“The Silence Of The Austerians”: Here’s Why 2014 Could Be The Year America Finally Ditches Its Inane Deficit Obsession
The year 2013 will be seen as a year of crushing intellectual defeat for advocates of fiscal austerity. There were many smaller victories, but this big one came in April. Researchers at the University of Massachusetts examined the Austerian paper, “Growth in a Time of Debt,” by Carmen Reinhart and Ken Rogoff, which said that countries whose debt-to-GDP ratio reaches 90 percent experience dramatically slower growth. The UMass folks found not only dodgy statistics and backwards causation, but a goof in the paper’s Excel spreadsheet. The causation and statistics errors were more serious, but the fact that elites around the globe had gleefully embraced something with a flub any office temp could understand was horribly embarrassing.
It was an intellectual rout that badly wrong-footed the Austerians, who have since been notably half-hearted in the face of a resurgent left now campaigning on economic justice. This includes, for example, increasing Social Security benefits, which was unthinkable two years ago, when the fight to stop benefits from being cut was nearly lost.
The question for 2014, then, will be whether this triumph can be consolidated and expanded into the policy sphere. Because despite the intellectual collapse, Austerian assumptions and reasoning still dominate United States policy, which is undertaking fiscal consolidation at a pace not seen since the WWII demobilization. If the current Austerian death grip on the framework of policy negotiation can be broken, there might be a chance.
The answer to this question turns on how one views intellectual debate. Given the history of the last few years, one could be forgiven for thinking it’s pointless. As the Polish economist Michal Kalecki demonstrated brilliantly, there are powerful cultural and class-based reasons for both political and business elites to favor austerity now.
We see this today, as Steve Randy Waldman has demonstrated, in the blatant double standards applied to austerity as compared to inequality or raising the minimum wage. Consider a recent paper by the liberal economist Jared Bernstein, which, while outlining much excellent evidence about the economic harm of inequality, is stuffed with unnecessary hedging and hesitation. The Reinhart and Rogoff paper, by contrast, was weak even without knowing about the Excel and stats errors (as Paul Krugman, among others, observed at the time), but elites nearly tripped over their own feet seizing on it anyway. Their bogus “90 percent” conclusion was stated as economic fact by everyone from Paul Ryan to the Washington Post editorial board.
However, biased reasoning is different than no reasoning at all. Seizing on a fig leaf paper fulfills a deep psychological need. Current elites may be largely greedy, corrupt hypocrites, but the cultural credibility of science is such that what amounts to outright class warfare must have an “evidence-based” patina. It’s far too gauche to simply ram through one’s favored policies because you want all the money or to kick the poor.
Therefore, fiscal policy in 2014 and 2015 will hinge on whether the Austerian coalition can be split (assuming, as is probable, that progressive Democrats don’t sweep the 2014 midterms).
Roughly speaking, we’re talking about the center and the right, and there are good reasons to suppose that neither will be brought around. For the center, it takes an intellectual defeat roughly akin to the Battle of Trafalgar to get them to grudgingly abandon austerity. (And if some hack economist churns out another pro-austerity paper, they will probably grab it eagerly.) Meanwhile, “straight” reporters have been culturally conditioned to code deficit reduction as a non-ideological good thing, so even very recent straight reporting still contains buried Austerian assumptions.
And on the right, things look especially hopeless. Denial and motivated reasoning are so epidemic that even Mitt Romney believed the “unskewed” polls before the 2012 election. Ivory tower arguments alone are useless here.
However, all hope is not lost. The key is to change what is considered acceptable for budgetary negotiations. Right now, they all assume that any new spending must be “offset” by cuts elsewhere. That aversion to deficit spending is 100 percent Austerian.
So while Republicans are largely immune to evidence, it’s also true they don’t actually care about the deficit in and of itself. They favor reduced taxes on the rich and cutting social insurance. What’s more, conservative reformists at places like National Affairs have gotten louder and bolder in their advocacy of new thinking, even including infrastructure spending.
