The austerian Democrats: part II

How are we to understand the rise of Democratic Mugwumpery? Though one might look to the rise of neo-Keynesian theories of monetary and fiscal policy and Stiglitz’s view as Chair of Clinton’s Council of Economic advisors that balanced-budget stimulus was the key to growth, or more sociologically to the decline of organized labor and the decline of social democratic elements in the Democratic Party, we think it is worth noting something specific about the politics of deficit-spending. Big-time deficit spending requires convincing the public that the risk and potential sacrifice is worth it, that there is a specific and significant collective purpose at stake. But the Democrats are most definitely a party without a purpose. Their Mugwumpish attachment to reasonability, living within one’s means, and good government is a substitute for purpose – it is a way of giving the appearance of principled government in the absence of principles.

Consider, for instance, the fact that Republicans have become the big deficit-spenders. Robin notes that the Republican strategy of “starving the beast” by cutting taxes and hoping that spending will be reduced down to new revenue levels has only recently been successful. But as the now familiar graph shows the other major component of the recent growth in deficits has been war.

Republicans get to deficit spend not just because their side will sign-up happily to tax-cuts, but because their constituents believe big-time in war. And war costs a lot. Republicans will “sacrifice” themselves and future generations in the name of fighting a war. Now the Dems are into war too, though not quite like the Republicans. But the Dems can’t quite convince their members that the party should spend money on any other big projects – in fact, they no longer believe it themselves. Democratic spending is buried in the indirect incentive changes and obscure tweaks of the tax codes. But there is no ideal or purpose important enough that people are willing to say “screw it, we’ll come up with the money somehow – the sweat of our brow tomorrow, for the debts we incur today.” Revenue neutrality, offsets, CBO estimates – those are the buzzwords of Democratic fiscal policy. The dull, mind-numbing repetition of wonkspeak is not just a policy program, it is a totemic incantation, hoping to making something real out of the apparition of a party without projects.

Obama: My message to Democrats is the same message I’ve got to Republicans and independents, and that is, I want a balanced approach to deficit reduction that combines additional revenue, particularly from folks like me who can afford it, with prudent cuts on both the discretionary side and the mandatory side but that still allows us to make investments in the things we need to grow.

And that means I’m prepared to look at reforms in Medicaid. I’m prepared to look at smart reforms on Medicare. But there are things I won’t do, and this is part of the debate we’re having in this election. I do not think it is a good idea to set up Medicare as a voucher system in which seniors are spending up to $6,000 more out of pocket. That was the original proposal Congressman Ryan put forward. And there is still a strong impulse I think among some Republicans for that kind of approach.

I’m not going to slash Medicaid to the point where disabled kids or seniors who are in nursing homes are basically uncared for. We’re not going to violate the basic bargain that Social Security represents.

Now, the good news is, if you’re willing to raise taxes on millionaires and billionaires, then you can make modest reforms on entitlements, reduce some additional discretionary spending, achieve deficit reduction and still preserve Social Security and Medicare and Medicaid in ways that people can count on. The only reason that you would have to go further than that is if there’s no revenue whatsoever. And that’s a major argument that we’re having with the Republicans.