Tuesday, January 26, 2010

Democrats freezing over?

Joan Walsh takes a look at Obama's proposed spending freeze on non-military programs in Dead wrong, or deeply cynical Salon 01/26/10. There's another possibility that suggests itself - floundering - but we'll have to wait a bit to see what they are really proposing. Joan links to various other reactions, including Paul Krugman's ("Right now, this looks like pure disaster."). And that of "R.A." at the British Economist blog:

I understand the arguments from supporters of the president that this is a poltical [sic] gambit, that it won't actually amount to much but a sound talking point and a tool with which to co-opt the president's moderate antagonists. What's the difference? Seriously. How does the president move from this to any important policy goal? What room does this leave him to deal with either the jobless recovery or the long-run budget deficit? [my emphasis]
Along with the Democrats' Fighting Gap comes an ideology gap. Republicans' policy goals are generally helped by what even American economists call the "neoliberal" ideology of deregulation of business, freeing the wealthiest from the burden of paying taxes to support their country, free trade policy that guts American manufacturing and minimizing the social functions of government. But the Republicans mostly seem to be cynical enough to know what they are doing with that dogma. A lot of Democrats seem actually to believe it.


Which means that they try to couch even proposals like health care reform in terms that don't challenge the neoliberal "free market" dogma. Like by stressing cost control instead of access and quality in selling the program. Their commitment to deficit and debt reduction is the most self-destructive. Dick Cheney expressed the actual Republican attitude on that when he famously said "deficits don't matter", possibly the closest thing to true words that ever passed through his lips.

For Democrats to spotlight the deficit and debt right now the way the Obama administration is doing does nothing but undermine the Democrats' case for necessary spending and give support to the Republicans' long-term campaign to destroy Social Security and Medicare, which is mainly what the Republicans' hoopla over the deficit is about. Senate Minority Leader Growling Mitch McConnell was on Meet the Press this past weekend talking about the deficit and the idea of a deficit-reduction commission. He made it painfully clear that this supposedly critical deficit problem is certainly not something that should be solved by asking the wealthy to pay more taxes:

SEN. McCONNELL: Well, the first thing you do is you stop this job killing healthcare bill, and you don't pass the energy tax that passed the House earlier this year. Their prescription for new jobs is obviously higher taxes. Don't do that. You've got tax relief that was passed a number of years ago expiring next year. Don't raise taxes in the middle of a recession. Look, if I'm running a small business, David, and I'm trying to figure out what to do next year, I'd like to expand employment, but I'm looking at the potential for healthcare taxes, I'm looking at the potential of income taxes going up, dividend taxes going up, capital gains taxes going up. The cost of adding employees is bothering me. And then I see the administration rattling the markets on top of it. You know, if you sum up the first year, what this administration has done best is rattle the markets, advocate tax increases and run up deficits. That's not a very comforting message to business people looking at trying to expand employment.

MR. GREGORY: The president's also looking at the long-term fiscal health of the United States. He wants to put together a bipartisan commission that will look at the possibility of either tax increases or budget cuts or both, but long-term budget health. Will you support that?

SEN. McCONNELL: I think a spending commission is a good idea. I've been advocating it all year. We're going to have votes on several different forms of that in the, in this very next week in the Senate. Spending is the problem. I do worry that if we construct this commission in the wrong way, it will be kind of an indirect way to raise taxes. I've already indicated what I've said earlier today, that raising taxes in the middle of a recession's not a good idea. We don't want this to end up doing that. What we need is a spending reduction commission. Get spending down. [my emphasis]
On the same problem, White House Domestic Policy Adviser Valerie Jarrett played right in to alarmism over the deficit:

... the deficit is looming out of control ...

Let's, let's just remember where we were a year ago, David. We were losing 700,000 jobs a month. We were in the middle of the worst economic meltdown in our nation's history. Our financial system was on the brink of collapse. We had the largest federal deficit in our nation's history. [my emphasis]
And Gregory played a tape of Blue Dog Democratic Sen. Evan Bayh saying:

If you look at the independent voters who have bailed out on the Democratic Party in Virginia and New Jersey and now Massachusetts, they care about the economy, they think the healthcare bill was--went too far in some ways, and they care about spending and deficits. That's one thing we can correct, starting with the president's budget and starting with the State of the Union address this week. [my emphasis]
I would say there's little evidence that voters anywhere actually care about deficits as such. But in the absence of the Democrats providing an alternative narrative, voters and pundits will tend to fall back on the received wisdom that deficits are always and everywhere a problem. But exit polls rarely if ever indicate that concern over the federal budget deficit was actually a decisive issue in an election.

But the Democrats can't seem to let go of the idea that it will somehow show them to be virtuous to talk up the idea that the deficit is a big problem. So we're getting headlines like, "Obama endorses deficit task force". Not a good sign.

It's a good time for Jamie Galbraith's advice:

James Galbraith on How Government Deficits Saved Us and Are Still Needed FDL Seminal 12/01/09

Another Crash, Another Galbraith Bill Moyers Journal 10/30/09

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