduced by the Democratic Party.  Their problem is that they know it is toxic for Republican candidates to try to destroy the safety net.  Only Democrats, through a “Great Betrayal” can give Republicans the political cover they need to unravel the safety net.

The safety net is so popular with the American people because it consists of superb programs that constantly put the lie to Republican memes that the government is incapable of success.  There is no need to allow Social Security to “go bankrupt.”  The necessary expenditures can easily be made by the Treasury.

There is a need to contain the rise in medical costs, but we know how to do that without harming health outcomes.  Most advanced nations attain the same health outcomes at half the expense (relative to GDP) of the U.S.  Obama’s opposition to the “public mandate” was a grave mistake that needs to be reversed.

Because unraveling the safety net is unnecessary, harmful, and politically insane for a Democrat and politically suicidal for Republicans, the proponents of these terrible policies have long failed in their efforts.   Republicans, however, have now found a fifth column within the Democratic Party who they hope will open the door to attacking the safety net.  This would provide the political cover that Republicans could use to unravel fully the safety net.

The Republican Party’s approach to convincing Obama to commit the Great Betrayal cleverly exploits three human weaknesses.  First, Obama wants to be considered a “centrist.”  Second, Obama yearns to be considered “bipartisan.”  These first two weaknesses are forms of vanity.  The siren song is “do this and you will become known as the President who acted as a statesman to cut across Party and ideological divides and make the hard choices essential to allowing America to continue to be a great nation – while ‘saving’ the safety net.”

The third weakness that the Republicans seek to exploit is fear – and the death of alternatives.  The mantra of European austerity proponents is “there is no alternative.”  The only choice is between austerity and collapse, and that means there is no real choice.  The Republican strategy is to create a series of “moral panics.”  As the name implies, this involves the creation of a special form of panic falsely premised on immorality.  (Think: “Reefer Madness” or Professor Hill causing River City, Iowans to believe that the arrival of pool hall demonstrated the imminent moral collapse of their children.)  The Great Betrayal can only occur if Obama succumbs to mindless (and innumerate) panic.

The Democratic wing of the Democratic Party has to lead the effort to save America from the Great Betrayal.  It is essential to focus on the self-destructive nature of austerity.  The irony is that a proponent of austerity has just handed us a coup.  Becky Quick, co-host of one of CNBC’s business entertainment program, recently wrote a column intended to discredit Paul Krugman.  Quick solicited a written statement from former President Bill Clinton to use in her attack on Krugman (who had criticized Quick and her co-host’s stream of “zombie facts” when he appeared on their program).  Quick reveled in her success in obtaining ammunition from Clinton to attack Krugman, asserting that it constituted a “damning retort to Krugman” and proved the need to adopt austerity.  In fact, Clinton’s statement stated his agreement with Krugman:

[I]t’s important not to impose austerity now before a growth trend is clearly established, because as the austerity policies in the eurozone and the U.S. show, that will slow the economy, cut jobs, and increase deficits….

Clinton is a leader within the Rubin-wing of the Democratic Party that has been seeking to create the moral panic, but even he admits that “austerity now” “will slow the economy, cut jobs, and increase deficits.”  The Great Betrayal of the safety net will begin if Obama is able to deliver the “grand bargain” imposing austerity that would “slow the economy, cut jobs, and increase deficits” and unravel the safety nets – the four horsemen of the economic apocalypse.

Obama is telling the media that the Great Betrayal is his first, and overarching, priority should he be re-elected.  We are forewarned and we must act now to make clear that we will block the Great Betrayal and crush at the polls any member of Congress who supports it.

Do not concede the phrase “grand bargain” to the proponents of the betrayal.  We should heed Camus’ warning that it is essential to call a plague by its real name if one is to resist it – and it is essential to resist the pestilence.  “[W]hen you see the suffering and pain that it brings, you have to be mad, blind or a coward to resign yourself to the plague.”  We must refuse to resign ourselves to being betrayed by Democratic leaders.  Our actions must make it clear that we are not mad, blind, or cowards.  We refuse to fall for their faux moral panics.  It is our leaders who are all too often mad, blind, and cowards.

15 Responses to The Great Betrayal – and the Cynicism of calling it a Grand Bargain

  1. The situation is tough not easy to handle. Reduction in safety net leads to Great Betrayal. Avoiding this Betrayal means excessive spending which will result in increased deficits and debts. Damn it if you do it and damn it if you do not do it. It is a quite paradoxical.

