“Obama Gets Real”: A Growing Deficit Of Opportunity Is A Bigger Threat To Our Future Than Our Rapidly Shrinking Fiscal Deficit
Much of the media commentary on President Obama’s big inequality speech was cynical. You know the drill: it’s yet another “reboot” that will go nowhere; none of it will have any effect on policy, and so on. But before we talk about the speech’s possible political impact or lack thereof, shouldn’t we look at the substance? Was what the president said true? Was it new? If the answer to these questions is yes — and it is — then what he said deserves a serious hearing.
And once you realize that, you also realize that the speech may matter a lot more than the cynics imagine.
First, about those truths: Mr. Obama laid out a disturbing — and, unfortunately, all too accurate — vision of an America losing touch with its own ideals, an erstwhile land of opportunity becoming a class-ridden society. Not only do we have an ever-growing gap between a wealthy minority and the rest of the nation; we also, he declared, have declining mobility, as it becomes harder and harder for the poor and even the middle class to move up the economic ladder. And he linked rising inequality with falling mobility, asserting that Horatio Alger stories are becoming rare precisely because the rich and the rest are now so far apart.
This isn’t entirely new terrain for Mr. Obama. What struck me about this speech, however, was what he had to say about the sources of rising inequality. Much of our political and pundit class remains devoted to the notion that rising inequality, to the extent that it’s an issue at all, is all about workers lacking the right skills and education. But the president now seems to accept progressive arguments that education is at best one of a number of concerns, that America’s growing class inequality largely reflects political choices, like the failure to raise the minimum wage along with inflation and productivity.
And because the president was willing to assign much of the blame for rising inequality to bad policy, he was also more forthcoming than in the past about ways to change the nation’s trajectory, including a rise in the minimum wage, restoring labor’s bargaining power, and strengthening, not weakening, the safety net.
And there was this: “When it comes to our budget, we should not be stuck in a stale debate from two years ago or three years ago. A relentlessly growing deficit of opportunity is a bigger threat to our future than our rapidly shrinking fiscal deficit.” Finally! Our political class has spent years obsessed with a fake problem — worrying about debt and deficits that never posed any threat to the nation’s future — while showing no interest in unemployment and stagnating wages. Mr. Obama, I’m sorry to say, bought into that diversion. Now, however, he’s moving on.
Still, does any of this matter? The conventional pundit wisdom of the moment is that Mr. Obama’s presidency has run aground, even that he has become irrelevant. But this is silly. In fact, it’s silly in at least three ways.
First, much of the current conventional wisdom involves extrapolating from Obamacare’s shambolic start, and assuming that things will be like that for the next three years. They won’t. HealthCare.gov is working much better, people are signing up in growing numbers, and the whole mess is already receding in the rear-view mirror.
Second, Mr. Obama isn’t running for re-election. At this point, he needs to be measured not by his poll numbers but by his achievements, and his health reform, which represents a major strengthening of America’s social safety net, is a huge achievement. He’ll be considered one of our most important presidents as long as he can defend that achievement and fend off attempts to tear down other parts of the safety net, like food stamps. And by making a powerful, cogent case that we need a stronger safety net to preserve opportunity in an age of soaring inequality, he’s setting himself up for exactly such a defense.
Finally, ideas matter, even if they can’t be turned into legislation overnight. The wrong turn we’ve taken in economic policy — our obsession with debt and “entitlements,” when we should have been focused on jobs and opportunity — was, of course, driven in part by the power of wealthy vested interests. But it wasn’t just raw power. The fiscal scolds also benefited from a sort of ideological monopoly: for several years you just weren’t considered serious in Washington unless you worshipped at the altar of Simpson and Bowles.
Now, however, we have the president of the United States breaking ranks, finally sounding like the progressive many of his supporters thought they were backing in 2008. This is going to change the discourse — and, eventually, I believe, actual policy.
So don’t believe the cynics. This was an important speech by a president who can still make a very big difference.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 5, 2013
“The Mutilated Economy”: Anyone Who Talks About How We’re Borrowing From Our Children Just Hasn’t Done The Math
Five years and eleven months have now passed since the U.S. economy entered recession. Officially, that recession ended in the middle of 2009, but nobody would argue that we’ve had anything like a full recovery. Official unemployment remains high, and it would be much higher if so many people hadn’t dropped out of the labor force. Long-term unemployment — the number of people who have been out of work for six months or more — is four times what it was before the recession.
