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Hullabaloo


Sunday, July 28, 2013

 
"A damaging framework in Washington"

by digby

I just read David's piece below and I am still in shock.  The President really said this?
In an interview with The New York Times, Obama said the overwhelming focus on cutting spending and trimming the deficit has been a "damaging framework in Washington," and that there needs to be ample attention given to ensuring upward mobility for all Americans.
Uhm, we know the history here Mr. President:
In the summer of 2009 [only six months into the first term], Geithner was asked by a television interviewer whether tax hikes would be needed to rein in the nation’s debt. Geithner responded it was too early to tell, an early hint of the priority he put on cutting the deficit.

Political strategists at the White House were mortified. Obama had promised not to raise taxes on the middle class. This had been a centerpiece of his election campaign. At a White House briefing a day after Geithner’s remarks, he was publicly chided by Obama’s top spokesman for engaging in a “hypothetical.”

But Geithner already had the president’s ear. Privately, Obama offered reassurance. “I’d have said the same thing,” Obama told him, according to two people familiar with the conversation.

By early last year, Geithner was beginning to gain the upper hand in a rancorous debate over whether to propose a second economic stimulus program to Congress, beyond the $787 billion package lawmakers had approved in 2009.

Lawrence Summers, then the director of the National Economic Council, and Christina Romer, then the chairwoman of the Council of Economic Advisers, argued that Obama should focus on bringing down the stubbornly high unemployment rate. This was not the time to concentrate on deficits, they said.

Peter Orszag, Obama’s budget director, wanted the president to start proposing ways to bring spending in line with tax revenue.

Although Geithner was not as outspoken, he agreed with Orszag on the need to begin reining in the debt, according to current and former administration officials. Some spoke for this article on the condition of anonymity to discuss internal deliberations.

Even before the president had been inaugurated, Geithner had been urging him to set a target for the budget deficit that would require shrinking its size to 3 percent of the U.S. economy. At that level, the national debt would eventually become manageable.

“From the earliest moments of the administration and even before, he clearly had a big focus on long-term deficit reduction and making clear, not just to the markets but for the entire economy, that the government is living within its means,” Goolsbee said in an interview.

The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.

Wrong, Romer snapped back. Stimulus is an “antibiotic” for a sick economy, she told Geithner. “It’s not giving a child a lollipop.”

In the end, Obama signed into law only a relatively modest $13 billion jobs program, much less than what was favored by Romer and many other economists in the administration.

“There was this move to exit fiscal stimulus a lot sooner than we should have, and we’ve been playing catch-up ever since,” Romer said in an interview.
In truth, the president had been with Geitner from the beginning:
I asked the president-elect, "At the end of the day, are you really talking about over the course of your campaign some kind of grand bargain? That you have tax reform, healthcare reform, entitlement reform including Social Security and Medicare, where everybody in the country is going to have to sacrifice something, accept change for the greater good?"

"Yes," Obama said.

"And when will that get done?" I asked.

"Well, right now, I’m focused on a pretty heavy lift, which is making sure we get that reinvestment and recovery package in place. But what you described is exactly what we’re going to have to do. What we have to do is to take a look at our structural deficit, how are we paying for government? What are we getting for it? And how do we make the system more efficient?"

"And eventually sacrifice from everyone?" I asked.

"Everybody’s going to have give. Everybody’s going to have to have some skin the game," Obama said.
I certainly agree that this focus on the deficit has been a "damaging framework." I'd say it's been especially damaging that it happened in the midst of an epic economic crisis by a Democratic president. In fact, it was inexplicable. And it has had a very deleterious effect on our economy with the only bright spot being that it coincided with a gridlocked congress featuring a right wing faction that hates the president so much they haven't been able to force themselves to take yes for an answer. We've avoided Europe's repeated recessions and settled for a stock market bubble and tepid growth with high long-term unemployment instead. So I guess that's something...

This is infuriating, but only because I've been screaming about this for years now, as have been many people more important than I (like certain Nobel prize winning economists in the New York Times.) The fatuous trope that the government has to "tighten its belt, just like your family" has repeatedly come out of the mouths of every political leader of both parties, including the president. The vague insinuation that deficits are the cause of our bad economy cannot have been an accident and yet it has been totally wrong from the get.

Look, I certainly understand that all the smart liberals have recently discovered that the executive branch is powerless and that the presidency is largely a ceremonial position, much like Wills and Kate. But I still think that it might have a tiny bit of influence in setting the terms of the debate, at least to the extent of nudging Democrats in congress to focus on certain issues or see the solutions to problems in a certain way. And there is just no denying that the president has been framing the deficit as a major problem (if not the major problem) that must be dealt with immediately. Indeed, his administration has taken great pride in their accomplishments in this regard.

Recall that the president even framed the Senate passage of his signature Health Care bill like this at the conclusion of his Christmas 2009 press conference:
"With today’s vote, we are now incredibly close to making health insurance reform a reality in this country. Our challenge, then, is to finish the job. We can’t doom another generation of Americans to soaring costs and eroding coverage and exploding deficits. Instead we need to do what we were sent here to do and improve the lives of the people we serve. For the sake of our citizens, our economy and our future, let’s make 2010 the year we finally reform health care in the United States of America."
And that was only the beginning of the increasingly shrill deficit mongering by Democrats and Republicans alike with a few dirty hippies screaming impotently on the sidelines. It led to the endless budget showdowns we've endured ever since with the Democrats offering up massive cuts even as the Republicans demand more and more.

It's a step in the right direction for the president to try to reframe this debate. It's long overdue. But much damage has been done and it's largely because of a very big mistake on the administration's part to validate conservative cant on economics and focus on deficits at the wrong time. As David says below, there's nothing to lose by confrontation at this point. Indeed, there never was, as we've seen demonstrated in living color. So perhaps the president could at least make amends for this error by using his considerable skills to reframe this debate for his potential successors, his Party and the people of this country.  We can't take any more of this.

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