Hullabaloo

Sunday, June 14, 2009

 
Scolds And Boogeymen

by digby

Robert Reich has a great article on the return of the fiscal scolds in which he correctly notes that forces from throughout the spectrum are suddenly panicking about a debt which was created by George W. Bush (and which nobody said a peep about at the time.)

The Great Debt Scare is back.

Odd that it would return right now, when the economy is still mired in the worst depression since the Great one. After all, consumers are still deep in debt and incapable of buying. Unemployment continues to soar. Businesses still are not purchasing or investing, for lack of customers. Exports are still dead, because much of the global economy continues to shrink. So the purchaser of last resort -- the government -- has to create larger deficits if the economy is to get anywhere near full capacity, and start to grow again.

Odder still that the Debt Scare returns at the precise moment that bills are emerging from Congress on universal health care, which, by almost everyone’s reckoning, will not increase the long-term debt one bit because universal health care has to be paid for in the budget. In fact, universal health care will reduce the deficit and cumulative debt -- especially if it includes a public option capable of negotiating lower costs from drug makers, doctors, and insurers, and thereby reducing the future costs of Medicare and Medicaid.

Even odder that the Debt Scare rears its frightening head just as the president’s stimulus is moving into high gear with more spending on infrastructure. Every expert who has looked closely at the nation’s crumbling infrastructure knows how badly it suffers from decades of deferred maintenance -- bridges collapsing, water pipes bursting, sewers backed up, highways impassable, public transit in disrepair. The stimulus, along with the president’s long-term budget, also focuses on the nation’s schools, as well as America’s capacity to reduce emissions of greenhouse gases. These public investments are as important to the nation’s future as are private investments.

He goes on to explain that the US has had much higher debt to GDP ratios in the past and that we have always grown our way out of these deficits, which are usually caused by war and economic stress. Therefore, when the nation has to go further into debt to stimulate the economy, one of the smart strategies is to spend the money on investments that will prepare the ground for recovery and future growth. "Pulling in your belt" or obsessing about deficits in the middle of recession is actually counterproductive to both the short term goal of getting the economy moving and the long term goal of reducing the debt.

He then asks a critical question:

Why are the ostensibly liberal Center for American Progress and New York Times participating in the Debt Scare right now? Is it possible that among the President’s top economic advisers and top ranking members the Fed are people who agree more with conservative Republicans and Wall Streeters on this issue than with the president? Is it conceivable that they are quietly encouraging the Debt Scare even in traditionally liberal precincts, in order to reduce support in the Democratic base for what Obama wants to accomplish? Hmmm.

I'm afraid that's treating our president like a bit of an idiot. He's been talking up "Grand Bargains" and "Fiscal Responsibility" for a long, long time. He has not made the argument that Reich makes and neither has any other elected Democrat. They simply refuse to refute the Republican propaganda that says the deficit and higher taxes are second only to terrorism as the greatest threat America faces. They will not speak to the American people like adults, instead trying to finesse conservative cant around the edges until they can get to a point where they can fully embrace it --- as when Bill Clinton proudly stood before the people and proclaimed "the era of big government is over!" (And then they impeached him ...)

Through years of relentless hammering (and a natural distaste for paying the bills) American people have been conditioned to believe that deficits are a serious problem for them personally and must be avoided at all costs or the country will ... implode? And yet it's a completely abstract concept that doesn't actually mean anything to an individual citizen. Meanwhile, the tangible, real life benefits they receive for their tax dollars in the form of social security and food safety and roads and schools and health care are called "entitlements" or "government waste" and they believe that their tax dollars go into a black hole of special interests in "the fleecing of America." And nobody in the Democratic Party ever tries very hard to challenge those assumptions. It makes you wonder if they really want to.

Update: Tim Fernholz takes issue with Reich's assertion that progressive institutions and the administration are failing to properly challenge the fiscal scolds. He says that on balance, the president has been far more progressive than not on these issues. He concludes with this:

This post reminds me of the panic that surrounded Obama's White House meeting on entitlements, which was initially met with dark warnings that the president was planning on attacking social security but everyone quickly realized that the effort was focused on health care reform. There are people out there who are saying nonsense about the federal debt, but they're not at the Center for American Progress or, so far as we know, in the current administration.

That's not exactly correct. The Peterson Foundation was scheduled to be involved with the summit and they are not about health care. What happened was that the White House realized that attacking social security was going to muddle their agenda on health care. But there's little doubt that it was, and is, on the agenda for deficit reduction.

Perhaps more to the point, is this twitter from Ana Marie Cox from an event last week:

Orszag just called Social Security reform a "test of manhood." Oh honey...

Yep. Taking on social security will prove to all the villagers just how tough Democrats are. Nothing makes 'em happier than punching a hippie -- especially an old hippie.

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digby 6/14/2009 09:00:00 AM |