Tuesday, July 26, 2011

The Debt Ceiling or How Not To Negotiate

As we enter the 11th hour and 59th minute of furious deliberation on the debt crisis, Paul Krugman has made the most sensible point about the whole mess thus far: namely that the media's decisions to portray this debate in an even handed fashion despite the obvious extremist position that the GOP is taking.

Think about what’s happening right now. We have a crisis in which the right is making insane demands, while the president and Democrats in Congress are bending over backward to be accommodating — offering plans that are all spending cuts and no taxes, plans that are far to the right of public opinion.
So what do most news reports say? They portray it as a situation in which both sides are equally partisan, equally intransigent — because news reports always do that. And we have influential pundits calling out for a new centrist party, a new centrist president, to get us away from the evils of partisanship.

This debate has been so extreme that even David Brooks managed to see the forest for the trees for once, despite, true to form, rapidly returning to his overarching approach of 'even handedness'. As it stands, what is being pressed is pure heads Republicans win, tails Democrats lose, which is a bit rich. I think Boehner et al, are using their current stalling tactic as a means of pushing their plan at the last possible moment and try to pass it on the grounds that their is no way of coming up with an alternative. Never mind the fact that the Reid plan has been ready to go for some time and was scored more highly by the Budgetary Committee.
Meanwhile, Dean Baker argues repeatedly that the Republicans will inevitably have to cut a deal as those most inconvenienced by the failure to raise the debt ceiling increase are Wall Street interests that the party is aligned with. Baker notes:

This fact is essential in understanding the endgame on the debt ceiling. Suppose that we get to the dates in August when the Treasury has reached the limit of its ability to shuffle accounts and literally can no longer pay its bills. Secretary Geithner will at that point make an announcement that in three days there is an X billion payment on Treasury bonds coming due. He will say that the government does not have the money in the bank and will therefore have to miss this payment.
The markets will then go into turmoil. We will see the same sort of plunge in the stock market that we saw when the House voted down the TARP the first time back in September of 2008. At that point, the Wall Street boys will be screaming their heads off at Speaker Boehner and the rest of the Republican leadership. The news media would all be running clips with depression footage, telling us that another Great Depression looms just around the horizon.

Despite the intransigence of the Tea Party, one cannot underestimate the power of Wall Street. Besides, the Tea Party, despite their populist rhetoric, largely represent strong corporate interests at the end of the day and will eventually be made to bight the bullet and agree to something. They seem to merely be trying to agree to things on their own terms with a compromise only coming once a means of saving face in front of their base can be concocted.

One does get the sense, however, that Obama is not a strong negotiator. Then again, his position is already largely to the right, and as I have written repeatedly previously, he has done little to secure much in the way of progressive legislation, or even reign in the extreme right, over the course of his presidency. The administration's negotiation position in the debate runs something like the following clip:

Thursday, July 21, 2011

Mute Ideology

The ongoing ridiculous debt ceiling debate (touched on in my last post) has further pointed to what many of us guessed from the onset about would be liberal messiah Barrack Obama, namely that he is clearly a creature of the far right. Yet the partisan nature of American politics has created a culture within which, for a leftist to point a finger at the failings of the administration, one is to commit an act of betrayal worthy of Benedict Arnold. It is similar to Christopher Hitchens' often-voiced complaint (some might say he never tires of repeating) that progressive people made the worst sorts of excuses for Bill Clinton while he was president, regardless of his lapses, either ideological or personal. I think this is a pertinent observation and that the tendency to make excuses for ones own 'side' frequently prevents politicians from not doing a better job.