These dry numbers translate into millions of human tragedies — homes lost, careers destroyed, young people who can’t get their lives started. And many people have pleaded all along for policies that put job creation front and center. Their pleas have, however, been drowned out by the voices of conventional prudence. We can’t spend more money on jobs, say these voices, because that would mean more debt. We can’t even hire unemployed workers and put idle savings to work building roads, tunnels, schools. Never mind the short run, we have to think about the future!
The bitter irony, then, is that it turns out that by failing to address unemployment, we have, in fact, been sacrificing the future, too. What passes these days for sound policy is in fact a form of economic self-mutilation, which will cripple America for many years to come. Or so say researchers from the Federal Reserve, and I’m sorry to say that I believe them.
I’m actually writing this from the big research conference held each year by the International Monetary Fund. The theme of this year’s shindig is the causes and consequences of economic crises, and the presentations range in subject from the good (Latin America’s surprising stability in recent years) to the bad (the ongoing crisis in Europe). It’s pretty clear, however, that the blockbuster paper of the conference will be one that focuses on the truly ugly: the evidence that by tolerating high unemployment we have inflicted huge damage on our long-run prospects.
How so? According to the paper (with the unassuming title “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy”), our seemingly endless slump has done long-term damage through multiple channels. The long-term unemployed eventually come to be seen as unemployable; business investment lags thanks to weak sales; new businesses don’t get started; and existing businesses skimp on research and development.
What’s more, the authors — one of whom is the Federal Reserve Board’s director of research and statistics, so we’re not talking about obscure academics — put a number to these effects, and it’s terrifying. They suggest that economic weakness has already reduced America’s economic potential by around 7 percent, which means that it makes us poorer to the tune of more than $1 trillion a year. And we’re not talking about just one year’s losses, we’re talking about long-term damage: $1 trillion a year for multiple years.
That estimate is the end product of some complex data-crunching, and you can quibble with the details. Hey, maybe we’re only losing $800 billion a year. But the evidence is overwhelming that by failing to respond effectively to mass unemployment — by not even making unemployment a major policy priority — we’ve done ourselves immense long-term damage.
And it is, as I said, a bitter irony, because one main reason we’ve done so little about unemployment is the preaching of deficit scolds, who have wrapped themselves in the mantle of long-run responsibility — which they have managed to get identified in the public mind almost entirely with holding down government debt.
This never made sense even in its own terms. As some of us have tried to explain, debt, while it can pose problems, doesn’t make the nation poorer, because it’s money we owe to ourselves. Anyone who talks about how we’re borrowing from our children just hasn’t done the math.
True, debt can indirectly make us poorer if deficits drive up interest rates and thereby discourage productive investment. But that hasn’t been happening. Instead, investment is low because of the economy’s weakness. And one of the main things keeping the economy weak is the depressing effect of cutbacks in public spending — especially, by the way, cuts in public investment — all justified in the name of protecting the future from the wildly exaggerated threat of excessive debt.
Is there any chance of reversing this damage? The Fed researchers are pessimistic, and, once again, I fear that they’re probably right. America will probably spend decades paying for the mistaken priorities of the past few years.
It’s really a terrible story: a tale of self-inflicted harm, made all the worse because it was done in the name of responsibility. And the damage continues as we speak.
By: Paul Krugman, Op-Ed Columnist, The New York Times, November 7, 2013
“Moment Of Truthiness”: Stuck With Politicians Who Gleefully Add To The Misinformation And Watchdogs Who Are Afraid To Bark
We all know how democracy is supposed to work. Politicians are supposed to campaign on the issues, and an informed public is supposed to cast its votes based on those issues, with some allowance for the politicians’ perceived character and competence.
We also all know that the reality falls far short of the ideal. Voters are often misinformed, and politicians aren’t reliably truthful. Still, we like to imagine that voters generally get it right in the end, and that politicians are eventually held accountable for what they do.
But is even this modified, more realistic vision of democracy in action still relevant? Or has our political system been so degraded by misinformation and disinformation that it can no longer function?
Well, consider the case of the budget deficit — an issue that dominated Washington discussion for almost three years, although it has recently receded.
