By William K. Black
The Beltway moved immediately from the election to an obsession with the “Grand Bargain.” The discussion about the budget deal is focused almost entirely on the question of how much increased revenue we should obtain from taxes on the wealthy. That is an important question, but it is the least important of the four important issues that the deal would address.
The four most important questions, in descending order, are:
- Will we inflict austerity on the nation, forcing the U.S. back into recession, raising unemployment, and increasing the deficit?
- Will we begin to unravel the safety net, enriching Wall Street and betraying our promises to those most in need?
- What social programs will we cut, and how deeply?
- What increases will we make in tax revenues from wealthy Americans?
The Grand Bargain that Obama and Boehner reached general agreement on in July 2011 would have inflicted austerity on the U.S. and begun to unravel the safety net. It would have made extremely large cuts in social programs, including major cuts to the safety net. It would have produced modest increased tax revenues from wealthy Americans. Austerity, as was the case in Europe, would have thrown the nation back into a recession. Unemployment, which was 9.1% in July 2011, would have risen to over 10% and would have been rising throughout 2012 as we went into the election. Because social programs would have been slashed by the deal the misery of this increasing unemployment would have been compounded. Obama would have suffered a crushing defeat, the Democrats would have lost their majority in the Senate, and the Republicans would have achieved major gains in the House and in state races.
The austerity component of the Grand Bargain was economically illiterate. Within the administration, it was the product of refusing to listen to its economists and listening instead to Treasury Secretary Timothy Geithner. Geithner is not an economist. Geithner hated Obama’s stimulus program and embraced austerity. He convinced Obama to embrace an austerity deal that would have inflicted a gratuitous second recession on America and doom Obama’s chance of re-election.
Geithner had a powerful ally in convincing Obama to adopt such a program. Obama had decided to signal his fidelity to Wall Street by appointing William Daley as his Chief of Staff. Daley was from JP Morgan Chase. He came from (and has returned to) The Third Way – a Wall Street front group dedicated to pushing austerity and trying to further enrich Wall Street by privatizing Social Security. Daley’s Third Way bio emphasizes his roles:
“As Special Counsel to President Clinton in 1993, Daley coordinated the successful campaign to pass the North American Free Trade Agreement (NAFTA).
He was co-chair of the US Chamber of Commerce Center for Capital Markets Competitiveness.”
“Capital markets competitiveness” is code for pushing the deregulation of finance. The Chamber of Commerce is Obama’s fiercest critic. The Chamber loves austerity and detests the safety net.
Obama had the great luck that House Tea Party fanatics ultimately caused Boehner not to consummate the Faustian bargain.
But Obama, Geithner, and Daley were not content to have the Tea Party snatch defeat from the jaws of a Republican political victory that would have doomed Obama politically by doing horrific damage to our nation. When it was clear that the Great Betrayal and austerity would fail Obama successfully sought from Boehner an agreement to create a “trigger” that would impose austerity should the parties fail to agree to an austerity deal. This led to the creation of what the media now (inaccurately) calls the “fiscal cliff.”
The fiscal cliff is an austerity program (but not a betrayal of the safety net). It is not analogous to a cliff. The tax increases and spending cuts take place over 2013. The great bulk of the tax increases are likely to be retroactively rebated even if the trigger isn’t postponed for several months. (It is likely that the trigger will be postponed.) Here is the curious fact – the beltway now believes (correctly) that if we sat back for a year and did nothing the austerity imposed by the trigger would force the nation back into recession, increase unemployment, and greatly increase the misery of those who lost their jobs because it would slash public services the unemployed need. Most of the Beltway also believes (correctly) that the austerity trigger would increase the deficit rather than reduce it. Recessions greatly diminish government revenues and increase expenses. Adopting austerity for the purpose of reducing a “deficit and debt crisis” is a perverse policy that generally causes the deficit and debt to grow.
