Putting the Pains in their Place

By Jan 4, 2013, 11:57 AM Author's Blog  

As part of his Tuesday night statement on the fiscal cliff deal he had just concluded with Congress, President Obama boldly affirmed that he would not negotiate over the debt ceiling, implicitly raising the dire specter of government default to defend his position:

Now, one last point I want to make — while I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed. Let me repeat: We can’t not pay bills that we’ve already incurred. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic — far worse than the impact of a fiscal cliff. 

Now this is the kind of thing that tends to make star-struck Democrats weak in the knees.  Partisan Democrats are always extraordinarily impressed by ejaculations of tough talk from President Obama.  But they often have difficulty distinguishing the stagy theatrics of tough talk from the drab backstage reality of tough action.  And unfortunately, every time Obama succeeds in turning some policy debate into a theatrical tilt with Republican leaders, progressives lose.  They lose because Obama’s Democratic supporters will usually follow him almost anywhere – so long as he gives them an emotionally gratifying “win” in the end.  Of course, they will allow Obama himself to define the rules and objectives of the games he is playing, and thus to implicitly define what constitutes winning.

As an example of this phenomenon, consider the outcome of the recent fiscal cliff debate.  The White House and Congress just agreed on a tax package that Goldman Sachs has estimated will create a fiscal drag on our economy amounting to 1.5% of GDP.   The vast majority of American households – many of them struggling from paycheck to paycheck – will pay higher taxes in 2013.  And while the scheduled sequestration cuts were delayed for two months, we can be fairly sure that when the smoke has cleared on the upcoming debate over those cuts, we will all be socked with an even tougher economic blow than the one we just received.   Some combination of reduced government spending and additional tax increases will extract a substantial amount of much-needed spending power out of an already fragile economy.  In the name of budget sobriety, out political leaders are steering us back toward recession.

Many Democrats, however, are convinced that Obama “won” this policy round because he temporarily saved us from the brutal body blow we would have experienced if we had fallen off the fiscal cliff and the full draconian provisions of the Budget Control Act of 2011 had taken effect.   But the fiscal cliff was created by both Congress and Obama last year!  Barack Obama negotiated the Budget Control Act with Congress, and then signed it, after failing to obtain the massive “grand bargain” austerity package he was seeking.  Obama’s fans have a terribly difficult time remembering these facts.  Maybe the new haze blowing in from Colorado and Washington is damaging their memories.  In any case, they think Obama gets to take a bow for blunting the sword that he himself dangled over our necks.

The new Congress that was sworn in yesterday will have to negotiate with the White House on what to do about the still-scheduled cuts, and that negotiation will take place in the context of an argument over the debt ceiling.  The government borrowing limit was reached this week, and within two months the US Treasury will run out of the accounting tricks it is using to forestall the impact of the debt ceiling on scheduled government spending.  Mitch McConnell has already signaled he intends to use the leverage of the debt ceiling to extract deep spending cuts from the White House.

Ah, but the President has already promised that he will not negotiate with Republicans over the debt ceiling.  So all is well, is it not?  Entitlement cuts will not be traded in for a permanent modification of the debt ceiling law, right?

Don’t bet on it.  Here is how it’s likely to go down:

OBAMA (glowering forcefully): “I will not negotiate over the spending Congress has already approved. If Congress passes a permanent extension of the debt ceiling first, I will then be willing to talk to them about reasonable plans for entitlement cuts.”

HOUSE: “OK, here is your permanent debt ceiling extension.”

OBAMA: “OK, here is my signature on entitlement cuts.”

HOUSE: “Thank you for negotiating with us.”

OBAMA: (wagging finger aggressively) “That wasn’t a negotiation. You passed the debt ceiling extension first.”

HOUSE: “Um … OK. Whatever”

OBAMA: (standing firmly) “Let that be a lesson to you.  Just don’t say I negotiated!”

HOUSE: “You’ve got it Mr. President.  Thank you for whatever it is you just did.”

Now this is the kind of thing that will make a lot Democratic partisans cheer, because many of them don’t care what Obama actually does.  They only care that he looks cool and tough in the doing of it, and delivers his lines with the right measure of haughty aplomb.

There certainly are things Obama can do if he wants to take the debt ceiling out of the negotiating equation entirely.  One involves directing the Secretary of the Treasury to issue a trillion dollar (or more) platinum coin to finance all scheduled government spending.  My blogging colleague Joe Firestone is the expert on the platinum coin option, and so I will direct the reader to Joe’s many informative posts on that topic.

But I am afraid that if people are looking for Barack Obama to use the platinum coin option or any other tough guy alternative to hold the line against entitlement cuts, they are going to be disappointed.   The fact is that Obama wants to cut entitlements.  He has signaled this over and over since he took office.  Toughness for Obama means finding some way to stand up to the very people who elected him, not to Republicans, and to force his followers to swallow the medicine he has decided they must take.

We all need to recover some sense of perspective on the debt ceiling debate.   The debt ceiling ploy is pure demagoguery on Congress’s part.  Congress possesses the power of the purse in our system, and the President and the US Treasury can’t spend one single dime more than Congress has approved.  The debt ceiling law allows Congress to authorize a given quantity of spending, and then to complain melodramatically about the high volume of spending later, all while creating the impression that it is the White House that is doing the extra spending.  It’s a rhetorical scam.