You probably won’t be surprised to hear that voters are poorly informed about the deficit. But you may be surprised by just how misinformed.
In a well-known paper with a discouraging title, “It Feels Like We’re Thinking,” the political scientists Christopher Achen and Larry Bartels reported on a 1996 survey that asked voters whether the budget deficit had increased or decreased under President Clinton. In fact, the deficit was down sharply, but a plurality of voters — and a majority of Republicans — believed that it had gone up.
I wondered on my blog what a similar survey would show today, with the deficit falling even faster than it did in the 1990s. Ask and ye shall receive: Hal Varian, the chief economist of Google, offered to run a Google Consumer Survey — a service the company normally sells to market researchers — on the question. So we asked whether the deficit has gone up or down since January 2010. And the results were even worse than in 1996: A majority of those who replied said the deficit has gone up, with more than 40 percent saying that it has gone up a lot. Only 12 percent answered correctly that it has gone down a lot.
Am I saying that voters are stupid? Not at all. People have lives, jobs, children to raise. They’re not going to sit down with Congressional Budget Office reports. Instead, they rely on what they hear from authority figures. The problem is that much of what they hear is misleading if not outright false.
The outright falsehoods, you won’t be surprised to learn, tend to be politically motivated. In those 1996 data, Republicans were much more likely than Democrats to hold false views about the deficit, and the same must surely be true today. After all, Republicans made a lot of political hay over a supposedly runaway deficit early in the Obama administration, and they have maintained the same rhetoric even as the deficit has plunged. Thus Eric Cantor, the second-ranking Republican in the House, declared on Fox News that we have a “growing deficit,” while Senator Rand Paul told Bloomberg Businessweek that we’re running “a trillion-dollar deficit every year.”
Do people like Mr. Cantor or Mr. Paul know that what they’re saying isn’t true? Do they care? Probably not. In Stephen Colbert’s famous formulation, claims about runaway deficits may not be true, but they have truthiness, and that’s all that matters.
Still, aren’t there umpires for this sort of thing — trusted, nonpartisan authorities who can and will call out purveyors of falsehood? Once upon a time, I think, there were. But these days the partisan divide runs very deep, and even those who try to play umpire seem afraid to call out falsehood. Incredibly, the fact-checking site PolitiFact rated Mr. Cantor’s flatly false statement as “half true.”
Now, Washington still does have some “wise men,” people who are treated with special deference by the news media. But when it comes to the issue of the deficit, the supposed wise men turn out to be part of the problem. People like Alan Simpson and Erskine Bowles, the co-chairmen of President Obama’s deficit commission, did a lot to feed public anxiety about the deficit when it was high. Their report was ominously titled “The Moment of Truth.” So have they changed their tune as the deficit has come down? No — so it’s no surprise that the narrative of runaway deficits remains even though the budget reality has completely changed.
Put it all together, and it’s a discouraging picture. We have an ill-informed or misinformed electorate, politicians who gleefully add to the misinformation and watchdogs who are afraid to bark. And to the extent that there are widely respected, not-too-partisan players, they seem to be fostering, not fixing, the public’s false impressions.
So what should we be doing? Keep pounding away at the truth, I guess, and hope it breaks through. But it’s hard not to wonder how this system is supposed to work.
By: Paul Krugman, Op-Ed Columnist, The New York Times, August 16, 2013
“Adolescent Nihilism”: The GOP’s True Believers Risk Nothing By Threatening Economic Catastrophe
So what’s it going to be for GOP hotheads in Congress this fall?
A soul-satisfying episode of adolescent nihilism culminating in a government shutdown and yet another debt/default scare? Or an abject capitulation to political (and fiscal) reality and an acceptance of the Republican Party’s role as the loyal opposition?
As I write, there’s just no telling. It’s partly a contest between the GOP’s electronic infotainment/Tea Party wing and the party establishment. Talk-radio shouters and cable TV entrepreneurs thrive on melodrama, and a substantial proportion of the Tea Party base follows excitedly along. Defund Obamacare! Shut it down! To those of us of a certain age, this has a ring of nostalgia, like Abbie Hoffman’s 1967 vow to levitate the Pentagon. I don’t know what they’re smoking down at RNC headquarters, but on CNN’s State of the Union, party chairman Reince Priebus made a lame attempt to blame President Obama.
