“The Politics Of The Deficit Are Utterly Backward”: Ignore The Rending Of Garments From Deficit Paranoiacs
One of the most frustrating things about being a lefty during the depths of the Great Recession was watching giant policy errors build on the horizon like some sewage tsunami, and being powerless to stop them. And in 2010 the biggest and sewage-iest of the errors was the turn to austerity — the combination of budget hikes and spending increases that has slowed economic recovery across the developed world.
Five years later, as the deficit has fallen dramatically and so has interest in its supposed danger, it provides an interesting window into the politics of deficit paranoia — and how it is 180 degrees from reality.
Let me quickly review the story up to the present. A recession means the economy is suffering a shortage of aggregate demand. People are losing their jobs, meaning companies have fewer sales, so they fire employees or go out of business — rinse and repeat. The standard response to this is economic stimulus, both monetary and fiscal. For the former, the Federal Reserve cuts interest rates, making loans easier to get and thus stoking the economy; for the latter, the government borrows and spends directly, mechanically jacking up total spending.
Like the Great Depression, fiscal stimulus was particularly important during the Great Recession, because by late 2008, the Fed had cut interest rates all the way to zero — pushing its economic accelerator all the way to the floor — and it didn’t halt or even much slow down the recession.
Initially, with big Democratic Party majorities in both the House and Senate, the government did the right thing. Right after President Obama took office, it passed the Recovery Act, a fairly sizable piece of fiscal stimulus. But as trusted center-left commentators like Paul Krugman pointed out, it wasn’t nearly big enough to fill the economic hole visible at the time — and later measurements would show the hole to be vastly larger than the initial estimates.
So after that first round of stimulus, the deficit was very large due to all the borrowing. However, its inadequacy was also obvious, as unemployment plateaued at nearly 10 percent — then stayed there for an entire year. During and immediately after the crisis, the centrist establishment was too shocked to respond, but they eventually regrouped and began demanding immediate cuts to balance the budget — effectively aligning themselves with resurgent conservatives, who as usual demanded all social insurance programs be torched.
After the 2010 election, the centrists and conservatives got much of what they supposedly wanted: tons of austerity, most of it in cuts to government spending (particularly when compared to previous presidencies). The effects were obvious: a recovery that was grindingly slow and weak. It still shows no sign of returning to the previous trend.
In other words, austerians were successful in cutting the short-term deficit at the worst imaginable time. But what about now, as the economy is returning to at least a modicum of health? According to the standard economic script, government deficits aren’t always good. When recovery has been reached, then it’s time to cut back. “The boom, not the slump, is the right time for austerity at the Treasury,” as John Maynard Keynes said (though adherents of Modern Monetary Theory would quibble with this).
What are the centrist austerians doing? Why, they’ve gone almost totally silent, of course. Ron Fournier, the avatar of D.C. centrism and a fanatical austerian, has barely mentioned the subject over the last year. More broadly, as Andrew Flowers documents for FiveThirtyEight, mentions of “deficit” and “debt” by Republican presidential candidates have fallen by about two-thirds since 2012. Mentions in Congress have fallen even further.
This demonstrates that the conventional politics around deficits and debt are fundamentally disconnected from any sort of rational understanding as to why they might be a problem. And due to those same actual mechanics, the political salience of austerity moves in inverse proportion to its real importance — insane overreaction when the deficit should be very high, bland disinterest when it ought to be coming down again.
It’s maddening, but at least predictable. The next time a liberal administration is in charge during a recession, it may safely ignore the rending of garments from deficit paranoiacs. As soon as the immediate crisis is over, they’ll quickly forget all about it.
By: Ryan Cooper, The Week, January 15, 2016
“The Insecure American”: Members Of Our Political Elite Seem To Have No Sense Of How The Other Half Lives
America remains, despite the damage inflicted by the Great Recession and its aftermath, a very rich country. But many Americans are economically insecure, with little protection from life’s risks. They frequently experience financial hardship; many don’t expect to be able to retire, and if they do retire have little to live on besides Social Security.
Many readers will, I hope, find nothing surprising in what I just said. But all too many affluent Americans — and, in particular, members of our political elite — seem to have no sense of how the other half lives. Which is why a new study on the financial well-being of U.S. households, conducted by the Federal Reserve, should be required reading inside the Beltway.
Before I get to that study, a few words about the callous obliviousness so prevalent in our political life.
I am not, or not only, talking about right-wing contempt for the poor, although the dominance of compassionless conservatism is a sight to behold. According to the Pew Research Center, more than three-quarters of conservatives believe that the poor “have it easy” thanks to government benefits; only 1 in 7 believe that the poor “have hard lives.” And this attitude translates into policy. What we learn from the refusal of Republican-controlled states to expand Medicaid, even though the federal government would foot the bill, is that punishing the poor has become a goal in itself, one worth pursuing even if it hurts rather than helps state budgets.