So if the center, especially including President Obama, can be persuaded to drop their deficit obsession (and again, it’s hardly possible to overstate how badly this debate has been lost), we could trade tax cuts for some austerity relief, like re-extending unemployment benefits and food stamps. And, it’s important to note, both spending increases and tax cuts count as austerity relief. Tax cuts, especially on the rich, aren’t very good stimulus, but they still put money into people’s pockets.
But the main point is to shift ground for negotiation. This strategy of “tax cuts for more spending” has been suggested many times in the past few years and gone nowhere. But before that, it had been the basis for many successful bipartisan deals, including expanding Medicaid in the 1980s and the CHIP program in the 1990s.
So while the deck is stacked against the anti-Austerians, continuing the intellectual battle is by no account useless. It’s highly possible to influence even a crooked debate.
By: Ryan Cooper, Web Editor of The Washington Monthly; Published in The New Republic, January 5, 2014
“Worsening Inequality”: 900 Rich People Won’t Pay Into Social Security For The Rest Of The Year
While almost all working Americans will pay into Social Security through their paychecks throughout the year, the 900 wealthiest people in the country won’t. That’s because the highest-earning 0.0001 percent of the U.S. — many of them corporate CEOs — made $117,000 in the first two days of the year, which is the maximum annual income that is subject to Social Security taxes under federal law.
It’s tough to say for certain who will be a part of this group in 2014, since the most recent available data on Americans’ earnings is from 2012. In that year, 894 individuals nationwide made enough to qualify for membership in this club, according to the Los Angeles Times. Economist Teresa Ghilarducci came up with the calculation, and points out that Forbes data on top earners enables analysts and the public to see some of the members of this group. There were nearly 70 corporate CEOs who made enough to qualify in 2012, including the top officers at companies like Philip Morris, NewsCorp, Starbucks, ComCast, and Pfizer.
They get to live the year free from Social Security taxes because the law says that only the first $117,000 earned in a year can be taxed to fund the retirement program that kept more than 15 million people out of poverty in 2011. Democrats have pushed to raise the cap in recent years from $106,800 in 2009 to the current level. Eliminating the cap entirely could make the program solvent for the next 75 years without cutting a dime from anyone’s benefits — and doing so wouldn’t touch the earnings of 94.2 percent of all American workers.
Despite that option, most of the debates around Social Security in recent years have focused on cutting the program rather than increasing its revenue stream. Yet Americans are facing a retirement crisis. Companies’ shifts from pensions to investment plans for retirees has undermined the financial security of working people while enriching the financial services industry and worsening inequality. For non-white workers who are far less likely to have access to even those paltry 401(k) plans, the picture is even bleaker. Overall more than half of all Americans are projected to see a steep drop in their standard of living upon retirement. There is a $6.6 trillion gap between what working Americans have saved and what they ought to have saved to retire well.
In the face of all of this, Sen. Elizabeth Warren (D-MA) and others have proposed increasing Social Security benefits rather than cutting them.
By: Alan Pyke, Think Progress, January 3, 2014
“Listening To The Founding Fathers”: Constitutionalism With An Anti-Government Ideology Is Historically And Philosophically Mistaken
A political backlash has commenced within the Republican Party against tea party and libertarian groups that have limited interest in securing Republican victories and majorities. Elected leaders, party officials and business groups have begun pushing back against self-destructive legislative strategies and unelectable primary candidates.
But the GOP’s political reaction often concedes a great deal of ideological ground to anti-government populism — what its advocates describe as “constitutionalism.” Our national recovery, in this view, depends on returning to the severely constrained governing vision of the Founding Fathers, as embodied in the Constitution. Many Republicans now seem to be saying: Yes, this is the conservative ideal, but it is just not practical to implement at the moment.
This cedes too much. In a new essay in National Affairs, “A Conservative Vision of Government,” Pete Wehner and I argue that the identification of constitutionalism with an anti-government ideology is not only politically toxic; it is historically and philosophically mistaken.
It is not enough to praise America’s Founders; it is necessary to listen to them. The Federalist Founders did not view government as a necessary evil. They referred to the “imbecility” of a weak federal government (in the form of the Articles of Confederation) compared to a relatively strong central government, which is what the Constitution actually created. Though they feared the concentration of too much power in one branch of government, they believed that good government was essential to promote what they called the “public good.”