“I think all Republicans are unified on one thing and that is defunding, delaying, getting rid of, eliminating Obamacare,” Priebus said. “So we have total unanimity on that issue and the question is what are the tactics?…So Mr. President, if you want to shut the government down because you want to continue to fund this monstrosity…then go ahead.”
Nice try. No cigar.
Having wasted countless hours on 40 — count ’em, 40 — votes to defund Obamacare, you’d think House Republicans might be getting the message. Their scheme’s DOA in the Senate, and even if it weren’t, the White House holds veto power. The GOP’s last constitutional chance to prevent 30 million Americans from buying affordable health insurance coverage expired with Mitt Romney’s presidential candidacy. End of story.
True, rising Republican celebrities like Senators Ted Cruz (R-TX), Rand Paul (R-KY), Marco Rubio (R-FL), Mike Lee (R-UT), and rising star Rep. Tom Cotton (R-AR) are breathing smoke and fire. However, it’s also true that none of these worthies hold leadership positions. Until very recently nobody knew who they were. They risk nothing by enrolling in a purely symbolic resistance.
Quite the opposite: True Believers in utopian right-wing crusades evaluate politicians according to their fervor, not their coherence. Did Ronald Reagan ever pay a political price for describing Medicare as the death knell of freedom? He did not.
Indeed, the best possible outcome for Senatorial rabble-rousers would be what now appears likely: A minority of GOP House moderates voting with Democrats to pass a continuing resolution, avoiding a party-line government shutdown that could doom the Republican Party’s national electoral chances. Speaker Boehner won’t have much choice but to allow it.
See, there’s nothing the Southern wing of the GOP loves more than a heroic defense of a lost cause. Save your Confederate dollars, boys, because…
Well, you know the rest.
Lately the party’s adult leadership has also taken to signaling the need for restraint regarding the National Debt. According to the Washington Post’s Greg Sargent, congressional Democrats scrutinize Wall Street Journal columnist Stephen Moore for signs of Republican establishment thinking.
Recently, Moore informed readers that “[t]he biggest underreported story out of Washington this year is that the federal budget is shrinking and much more than anyone in either party expected.”
Overall federal spending that peaked at $3.598 trillion in FY2011 due largely to recession-related costs will drop to $3.45 trillion by the end of FY2013. “The $150 billion budget decline of 4 percent,” Moore writes “is the first time federal expenditures have fallen for two consecutive years since the end of the Korean War.”
Also dropping is the annual federal budget deficit. Projections by the Congressional Budget Office show a $642 billion shortfall this year—less than half of the $1.3 trillion shortfall the Obama White House inherited from George W. Bush. It’s forecast to drop to $560 billion next year, and $378 billion in 2015.
Moore: “Already the deficit has fallen from its Mount Everest peak of 10.2 percent of gross domestic product in 2009, to about 4 percent this year. That’s a bullish six percentage points less of the GDP of new federal debt each year.”
In short, informed conservatives understand that there is no need whatsoever for a melodramatic standoff over raising the federal debt limit. No need to risk “the full faith and credit of the United States” by threatening default. Hostages need not be taken.
As in the Obamacare charade, Republican posturing on the debt would only risk catastrophe for the sake of certain defeat.
Alas, but herein lies the rub: The great majority of GOP voters out in the wilderness beyond the Hudson and the Potomac not only don’t know these facts, they’re constitutionally incapable of accepting them.
To followers of politicians like Rand Paul and Ted Cruz, fears of fiscal collapse, runaway inflation and social chaos aren’t political ideas, but fixed beliefs scarcely amenable to arithmetic or reason.
And their Antichrist is Barack Obama.
By: Gene Lyons, The National Memo, August 14, 2013
“Purifying The Republican Party”: The Destructive Rise Of The No-Government Conservatives
Nine months after a decisive loss in the 2012 elections, the battle for the soul of the Republican Party—or whatever’s left of it—has begun.
I’m not talking about a battle between moderates and conservatives. The conservatives won that fight a long time ago. Our children may never believe that moderate Republicans once roamed the Earth, advocating policies that would limit carbon pollution and invest in scientific research, reform our schools and build new roads, promote national service, reduce the influence of money in politics, and require individuals who can afford health insurance to take responsibility for buying it. Soon enough, these politicians will exist only in the minds of ’90s-era pundits and Aaron Sorkin’s writing staff.