But leave self-declared conservatives and their contempt for the poor on one side. What’s really striking is the disconnect between centrist conventional wisdom and the reality of life — and death — for much of the nation.
Take, as a prime example, positioning on Social Security. For decades, a declared willingness to cut Social Security benefits, especially by raising the retirement age, has been almost a required position — a badge of seriousness — for politicians and pundits who want to sound wise and responsible. After all, people are living longer, so shouldn’t they work longer, too? And isn’t Social Security an old-fashioned system, out of touch with modern economic realities?
Meanwhile, the reality is that living longer in our ever-more-unequal society is very much a class thing: life expectancy at age 65 has risen a lot among the affluent, but hardly at all in the bottom half of the wage distribution, that is, among those who need Social Security most. And while the retirement system F.D.R. introduced may look old-fashioned to affluent professionals, it is quite literally a lifeline for many of our fellow citizens. A majority of Americans over 65 get more than half their income from Social Security, and more than a quarter are almost completely reliant on those monthly checks.
These realities may finally be penetrating political debate, to some extent. We seem to be hearing less these days about cutting Social Security, and we’re even seeing some attention paid to proposals for benefit increases given the erosion of private pensions. But my sense is that Washington still has no clue about the realities of life for those not yet elderly. Which is where that Federal Reserve study comes in.
This is the study’s second year, and the current edition actually portrays a nation in recovery: in 2014, unlike 2013, a substantial plurality of respondents said that they were better off than they had been five years ago. Yet it’s startling how little room for error there is in many American lives.
We learn, for example, that 3 in 10 nonelderly Americans said they had no retirement savings or pension, and that the same fraction reported going without some kind of medical care in the past year because they couldn’t afford it. Almost a quarter reported that they or a family member had experienced financial hardship in the past year.
And something that even startled me: 47 percent said that they would not have the resources to meet an unexpected expense of $400 — $400! They would have to sell something or borrow to meet that need, if they could meet it at all.
Of course, it could be much worse. Social Security is there, and we should be very glad that it is. Meanwhile, unemployment insurance and food stamps did a lot to cushion unlucky families from the worst during the Great Recession. And Obamacare, imperfect as it is, has immensely reduced insecurity, especially in states whose governments haven’t tried to sabotage the program.
But while things could be worse, they could also be better. There is no such thing as perfect security, but American families could easily have much more security than they have. All it would take is for politicians and pundits to stop talking blithely about the need to cut “entitlements” and start looking at the way their less-fortunate fellow citizens actually live.
By: Paul Krugman, Op-Ed Columnist, The New York Times, May 29, 2015
“When Things Go Well”: Republicans Now Take Credit For The Recovery They Sabotaged
This is unlikely to prompt anyone to break out the bubbly in the Oval Office, but last week’s poll numbers are nevertheless good news for President Obama. Since Democrats were thrashed in November’s midterm elections, the president’s approval ratings have been on the upswing.
As he prepares to deliver his sixth State of the Union address on Jan. 20, Obama’s approval has crept up to 47 percent, according to a new survey from Pew Research. That’s up 5 points since December.
Most analysts believe Obama’s recovering fortunes are the result of a much-improved economy — the one gauge that’s reliably important to voters. It’s taken a few years, but average workers are finally beginning to put the Great Recession behind them.
Take note of this now. Keep it in a spare file in your memory bank. Remember that the economy has been advancing for the six years of Obama’s tenure — a frustratingly slow process that is finally bearing fruit. The unemployment rate is now at 5.6 percent, the lowest since 2008. Foreclosures are down to pre-recession levels. The stock market is in historically high territory.
Why do I want you to remember this? In a stunning show of chutzpah, the president’s harshest critics, the hyper-conservatives who’ve done everything they could to wreck his presidency, want to take credit for the recovery they tried to sabotage.
Just take a look at the speech Kentucky Republican Mitch McConnell gave on the day he took the helm of the Senate as the new majority leader.
“After so many years of sluggish growth, we’re finally starting to see some economic data that can provide a glimmer of hope. The uptick appears to coincide with the biggest political change of the Obama administration’s long tenure in Washington: the expectation of a new Republican Congress,” he said.
According to his logic, consumers spent more money and businesses hired more workers starting back in the summer because they expected Republicans to win a majority in Congress. That’s nonsense.
Obama inherited a mess from George W. Bush — a financial crisis brought on by the excesses of Wall Street. President Bush started the bailout, but most of the work was left for the Obama administration. Obama continued the Wall Street bailout, passed a massive stimulus package and rescued the auto industry. Congressional Republicans, meanwhile, fought him every step of the way. That the economy has bounced back anyway is testament to its underlying resiliency.