And they assumed that the content of the public good would shift over time. “Constitutions of civil government,” argued Alexander Hamilton in Federalist No. 34, “are not to be framed upon a calculation of existing exigencies, but upon a combination of these with the probable exigencies of ages. . . . Nothing, therefore, can be more fallacious than to infer the extent of any power, proper to be lodged in the national government, from an estimate of its immediate necessities. There ought to be a CAPACITY to provide for future contingencies as they may happen.”
In the tradition of the Federalist Founders, Abraham Lincoln believed the federal government should be capable of adjusting to changing circumstances and active in pursuit of national purposes. In his “Fragment on Government,” Lincoln described a number of matters requiring the “combined action” of government, including “public roads and highways, public schools, charities, pauperism” and “providing for the helpless young and afflicted.”
Conservatives naturally want to be seen as defenders of the Constitution. But “constitutional conservatives” need to recognize what both the Federalist Founders and Lincoln actually envisioned for the republic they respectively created and preserved. Far from being constrained by the political and economic arrangements of an 18th-century coastal, agrarian republic, the Founders fully expected the United States to spread across a continent, undergo economic and social change and emerge as a global actor. And they purposely designed a constitutional system that could accommodate such ambitions.
This is not to argue that the Founders would be happy with the current size and role of government. But, after protecting a variety of essential civil liberties, they placed such matters mainly in the realm of democratic self-government. They made it procedurally difficult for majorities to prevail. But they placed few limits on the public policies that durable majorities might adopt in the future — leaving “a capacity to provide for future contingencies.”
In our time, durable majorities have endorsed the existence of Social Security and Medicare. These roles of government were not envisioned by the Founders. But they do not violate a principle of our system nor run counter to the prescient mind-set of the Founders. People are free to argue for and against such programs. But this debate can’t be trumped or short-circuited by simplistic and legalistic appeals to the Constitution as a purely limiting document.
The broad purposes of the modern state — promoting equal opportunity, providing for the poor and elderly — are valid within our constitutional order. But these roles are often carried out in antiquated, failing systems. The conservative challenge is to accept a commitment to the public good while providing a distinctly conservative vision of effective, modest, modern government.
But a shift in mind-set is first required among conservatives: thinking of government as a precious national institution in need of care and reform. This would honor the Founders. The real Founders.
By: Michael Gerson, Opinion Writer, The Washington Post, January 2, 2013
“The Obama Political Obituaries Are Way Premature”: Nothing That Happened In 2013 Is Nearly As Humiliating As What Bush Endured
If President Obama saw the columns and news stories I keep reading lately, he’d probably have half a mind to resign and scurry back to Chicago in time to see the Bears lose a playoff game. “Tanking” approval numbers, no accomplishments, rudderlessness, and of course the website fiasco; they all add up, the conventional wisdom seems to say, to a presidency that is already all but finished, unless John Podesta can somehow save it. The Washington Post reported this week that among second-term presidents in the polling era, only Richard Nixon had a lower approval rating at this point than Obama does now.
Nixon? Is it really that bad? (By the way, there’s still a considerable distance between the two—Obama sits at 43 percent in the Post poll, while Nixon was down at 29.) I can read numbers, and I know what’s happened over the past year. Obama has lost support among core Democratic groups such as women and Latinos, and one suspects that the failure—not his failure; the failure, a distinction not enough people are evidently making—to pass immigration reform was disillusioning for these cohorts. And obviously the HealthCare.gov fiasco is the governing reality here. It’s been a messy year.
At the same time, everything that’s happened can be rebounded from. Let’s look, by way of comparison, at where President Bush was at the end of 2005. He’d started out the year, you might recall, saying, “I have political capital, and I intend to use it.” Actually, he said that right after he beat John Kerry. Bush didn’t yet reveal how he meant to use that capital, but soon enough it became clear that he meant Social Security privatization, or partial privatization.
Bush staked a lot on that project. If you were around then, you remember those endless town halls, filled with plants and ringers offering their most plangent testimonials about how they couldn’t wait to get Uncle Sam’s heavy hand out of their purses and invest their own retirement money as they saw fit, as any real Murican would insist. This was how Bush and Karl Rove were going to create the permanent Republican majority, through the new ownership society.