But progressives should not allow the debt ceiling to be turned into a cause in itself, while losing sight of the needed public spending that is the real substance of the matter.  The point is not to defend the principle that the White House must be permitted to spend everything that Congress has previously authorized.  The point is to defend the spending itself.   If Obama “wins” the debt ceiling battle, and makes a deal that successfully defends the principle that the executive branch should have the means of financing and carrying out any spending that Congress has previously authorized, but gives away a good deal of the actual spending America needs in the process of reaching this deal, ordinary Americans will lose and plutocrats will win – again.

The point is not to force Obama simply to defend the principle of debt issuance, and be satisfied if Obama stands tough on the stage while acting out that piece of political theater.  We must force Obama to defend Social Security; force him to defend Medicare; force him to defend a jobs program; force him to defend expanded and enhanced public education; force him to defend public works investments; force him to defend an overhaul of our energy system.  Obama is, of course, very uncomfortable defending these things in a loud voice.  He prefers the public role of conservative bean-counter and purveyor of fiscal sobriety and modest austerity.   That’s where he wants to be in the political scene.  So progressives have to speak up, speak out and prevent him from turning the upcoming negotiations into a crowd-pleasing melodrama about the debt ceiling rather than a weighty debate about public policy substance.

As we transition from Obama’s first term into his second term, progressives need to take stock of the situation.  Where are we?   What are our prospects?   Truth be told, the situation does not look good.  The leaderships of both parties, in different ways, have pushed us into a permanent austerity mindset, where it is now taken for granted by almost everyone that we can’t afford any new public initiatives unless we axe some existing initiative at the same time, or suck more tax revenue out of the private sector to pay for the things we need to do.  Apparently we now can’t afford any of the things we desperately need.  As a country we’re dead in the water, save for whatever consumerist cleverness the private sector manages to come up with. If the political atmosphere doesn’t change, we’re on track for a long period of national stagnation and high unemployment.

Now the IMF is calling for even more US austerity and trying to worry the world about the US budget. They say we haven’t gone far enough on budget repair.  I had hoped that with the lesson of the double-dipping David Cameron and the UK, and the companion lesson of the struggling Eurozone, we had gotten past this business of austerity-mongering by the globe’s financial elites.  But now the austerity rhetoric appears to be getting even worse, as the global austerity crew have seized on the US fiscal cliff resolution as proof that the world’s largest economy shares their philosophy.  We are all commanded to follow the model of Latvia now.   Latvia!

All the rhetoric I have heard from Obama in recent days suggests to me he has totally bought into the austerity framework of budget discipline, “expansionary contraction” and growth via confidence fairies.  And Obama is egged on by a variety of mainstream politicos who have mustered under the banner of shared pain: fiscal contraction consisting of equal parts spending cuts and higher taxes in the cause of Fixing the Debt.  The Shared Painers – I like to call them just “Pains” for short – were out in full force following the debt ceiling deal, bemoaning the fact that the negotiated fiscal contraction was neither deep enough nor painful enough.  Obama is now the dour leader of this somber party of pain, along with his patrons Peterson, Bowles and Simpson.

With liberal Shared Painers and conservative Laissez Fairers running both sides of the debate right now, it is up to progressives to lead the charge on behalf of prosperity, progress, justice and can-do government activism.  The ongoing economic stagnation in much of the “developed world” is grounded in the reality that neoliberal political leaders and elites in those countries are convinced that (i) we can’t afford to grow until we have fixed government budgets, and (ii) growth is mainly something that just happens so long as the government doesn’t get in the way.  This is all backwards.  As the experience of China has been showing – along with the parallel experiences of the US, Europe, Japan and other developed countries during the more dynamic and more progressive earlier stages of their economic existence – growth is mainly a choice, a choice made by well-organized governments to mobilize the latent industry of their societies. If a country makes that choice, budget questions take care of themselves in pretty obvious, less painful and fairly natural ways.  If countries choose stagnation instead, the national budget becomes the scene of a bitter, permanent struggle over shares of diminishing turf.  In the current economic circumstances we should be expanding our deficits to power our economies and take charge of our national destinies.  This is a message almost nobody wants to hear, no mainstream media figures will touch and no politicians want to defend in debate.  But it is true nonetheless.

Ordinary Americans have taken it in the neck for several years now as plutocrats have robbed, looted, wrecked and ravaged the economy.  Obama needs to hear this message loud and clear: not one penny more in cuts to the social insurance programs that serve the forgotten American people.  But simply holding the line on further cuts is not enough.  Both Democrats and Republicans are leading this country backwards, destroying the prospects of the next generation, and embracing a regressive and unpatriotic national ethos of cowardly failure, social insecurity, neglected public investment and penny-pinching decline.

Americans and others have to stop thinking of their countries as developed countries, and realize that even though some modern countries have had strong periods of growth and economic leadership in the recent past, we are all still developing countries. We in the United States can have a “US miracle” if we choose to have one.   We can choose social progress and justice, national dynamism and broad, expanded prosperity – and we can shrug off our recent choice in favor of stagnation.  But first we have to say “no” to the Pains, and put them in their place.

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