Perhaps the greatest driver of consumers’ new optimism is the free-fall in gas prices, which haven’t been this low since the Great Recession drove down demand worldwide. Obama didn’t spur the investment in domestic oil drilling, but he has encouraged it, noting that it would help to free us from a dependence on foreign oil.
None of these hard-won gains have come a moment too soon. And, yes, there’s still much work to be done to revive the American middle class. The growing gap between the comfortable and everybody else remains one of the biggest threats to domestic tranquility. Wages are still stagnant.
Obama is well aware of that. In his State of the Union speech, he is expected to announce an ambitious new proposal to provide free access to the nation’s two-year community colleges. It’s an excellent plan.
Education experts say there are about 8 million community college students, and their average annual tuition is around $3,800. To the comfortable classes, that might not seem like much. But it presents a barrier to many working-class students trying to change their circumstances. It’s an investment that the nation can afford to make — and should make.
But like the other proposals the president has made to boost the economy, this one is likely to meet resistance from the Republicans in Congress. They want to take credit when things go well, but they’re only too willing to block a good idea if it comes from Obama.
By: Cynthia Tucker, The National Memo, January 17, 2015
“A Consequential President”: Obama’s Record Makes Him A Major Historical Figure In Ways Most Presidents Are Not
In early January 1999, as President Clinton’s penultimate year in office was getting underway, columnist George Will could hardly contain his “disgust” for the Democrat in the White House. He published a piece condemning Clinton – one of many similar columns for the Washington Post conservative – but he did so in a very specific way.
Clinton is “defined by littleness,” Will said, adding, “He is the least consequential president” since Calvin Coolidge in the 1920s.
It’s arguably the harshest of all possible criticisms. All presidents quickly grow accustomed to a wide variety of rebukes, but no one ever wants to be dismissed as inconsequential. It’s another way of saying your presidency is forgettable. It doesn’t matter. History won’t judge you unkindly because judgments require significance, and you’re just … irrelevant.
More than a decade later, President Obama has also received his share of criticisms, but it’s probably fair to say “inconsequential” is an adjective that no one will use to describe his tenure.
We talked the other day about the remarkable stretch of successes the president has had just since the midterm elections, and it led Matt Yglesias to note the “incredible amount” Obama has accomplished over the last six years.
It has been, in short, a very busy and extremely consequential lame-duck session. One whose significance is made all the more striking by the fact that it follows an electoral catastrophe for Obama’s party. And that is the Obama era in a microcosm. Democrats’ overwhelming electoral win in 2008 did not prove to be a “realigning” election that handed the party enduring political dominance. Quite the opposite. But it did touch off a wave of domestic policymaking whose scale makes Obama a major historical figure in the way his two predecessors won’t be.
I agree, though I’d go a bit further than just his two more recent predecessors and argue that Obama’s record makes him a major historical figure in ways most presidents are not.
This isn’t even a normative argument, per se. Obama’s critics, especially on the right, can and should make their case that the president’s agenda is misguided and bad for the country. A leader can have a wealth of accomplishments, but those deeds must still be evaluated on the merits.
What Obama’s detractors cannot credibly claim is that those accomplishments do not exist. By now, the list is probably familiar to many observers: the president’s Recovery Act rescued the country from the Great Recession. His Affordable Care Act brought access to medical care to millions of families. Obama rescued the American auto industry, brought new safeguards to Wall Street, overhauled the student loan system, and vastly expanded LGBT rights.
He improved food safety, consumer protections, and national-service opportunities. He signed the New START treaty, ordered the mission that killed Osama bin Laden, reversed a failed U.S. policy towards Cuba, and used the Clean Air Act to make strides in addressing the climate crisis. He brought new hope to 5 million immigrants living in the United States, moved the federal judiciary in a more progressive direction, and helped restore America’s standing on the global stage.
The list goes on and on.
Yglesias is right that neither Clinton nor Bush can point to a similar litany of policy breakthroughs, but truth be told, very few presidents can. Note than when Paul Krugman praised Obama in his Rolling Stone cover story a couple of months ago, he used two distinct adjectives: “Obama has emerged as one of the most consequential and, yes, successful presidents in American history.”
All of this comes with two meaningful caveats. The first, as noted above, is that being “consequential” is not evidence of an a priori good. One can acknowledge a president’s accomplishments without liking them (or him). Tom Brady may be a consequential quarterback, but if you’re a Dolphins fan, you’re probably not impressed.
The second is that there’s a degree of fragility to some of this record. Next year, for example, Republicans on the Supreme Court may very well tear down the American health care system. In time, they may also derail Obama’s climate agenda. Congressional Republicans will spend the foreseeable future chipping away at everything from immigration progress to Wall Street safeguards. And if the nation elects a GOP successor for Obama, the next president may very well undo much of what this president has done.
But at least for now, we probably won’t see any columns about Obama similar to what George Will said in 1999.
By: Steve Benen, The Maddow Blog, December 19, 2014
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