The Beltway crowd is telling us we must avoid the austerity-induced recession the “fiscal cliff” is purportedly about to cause. The fact that Obama and Boehner tried to impose even more self-destructive austerity in July 2011 is ignored. The fact that Obama and Boehner insisted on the trigger that produced the so-called fiscal cliff is ignored. Given the belated understanding of the Beltway that austerity would be disastrous two obvious questions arise.
- Why are Obama, Boehner, and the media treating the July 2011 effort to commit the Great Betrayal not as a cautionary tale of the idiocy of austerity but as a tragic tale of bipartisan bickering in which austerity is the path of righteousness and courage?
- Why are Obama, Boehner, and the media treating it as obvious that we must act immediately to prevent the austerity of the so-called fiscal cliff by imposing greater austerity and unraveling the safety net through the Great Betrayal?
Incoherent is an inadequate word to describe the logic behind the administration’s renewed effort to throw the nation into recession, increase unemployment, greatly increase misery by cutting vital social programs, betray the safety net, increase the deficit, and cause devastating losses to the Democratic Party in the next two elections.
It was predictable that the Washington Post would lead the charge for the Great Betrayal, and it did with a featured op ed from Erskine Bowles, the co-leader with Bob Rubin of the Wall Street wing of the Democratic Party. The Beltway media have an autonomic reflex that causes them to worship any bipartisanship even if the bipartisan agreement is an economic suicide pact that will harm the nation and further enrich Wall Street. Logical incoherence is irrelevant to autonomic reflexes.
The only real question was where MSNBC would come out on the budget issue. MSNBC has strongly defended the stimulus program and the importance of the safety net. How would it respond to a purported “Grand Bargain” that would inflict self-destructive austerity and begin the Great Betrayal of the safety net? Logic would compel MSNBC to oppose the deal. But MSNBC has a warring imperative – its hosts worship Obama and are awash in endorphins as a result of his re-election.
(Full disclosure, I voted for Obama in both presidential elections though I am a strong critic of his financial policies and his administration’s abject failure to hold fraudulent financial elites accountable criminally for their crimes that drove the financial crisis and the Great Recession. I was one of many who warned before the 2012 election that our task immediately upon Obama’s re-election would be to defeat his efforts to commit the Great Betrayal. He remains fixated on the dream that the Grand Bargain will establish his legacy and make him famous for his policies rather than for his election successes or his embarrassing Nobel Prize.)
Prior to the election, Lawrence O’Donnell correctly pointed out that the fiscal cliff was a misnomer and that Obama would have far greater negotiating leverage were he to wait to until the Bush tax cuts expired and freed Republicans from any need to violate their pledges to Grover Norquist. What would happen on MSNBC after the election?
Obama, as he promised, immediately sought his Grand Bargain. I spent nearly two hours listening to MSNBC’s midday coverage of the issue without hearing a single journalist, commentator, or politician recognize the logical incoherence of this embrace of austerity premised on a claim that the austerity of the fiscal cliff was about to throw us into recession.
I then watched four hours of MSNBC’s evening coverage of the fiscal cliff. Only Lawrence O’Donnell (of the six MSNBC hosts that I watched that day), noted that the fiscal cliff is not real. The others treated it as an imminent disaster. Every host, every journalist, and every guest on the programs who discussed the issue took it as a given that it was essential and urgent that Obama and Boehner agree to austerity and severe cuts in the safety net. There was no discussion of the merits. It was treated as obvious. The consistent message was that it was essential that we support our President unreservedly.
The first day of MSNBC’s coverage of this issue was dismal, but one can hope that the endorphins wear off and the quest for analytics clicks back in. The truth is that Obama’s interests coincide with America’s interests when it comes to the Great Betrayal. If he had succeeded in July 2011 in reaching the deal he offered Boehner he would have destroyed his presidency, crippled his nation and his Party, and ruined his legacy. The same is true today. The best service media can render to any President is the candor of honest criticism. Every President has a legion of sycophants eager to provide praise.