    • Javed, government deficits and debts are not a Bad Thing. You aren’t damned if you deficit spend. The spending is not excessive. The problem is that governments have been spending far too little, not too much. And in the long run, this tends to lead to unstabler economies and bigger deficits and debts – financial wealth more and more concentrated at the top. Usually, it doesn’t really matter how big a national debt is, because “we owe it to ourselves”. But MMT style spending tends to lead to lower inflation, lower deficits/GDP, lower National Debt / GDP, even though the last two are not an aim, but a nice side effect.

      • Thank you Calgacus. You have explained the situation for me and of course in a much better professional manner. So Mr President needs to stay in a balanced mode and not be run down by panic. Kind regards

        • Well, you’re welcome, and thanks for your thanks. Keep reading here, take a look at the Modern Money Primer and you’ll see that MMT and its ancestors, like Institutional & Keynesian economics have considered all the problems very carefully. It is not about governments spending like mad. It is about targetted, intelligent spending that makes sense in light of accounting. Which right now means a lot of government spending, true. Most mainstream economics simply doesn’t make accounting sense, and in avoiding imaginary problems coming from their defective theories, causes immense real ones.

  2. “We should heed Camus’ warning that it is essential to call a plague by its real name if one is to resist it – and it is essential to resist the pestilence. “[W]hen you see the suffering and pain that it brings, you have to be mad, blind or a coward to resign yourself to the plague.”
    ***Please post with link as it is intended to honor your space on this forum yet still allow a responce
    to “The betrayal of all the people”.
    Read two articles by justaluckyfool: Compilation of interpretations of articles by William Black, Michael Hudson, Steve Keen and mostly Frederick Soddy “The Role of Money”(written in 1926,1933):
    “Yes, you can lower taxes, pay off the debt, and at the same time increase spending”
    “”The Wealth of a Nation is in how it Redistributes Its Wealth”

    http://bit.ly/MlQWNs

    ***** “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha[Gautama Siddharta] (563 – 483 BC), Hindu Prince, founder of Buddhism

  3. Right!!! It’s “the Great Betrayal; not “the Grand Bargain.”

    “. . .First, Obama wants to be considered a “centrist.” Second, Obama yearns to be considered “bipartisan.” These first two weaknesses are forms of vanity.”

    I think you really nailed that. Obama is trying to express his personal identity and reinforce his self-image. But we need a president who cares more about solving our problems than he does about reinforcing his self image. As the President is fond of saying. It’s not about him, it’s about us. We don’t need be for him to to be “centrist” or “bipartisan.” We need to for him to provide real solutions to a really messed up nation.

    • I disagree with the idea that Obama wants to be seen as a centrist and bipartisan. Based on all his other financial policies, he doesn’t care how he’s seen as much as he cares about giving the banksters what they want.

      There’s nothing centrist about NOT prosecuting bankers for overt and clear crimes against millions of people, or of slapping them with cost-of-doing-business fines.

      I think the idea that “Obama’s opposition to the ‘public mandate’ was a grave mistake” is off the mark in the same way: it wasn’t a mistake. It was exactly what the “health” insurance industry wanted and Obama is nothing if not the point man for corporate America.

  4. “There is a need to contain the rise in medical costs …”
    Why? I think the cost containment meme has infected the healthcare discussion. Doesn’t MMT say the government can afford to buy anything that’s for sale in the economy? And isn’t it the case that we think deficits should be higher right now? What could be more socially useful than better health care? It’s a match made in heaven! Let the federal government fund all sorts of healthcare initiatives, education, research, new clinics, etc. Funnel that funding through the states and let them get creative with it. That should generate all sorts of jobs. Sure, healthcare becomes an even larger part of a larger economy, but what is so bad about that?

    • I think the point is that public health insurance would remove a lot of unnecessary overhead, and we could also do better with preventative healthcare – these are issues that waste physical resources.

  5. Great post. It is a Great Betrayal. Personally what Clinton says has little import for me. Krugman does. The fear of debt and deficits that has been spread by the Republicans, Obama and Climton is palpable. The work done by you and others at the UMKC plus other MMT economists like Warren Mosler and Mike Norman is commendable. Keep it up.

  6. We must act now and block the Great Betrayal by not voting for President Obama on November 6.

  7. Pingback: Wall Street urges Obama to commit the Great Betrayal - New Economic Perspectives

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  9. Pingback: Wall Street’s Plan to Push Obama to Betray – By William K. Black. . . thanks to R. | 2012: What's the 'real' truth?

  10. For @z3r0Projects For the most part, I agree with you. Even so, I also feel you are underestimating the role peolpe have played in creating this systemic’ mess. By analogy, Canada’s system of law, for example, is quite developed. Yet, greedy lawyers and compromised judges have undermined the law such that it amounts to little more than a protection racket rigged to serve the rich, powerful and corrupt. It is the peolpe in the system, which have rendered it unworkable.