The conservatives have finally purified the Republican Party, dispatching moderate infidels in primary after primary, demanding fealty to their agenda of huge tax cuts and drastically lower spending. They have used their sizable numbers in Congress to help realize that agenda, with periodic assists from a president who has always been more fiscally responsible than his enemies would admit.
Today the tax burden on the vast majority of families is lower than it’s been in decades. Domestic spending outside of Medicare and Medicaid is the lowest it’s been in more than half a century. A public sector that has grown under the last four presidents has significantly contracted under Barack Obama. And deficits are falling at the fastest pace in 60 years.
Conservatives remain unsatisfied. They want more tax cuts. More spending cuts. And I’m picking up signals that they’re not entirely thrilled with the Affordable Care Act.
But here, a new divide has emerged within the Republican Party. On one side are the traditional small-government conservatives, who have a rough acquaintance with the rules of politics and basic math. They may want to reduce the size of government further, but they also want to preserve the institutions of government, understanding that a functional democracy is necessary to provide for the common defense, promote a common prosperity, and tackle problems we can only solve together, as a nation.
These are Republicans like Chris Christie, who has witnessed the vital importance of robust federal aid in the wake of a terrible storm. These are Republicans like Jeb Bush, who has tried to reform public education without completely dismantling it. These are Republicans like John McCain, Lindsey Graham, and the handful of senators who have sought compromise with Democrats over issues such as immigration reform and finally ended the historically exceptional blockade of perfectly qualified executive-branch nominees so that the president can fill the jobs his administration is required to perform.
None of these actions have endeared the small-government conservatives to their rivals for power, the no-government conservatives. No-government conservatives take their inspiration from Grover Norquist’s famous quote that government should be shrunk to a size where it can be drowned in a bathtub. These Republicans, who make up most of the House and a healthy portion of the Senate, are on an uncompromising mission to abolish most government services, benefits, regulations, and taxes.
The goals of no-government conservatives are not primarily economic. They will propose more tax cuts in times of surplus and times of deficit. They care little when the nonpartisan experts and economists at the Congressional Budget Office say sequestration will cost up to 1.6 million jobs next year, or that immigration reform will boost our GDP, or that Obamacare will reduce the debt over time. No-government conservatives are not compelled by the evidence that temporary benefits such as food stamps and unemployment insurance put money in the pockets of those most likely to spend it at local businesses that will grow and create jobs as a result. Their only jobs agenda, their only growth agenda, their only deficit agenda is eliminating government, no matter how many people it helps or how big a boost it provides the economy.
Nor are the goals of no-government conservatives primarily political. They have advisers, they can read polls, and most of them probably know that shutting down the government or forcing a default would be, among other catastrophes, highly unpopular. They realize that rampant hostage-taking and filibuster-abuse are the chief contributors to the obstruction and gridlock that Americans of both parties hate.
They just don’t care. Jonathan Chait has written about the recent embrace of “procedural extremism” among many congressional Republicans, who have “evolved from being politically shrewd proponents of radical policy changes to a gang of saboteurs who would rather stop government from functioning at all.”
But for no-government conservatives, this has been their primary policy goal all along. Their fundamental philosophy is purely ideological—the idea that since government can’t do everything, it should do nothing. So as long as the public continues to see Washington as a dysfunctional circus of petty children, the conservative philosophy of government is vindicated. That is also precisely why no-government conservatives view the successful implementation of Obamacare as an existential threat—because it would prove that limited government intervention in the market can still be an effective force for good. It is why some Republicans are threatening a shutdown unless Obama agrees to defund the Affordable Care Act—a step they know can’t even be achieved through the annual budget process.
In 2016, Sens. Rand Paul and Ted Cruz seem to be the most likely champions of no-government conservatism, with Marco Rubio engaged in a delicate balancing act between purity and sanity. Whether Republican activists will still embrace traditional conservatives like Chris Christie, Jeb Bush, and others remains to be seen. But of one thing I am certain: while the single-minded pursuit of a no-government ideology may bring Republicans a fanatical sense of purpose, it will not bring them the 270 electoral votes needed to take back the White House, nor will it help our recovery gain the speed and strength it needs. The sooner the party faithful realize this, the better off the country will be.
By: Jon Favreau, The Daily Beast, July 30, 2013
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