Some One Penny Bets

By James Stuart

This post is not about the TDC, although I am a big fan. This is about putting into the MMT conversation a different point of view about Obama. Most MMTers seem to think that the President is a Trojan Horse – attractive on the outside; dangerous, even lethal on the inside. I have a different perspective. What I often do now, when I disagree with someone, instead of arguing, I make one penny bets. The bets need to be about something definite and measurable. If I win, my position on the issue may not be proven, but it is at least partially vindicated.

Here are a few of the things I have come to think about Obama:

1. He is beatable, but on balance he is a superb negotiator.

2. He plays the long game, organizing his efforts around clear principles and guidelines, not preset plans. He will lose a battle or two to win the war.

3. He does not love austerity, but knows Republicans do. He also knows he cannot work with or defeat Republicans if he denies the validity of their argument that we have a long term budget problem.

4. He is deeply committed to maintaining the integrity of Social Security, Medicare and Medicaid. He will entertain what he considers modest changes, but no wholesale structural overhaul.

5. He is a pragmatist and will be very interested in MMT when Dr. K gets a chance to present the case to him (which event I firmly believe will happen).


So here are my one penny bets, designed to support, if not to actually prove my arguments:

1. Republicans will cave on the debt ceiling and allow a clean increase. This will happen before the default witching hour.

2. The sequester will either be triggered or replaced with a Bargain trading new tax revenues (tax reform) for some of the $1.2Trillion spending cuts (say $600B new revenue/$600B spending cuts over 10 years). Bargain could be broader: entitlement tweaks (chained CPI on Social Security, Medicare age change) in return for giving President permanent ability to raise debt ceiling.

3. If Bargain made, no Government shutdown over Continuing Budget Resolution. If sequester triggered, possible shutdown.Obama will say $4Trillion in 10 year deficit reduction has been achieved, so the conversation is over. Any shutdown will be brief, and will further hurt GOP.

4. Beyond chained CPI, possible Medicare age change, and benefit means testing affecting the wealthy, there will be no structural change to entitlements during Obama’s second term.

5. To GOP and most of the country’s amazement, healthcare costs will moderate over the next five years, due mostly to system productivity enhancements called for and rewarded by ACA. As this becomes apparent, the long term budget crisis argument, disappears, even before MMT is broadly understood and accepted.

The fun thing about these bets is that we should know the answers to three of them by the end of March. If I am right, the Republicans will have been truly hammered, and like taxes after the cliff deal, deficit reduction will be off the table as a credible issue. $4Trillion in 10 year deficit reduction will have been accomplished, the original Simpson-Bowles goal, delivered December 1, 2010, with significantly fewer “tweaks” to entitlements than called for by Simpson-Bowles. Obama may have gotten the $1.2Trillion in new tax revenues he asked Boehner for in August 2011 (and that Boehner walked away from), with an important difference: tax rates on the wealthy have gone up, whereas if the August 2011 deal had been accepted by the GOP, they would not have.

If I am right, the extent of the Republican rout will be complete: taxes and tax rates up; significant deficit reduction achieved by a Democratic President with him calling most of the shots in what was cut; and very few reductions in long term entitlement benefits for the middle class.

And if I am right, we will have been privileged to observe probably the finest example of long term negotiating we will ever see. Why did Obama “unilaterally disarm” by saying no to the 14th Amendment and the TDC options? The answer to this is the same as why Gandhi and King’s non-violent methods were so powerful: “I/We are unarmed. We have no defense. Hurt us, and our brothers and sisters as well, if you choose. But remember: the responsibility is yours and the world is watching.”

As MMTers, we know the US economy did not/does not need $4Trillion in deficit reductions over 10 years. But for Obama, a young, African American President from the “big-spending liberal side of the aisle” to have tried to make this case after the giant GOP/Tea Party win in the November, 2010, midterms, would have been suicidal. Obama chose to engage the GOP beast on its own terms, in its own idiom and campaign language, and I think he’s going to win.

Obama has already proven himself a transformational President. First he transformed the War on Terror (that existential, deep fear-inducing Evil, capable of destroying America) into the War in Iraq (ended), the War in Afghanistan (ending) and the Fight Against Al Qaeda (continuing). Do you remember how afraid many were (some, but fewer, still are), how many knew we had to torture because the danger was so great?? And, if I am right, by the end of March, he will have taken all of us out of what too many have been calling the soon-to-snap-shut jaws of the debt and deficit monster. Could he have done any of this without entering the Belly of the Beast? In my opinion, no. Has he been affected, tainted even by this encounter? Yes, indeed.

So let me know at [email protected] if you want to take one or more of the bets. I will try to keep and to give a faithful accounting of my winnings and losses.

A final word: Why does it matter how we view Obama? Because I think it is a singular moment for MMT. The Coin has brought a new, magical image into our midst. As Joel Palmer said in his post on January 13, the “ground has shifted.” MMT will get a hearing, I believe, in the highest places of policy and power. And we will not have to wait that long. The person who needs to hear the message is President Obama. And in sometimes mysterious ways, they way we hold someone in our minds affects whether we can connect with that person and begin useful, generative conversations.

63 responses to “Some One Penny Bets