To wit, Glenn Greenwald, in the pages of The Guardian has convincingly argued that the Obama administration is as determined as anyone to gut what have been the core of the the Democratic policy since the New Deal. As was pointed out to me by my friend Nick, the most prescient statement from within the whole piece may very well be the following:
The nature of American politics is that once a policy is removed from the partisan wars – once it is adopted by the leadership of both parties – it is removed from mainstream debate and fortified as bipartisan consensus. That is why false claims in the run-up to the Iraq war, endorsed by both parties, received so little mainstream journalistic scrutiny. And it's why the former Bush lawyer and right-wing ideologue Jack Goldsmith – back in May 2009 – celebrated in The New Republic the fact that Obama was doing more to strengthen Bush/Cheney terrorism policies than his former bosses could have ever achieved: by embracing the very terrorism approach he once denounced, Obama was converting it from rightwing radicalism into into the official dogma of both parties, and forcing his supporters to defend what were, until 2009, the symbols of rightwing evil.
Greenwald hits the nail firmly on the head here. As we can see with the Clinton administrations' embrace of both free-trade and welfare reform within the 1990s, the moment an issue is co-opted by both political parties, it becomes official party dogma. I recall being repeatedly chided by fellow 'leftists' for asking questions of policies articulated by the inchoate and then latter Obama campaign. The sectarian nature of the response was shocking, especially during the (troublesomely ephemerally brief) debates about TARP. The venom that would be rapidly directed when one questioned exactly how the Democratic congress planned to help people keep their homes by giving hundreds of billions to the commercial banking industry painted questions asked about who's interest was being served, and why, with a mist of poison.

This may have had something to do with the issues at hand. Discussions of the economy and financial sector reform beget discomfort and quiet distress in many people. Many people simply do not like to talk about the finer points of fiscal policy because many of the loopholes that need to be closed are difficult to fully comprehend, (and thus easy to apply partisan sensibility to), and fear is being used as the primary vehicle by both Republicans and Democrats in any discussion of economic policy, acting as a catalyst for that discomfort. Secondly, a close examination of how the financial sector seems to influence political decisions seems to invalidate much of what people like to think about the democratic process. This challenges the very nature of what people think they understand about government.

After all, people have an understanding of politics that often the politician they support will pragmatically (or cynically, depending on ones outlook) cut deals with the opposition, where no one quite gets exactly what they want but a legislative docket is moved forward. They believe that, their elected officials, at base, share many of their deeply held political convictions. At the same time, the voting records and lifestyles of the majority of career politicians should lead us to believe that the priorities of these people are largely not our own - which is why the process of angrily and bitterly holding politicians accountable is so important. Instead of shouldering this responsibility, many have simply allowed their beliefs about how policy should be written to be ignored as their party- which has become the far greater cipher for self-identification than the actual issues - remains in office.

Obama remains a master of this process. By outlining throughout the 2008 presidential campaign center to far right political stances (with the odd scrap, usually on a culture war issue, thrown to progressives) while cloistering his language in that of the civil rights movement, he was able to create an image of genuine progressive leadership potential to many people, despite his very clear conservative stance on many issues. Obama, has been remarkably honest on the campaign trail in that he seems to genuinely attempting to carry out the policies he campaigned on. The distinction has been that people did not read his policy stances literally, and instead were captured by the rhetoric with which he articulated those policies.

This most clearly plays itself out in Obama's economic, and specifically, preferred taxation policy. Obama initially elected to last year portray, in this case inveigle, his decision to not end the Bush tax-cuts for the wealthy as a deal he had to cut with the Republicans in order to maintain welfare benefits for a few thousand Americans. This struck many as a terrible exchange, and further, by forgoing billions in potential tax-revenue, how would the federal government pay for those benefits? The current budgetary talks, where Obama has led by offering two trillion in austerity measures demonstrates just how deeply his commitment to assuring those welfare benefits really ran. This has been further compounded by an unwillingness to raise taxes in any meaningful way for the most wealthy. (I have written more about this here.) As Ezra Klein among others points out, Obama has absolutely no real interest in letting the Bush era tax cuts expire, thus any gamesmanship the administration may be locked into seems to be (if you will tolerate me abusing a metaphor) variances in which shades of grey hedge fund managers should get their next Brooks Brothers suit cut in. This is because Obama is hand-in-glove with the financial sector and thus asking for reasonable taxation rates for bankers and the other wealthy would prove pungent towards Obama's economic 'base'.