What happened? Congress, even Republicans in Congress, wanted nothing to do with it. It was basically dead by Memorial Day. So that was going to be the signature issue of Bush’s second term—with a House and a Senate, remember, that were also in Republican hands at the time. And it went up in flames.
Nothing that has happened to Obama in 2013 is nearly as humiliating as what Bush endured—and that was before Katrina hit in August 2005. You could make an immigration comparison, but they’re hardly the same, because Bush’s party controlled both houses of Congress. If the Democrats were running the House right now, there’s little question the immigration bill would have passed. I don’t expect the general public to make such distinctions, but that doesn’t mean I can’t make them. Being smacked down by the opposite party, which has shown its contempt for you a hundred times already, isn’t remotely the same thing as being smacked down by your own party. The Bush privatization failure was devastating not only to his standing as president but as head of his own party.
Obama hasn’t suffered anything like that. He’s been the victim of a couple of ginned-up “scandals,” the IRS most especially, that had no truth to them but nevertheless took a bite out of his ratings. The Republicans are a constant irritant, willing to sacrifice their own standing as long as they can drag him down with them. But he has not launched a huge, historic initiative on which history has slammed the sarcophagus lid screaming “Failure!”
Health care? Come on. You’re joking. That was a bad first inning. Granted, a really, really bad first inning, but a first inning all the same. There is a lot of ball yet to be played. Even now, we’re only in the top of the second in terms of implementation of this law. And every week brings new reports that the troubles are of the past. The information that’s supposed to be getting to insurance companies is getting to them now, and providers are about to start advertising heavily to potential enrollees. Jeff Zients, the man who fixed the site, is leaving, but he’s being replaced by a Microsoft exec, Kurt DelBene, who presumably knows a thing or two about state-of-the-art operating systems. I’ve said it before and I will say it again. Obamacare is going to have, for most Americans who come face to face with it, a happy ending, and I think sooner rather than later.
That is the big error the Republicans are making. They truly seem to think it’s game-set-match on Obamacare. It isn’t even close. And the media, espying bad Obama poll numbers, go along, because then, instead of the bad poll numbers being just bad poll numbers, they can be woven into a Meta-Narrative Think Piece about how second terms in the modern presidency are graveyards.
Obama isn’t close to any graveyard yet. The Obamacare story is going to keep getting better. And the economy, if you hadn’t noticed, has grown at 3 percent for the last two quarters. That’s not just good considering the circumstances of the meltdown and an opposition party that’s been trying actively to harm the economy. That’s just plain old good.
Predicting a politician’s standing a year out is a mug’s game, so I won’t do that. But I’ll comfortably make the claim that nothing that has happened to Obama in 2013 rules out a rebound. Far be it from me to question The Washington Post’s poll numbers, but Bush was in far worse shape at this point. Obama’s second term will not likely match the list of accomplishments of his first. But even if the second term is nothing more than the successful implementation of Obamacare for 30 million or 40 million Americans, that’s plenty. Public opinion will catch up.
By: Michael Tomasky, The Daily Beast, December 19, 2013
“It’s Every Man For Himself”: How To Stick It To The Poor, A Congressional Strategy
The 113th Congress has stuck it to the poor at pretty much every opportunity. In fact, if you take all their past and future plans into account, it looks like they have accomplished that rare feat: To close in on enacting an overarching, radical agenda without control of the Senate or the presidency. How did they do it? Probably by escaping scrutiny through a piecemeal approach to legislation, a president who is willing to meet them halfway, and one diabolic word: Sequester.
Let’s drill down into each piece:
1. Kick ’em to the curb
Congress will basically start kicking poor people out of their homes early next year. The idea is, if you can’t pay for your home without government assistance, you don’t deserve to live in one. In this spirit, budget cuts due to sequestration will take rental assistance vouchers away from 140,000 low-income families by the beginning of next year, making housing more expensive as agencies raise costs to offset the budget cuts. All in all, about 3 million disabled seniors and families will be affected. The savings?: $2 billion, which is pretty much what the government shutdown cost in back pay to federal workers.