The most striking outcome is how similar both parties stances on the issues have become, largely because at the end of the day, they serve very similar financial interests. The federal government has become almost exclusively vehicle for advancing the interests of banks and the defense industry and that this has intensified, and become more nakedly apparent over the last couple of decades. I think that local government remains overwhelmingly a far more capable and willing to act in the public interest, but this is beginning to be eroded by a groundswell of economic conservative populism. Further, local government can only go so far. This aside, I think that people intrinsically are less willing to give up local government that national however because the sense of scope makes the fight feel more winnable.

The only natural solution to the these problems of governance then is to either try to force bottom-up change through progressive action by local municipalities while simultaneously doing what tired old Chris Hedges keeps advocating and voting for third-parties as a means of insisting on better federal policy outcomes. People remain complacent and an injection of anger, as Stephan Hessel argues, may be a necessary outcome, but this business of partisan co-option seems to indicate that this point of civic outrage may only come at a point when the social state is so badly eroded it may prove unrecoverable. One also wonders how well, or what type of policy demands can be articulated at any point when rationality has been abandoned in favor of the passions of a mob. Still, anger seems better than the present system in which beliefs are allowed to die through a grubby process of negligence then made to dance macabre, come election cycle, by way of sweeping oration and rigor mortis.

Friday, July 15, 2011

The Mendacity in Austerity

The notion that economies will somehow 'austere' themselves back into economic growth - perhaps best illustrated in the current budget negotiations in the United States and in the the emergency measures being undertaken in Greece - is perhaps the most damaging economic misconception being peddled today.  The notion that drastically cutting already limited services, especially at a time when populations are more dependent upon them, is not only irresponsible, but represents a form of wishful thinking.  Simply reducing spending, or balancing a budget, cannot in and of itself serve as an engine for economic growth.  Indeed, deficit spending on large-scale stimulus projects in order to put people back to work - or to subsidize wages in the short run (as Germany recently did to great success) in order to prevent people from being laid off seems the best way to insure that money remains flowing through the economy.  As Paul Krugman has repeated many times in his New York Times editorials, the economy is best served when people are capable for spending money.  Simply cutting services reduces consumer spending possibility and makes everyone suffer.

More worryingly, the Democratic Party in general and the Obama administration in particular has continued down the neo-liberal route of the Reagan, Clinton and Bush Administrations. As Krugman has also noted, the Obama administration has effectively shed itself of it's real economic advisers, turned to ex-Wall Street insiders for policy formulation and pursued policies that have (a) largely been far more amenable to banks than to citizens, and (b) allowed the Republican party to insist on even more extreme cuts.  Meanwhile, the nominal taxation rate for the richest 1% stands at a staggeringly low 31% and the US is well on it's way, as new research demonstrates, to becoming one of the least equitable countries on Earth.  With that inequity, as the book The Spirit Level (previously discussed on this blog both here and here) indicates, is that we will be faced with the greatly elevated host of social ills associated with that inequity.  Indeed, the notion that taxation rates may return to 35% for the top 1% of earners, generating potentially billions in revenue is being vehemently opposed by the Republicans in the debt ceiling debates, with the Obama administration seeming perhaps willing to cave into even these extreme demands.

Recent statements by Obama point to where the administration stands:
“Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”
There is clearly very little real difference between the type of statements that represent free-market orthodoxy, the very orthodoxies that have seen the financial industry bailed out again and again while the Middle and Working Classes are forced to pay the bills.

Matt Taibbi, in typical clear eyed form, has come to the following conclusion about the Democrats:
I simply don't believe the Democrats would really be worse off with voters if they committed themselves to putting people back to work, policing Wall Street, throwing their weight behind a real public option in health care, making hedge fund managers pay the same tax rates as ordinary people, ending the pointless wars abroad, etc. That they won't do these things because they're afraid of public criticism, and "responding to pressure," is an increasingly transparent lie. This "Please, Br'er Fox, don't throw me into dat dere briar patch" deal isn't going to work for much longer. Just about everybody knows now that theywant to go into that briar patch.
Late last year, the economist Joseph Stiglitz published a thoughtful editorial entitled 'Alternatives to Austerity' in which he came to a similar conclusion, outlining a very clear plan for how austerity measures might be avoided and the economy, through modest increases in the nominal taxation rate for the riches, disentanglement from foreign wars, and the closing of laws to prevent the financial industry from running rough-shod over regulators and the system as a whole would secure a healthier economy.  He acknowledges that these solutions are unworkable because they would be certain to be opposed by those at the top and the financial industry as a whole.

Further, much as the Bush administration used raw fear as a means of garnering public acquiescence for their misadventure in Mesopotamia, current politicians are using debt panic as a means of advancing further economic policies that are beneficial to corporate interests but highly damaging for the public as a whole.  Most recently these attacks have been launched as a means of stripping Social Security of funding. This was exactly the same mechanism of aspersion that was used to bail out the financial sector, first with TARP and then with the additional measures.  The public was told that we needed to act before the economy melted down.  Panic was sounded and instead of meaningful, measured and thoughtful response that might have saved people their homes and jobs, we instead press forward with a policy of further corporate welfare.

This is exemplified by the recent discovery (via a freedom of information request) that in 2008, Timothy Geithner lent Goldman-Sachs an additional $30 billion from a discretionary fund at .01% interest.  This at a point in time where HUD was going wanting for a few hundred million to help keep people in their homes. This is the sort of act of government mis-use of public funds that can cause ones blood to curdle. Yet, in the face of this, austerity still remains the preferred government mechanism.

And of course, the austerity measures, without fail, hurt the poorest far more than they do the rest of the population.

I was recently sent the following article by John Lanchester on the current Greek crisis, where the full affects of this rush towards austerity as an economic balm is being felt.  The article should be read in full, but Lanchester summarizes that most Greek's are only dimly aware of how their countries economic evils began, and do not feel to have personally enjoyed the fruits for which they are now being made to pay the costs. Further, austerity hardly represents a sound means of putting the Greek economy on sound footing and simply insures at least a decade of misery.  To restate the point that I began this post with:
That was the old plan A, and it didn’t work. Papandreou made deep cuts across public-sector spending, but two things went wrong. One, the Greek economy kept crashing. Economists have varying theories about the practical effects of ‘austerity’, meaning sharp cuts in public spending. To an outsider, it’s a little alarming how they differ about something so big and basic as the effect of large public spending cuts. But if you ignore the economics and look at the history, it seems to be the case that you can’t simply cut your way to growth. (There are a couple of contentious counter-examples, but this is the broad rule.) Holding public spending flat while other parts of the economy grow is historically a more valid model – and, by the way, holding public spending flat is in itself a huge struggle, being roughly what Mrs Thatcher did in the UK. So the first problem was that the Greek cuts led to a worsening of the Greek predicament: the economy kept contracting, and unemployment hit a record high of 16.2 per cent. The second problem was that those richer Greeks who had never fancied paying their taxes showed no increased desire to do so, and, much worse, the state showed no new ability or desire to make them. Without the ability to raise more tax, the old plan A was invalid.
And thus, we shall see the poor continue to have crucial services cut cruelly and inhumanely from beneath them while the structural problems implicit within the financial system that wrought the current financial crisis remain ignored and we continue taxation and recovery policies that serve exclusively corporate interests. If there was hope for the Obama administration to embrace it's rhetorical progressive stance, now would be the time for it to prove that this is the case. Instead, the administration is hamstrung by it's corporate largess. The dishonesty is chilling.