If you’re lucky enough to keep your home, don’t expect to heat it. Sequester cuts to the Low Income Home Energy Assistance Program (LIHEAP) meant that 300,000 low-income families in 2013 were denied government support for energy costs.
2. Take the food out of their mouths. Literally.
The recent reduction in Supplemental Nutrition Assistance Program (SNAP) benefits has affected more than 47 million Americans and is the largest wholesale cut in the program since Congress passed the first Food Stamps Act in 1964.
The cuts to Food Stamps were implemented on November 1. Yet, Congress won’t let the program rest there — House Republicans are pushing to take $39 billion from SNAP over the next decade. If their plan succeeds, the Congressional Budget Office estimates that 3.8 million low-income individuals would lose their benefits in 2014 with 2.8 million more getting kicked off the program each year. SNAP is one of the three most effective anti-poverty programs the government has, keeping 4 million people out of poverty last year alone. So the initial and further cuts make a lot of sense — if you despise the poor.
And don’t worry, other cuts to food programs ensure both the oldest and youngest among us won’t be spared. Cuts to Meals on Wheels will cost poor seniors 4 to 18 million meals next year. Meanwhile, the Women, Infants, and Children program (WIC), which provides health-care referrals and nutrition to poor pregnant and postpartum women and children up to age 5, has grappled with $500 million in cuts this year and faces even deeper ones next. Fair’s fair, though.
3. Dim their kids’ future
There’s nothing that will make our economic future brighter than under-educating our children, right? That’s why, again as a result of sequestration, Head Start literally had to kick preschoolers out of their classrooms this March and removed 57,000 children from the program this September (70,000 kids total will be affected). If this weren’t enough, more than half of public schools have fired personnel due to the ominous cuts — and Rep. Jim Jordan (R-Ohio) said sequestration “has been one of the good things that has happened.” Given that 40 percent of children who don’t receive early childhood education are more likely to become a parent as a teenager, 25 percent are more likely to drop out of school, and 70 percent are more likely to be arrested for a violent crime, this is definitely the definition of a “good thing.”
4. Erase the road map for employment
The United States has one of the stingiest unemployment programs in the developed world and it is getting even stingier. People who have been out of work for 27 weeks or more — 40 percent of the unemployed — have already begun and will continue to lose a large portion of their benefits between January and March. Eight percent of this year’s sequestration cuts are coming from unemployment insurance. The logic here is that the program discourages people from looking for work, so why fund something that just makes the unemployed lazier? The evidence, however, proves that government assistance fuels the job searches of these 4.4 million Americans. Yet by the end of December, about 1.3 million will lose their extended jobless benefits if Congress doesn’t renew the program. And cuts to the Temporary Assistance for Needy Families program (TANF, or welfare) means there will be even less of a safety net to fall back on.
5. Make ’em work till they drop
President Obama put Social Security cuts in his budget for fiscal year 2014, and Republicans are thrilled. Switching to a new formula called Chained CPI would lead to benefit cuts of $230 billion in the next 10 years. Apparently, it’s Social Security that’s driving up the debt, as Speaker of the House John Boehner (R-Ohio) has said. The irony here, according to The New York Times’s Paul Krugman, is that while debt can indirectly make us poor if deficits drive up interest rates and discourage productive investment (they haven’t), investment is low because the economy is so weak, partly from cutbacks in public spending and investment — the cuts, such as this one, that supposedly protect Americans from a future of excessive debt. Democratic Sens. Elizabeth Warren (Mass.) and Tom Harkin (Iowa) have been fighting an uphill battle to boost Social Security benefits. But carry on, Congress. What you’re doing really makes sense here.
In just a few short decades, we’ve gone from LBJ’s Great Society, where many of these ideas originated, to this Congress’s attacks on the poor. According to the Census Bureau, safety net programs keep tens of millions of Americans out of poverty each year. But that’s just not the federal government’s priority anymore. This Congress’s message: It’s every man for himself.
By: Samantha Paige Rosen, The Week December 9, 2013
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