Wednesday's London Guardian newspaper carried a full report under the banner heading "Barack Obama battles left and right for debt ceiling agreement," documenting the manner in which he was playing the role of "mediator in direct talks to prevent government bills going unpaid, interest rates soaring and US stocks plummeting." The paper then briefed its UK audience on the unfolding political drama in Washington, the detail of which is well known to any political junkie based here in the United States. And buried deep in the article was this comment from Ron Haskins: "the Democratic party on average is further left, and the Republican party on average further right, so they are trying to cut a deal between folks who are more driven by their ideologies and principles."
The Guardian, that is, treated its UK liberal readership to the standard "plague on both their houses" interpretation of what is going on in Washington DC right now - the kind of interpretation David Brooks deploys too -- the "it is all so much more complicated than either pure free-marketeers or simple-minded Keynesians seem to grasp" argument. In the hands of either Hoskins or Brooks, the Guardian's interpretation is one designed to make us grateful for the courage and foresight of a centrist political leader who is willing to demand the surrender of sacred cows on both sides of the aisle. It suggests that political division is the main problem in play here, and that rising above politics is its only solution.
The "plague on both their houses" thesis is such an appealing narrative, particularly to hard-pressed Americans struggling to balance their own budgets, and already alienated from Washington by the regularly-reported depth of partisanship currently there. But as Eugene Robinson documented so clearly in The Washington Post on July 11, the plague thesis is also an entirely misleading narrative, and for progressives, at least, a politically dangerous way of describing what is going on, and what is needed. So let us try another narrative instead, another take on what is going on and what is needed. This one, built around these three observations of the dangers of centrism in the midst of crisis:
l. No matter how often triangulation is advocated, it always the case that the center is only stable politically if the two forces between which centrist politicians mediate are similarly fixed. But that is not the situation in Washington DC right now. Liberal positions within the Democratic Party are much as they have ever been: solid in defense of Social Security as a pension system fully-funded by those who eventually receive it, and solid in defense of health care for the old and poor. Those are old and well-established positions, of no great radicalism. What makes them appear so radical in the present political context is the right-wing gravitational pull of the Tea Party Movement on the agenda and thinking of the entire Republican Party. The danger of playing centrist politics in the face of the Tea Party's "great moving right show" is that the White House is suddenly obliged to tolerate (indeed to advocate) the erosion at the margin of what was once sacrosanct between both parties (and certainly was sacrosanct across the entire Democratic Party) -- namely Medicare/Medicaid and Social Security (the former third rail of American politics). The already hard-pressed living standards of the old and the poor suddenly become things to trade away behind a rhetoric of shared sacrifice, even though there is no similarity in the impact on the relevant groups of a cut in Medicaid and a marginal cut in the wealth of the rich. Which leaves open at least one question, rarely posed by the national media - who is really calling the shots in Washington D.C. these days, the intransigent right or the accommodating center? And possibly another question, too -- will those who campaigned so enthusiastically for Obama in 2008 do so again in any numbers in 2012?
2. There is a lesson here for the next general election: that the center will only hold electorally if the accommodations offered by the White House to win temporary political settlements will actually produce public policy that works. But in this case, they won't. The odds are that any compromise reached will make short-term economic conditions worse. Those conditions would improve if what the Republicans claim is true: namely that unemployment now is caused by lack of business confidence, rooted in the size of the federal deficit; and that pruning government programs will free up the space for a rapid expansion of private sector employment. But the evidence is overwhelming that any lack of confidence linked to the debt ceiling is entirely the product of the Republican Party's decision to use the raising of the debt ceiling as a bargaining chip in their campaign for welfare retrenchment and the erosion of minority rights (especially gay and abortion rights). The evidence is overwhelming that what is actually holding back private sector employment growth is a lack of demand for private sector output, a lack of demand rooted in stagnant/falling wages, home foreclosures and massive unemployment. And the evidence is overwhelming that cutting public spending actually creates more unemployment -- especially unemployment at the state level as federal stimulus money runs out and tax revenues remain depleted by low rates of economic growth. By upping the ante -- in the way he has done -- pushing the Republicans to accept large-scale deficit reduction through big spending cuts and modest tax hikes -- the President has reinforced in the public mind the underlying assertion of the entire Republican case: namely that our economic problems are primarily caused by excessive government spending and taxation. If that perception persists, November 2012 will see a rout of the Democratic Left.
3. The center will only succeed economically if it pulls the political debate back onto saner ground: saner ground on the immediate causes of unemployment, and saner ground on the long-term causes of U.S. economic under-performance. On the former, the White House should be insisting on (and actively campaigning for) a new stimulus package. It should be making the case again that the current debt problem is the product of unfunded spending and tax policies inherited from the Bush years, and of the recession caused by lack of tight financial regulation -- and then pushing for direct federal aid to hard-pressed state budgets (to protect education and Medicaid) paid for by an aggressive program of closing tax loopholes and ending tax cuts for the rich. The White House should also be arguing, to the exclusion of any concessions on the "burden" of public spending, that the long-term solution to the debt crisis is not just a matter of establishing some control over rising health care costs, vital as this is. It is also a matter of generating sustained economic growth through the recreation of high-paying jobs in a revitalized U.S. civil manufacturing sector. Free-market economics that privilege tax cuts and deregulation will never produce that. Managed-market economics organized around an active industrial policy might just get us there - though getting out of any hole becomes progressively more difficult the deeper the hole is and the longer we are in it. Time is not our friend on this matter, and the White House needs to realize that - and begin to try.
As the respected financial journalist Martin Wolf wrote in Thursday's Financial Times, "the view of Republican hawks in the US... that the crisis has fiscal roots alone is wrong," and because it is, "the US may be on the verge of making among the biggest and least necessary financial mistakes in world history." So with Republican intransigence on the tax side of the current budget equation now losing the Party support -- including support even from major business interests -- this is not the time to offer yet more concessions to a bankrupt philosophy. Nor is it the time to play politics with the whole notion of federal debt -- offering even bigger cuts on terms Republicans can't accept, just to make sure Democratic centrists look reasonable by comparison. All that that kind of politicking does is further entrench a political climate that stigmatizes public spending and makes a bogey of federal regulation. Obama might win the odd Washington battle playing that game; but without his solid advocacy of public services and federal regulation, those of us fighting for a fairer America will inevitably lose the war.
First posted at www.davidcoates.net
These arguments are developed more fully in Chapter 6 of Making the Progressive Case, New York, Continuum Books, 2011
David Latt: Is Obama Charlie Brown to Boehner's Lucy?
Obama Grasping Centrist Banner in Debt Impasse
Barack Obama, Instant Centrist
Obama, lawmakers face fresh doubts on debt deal
Give Peas A Chance: Obama Stakes Out Centrist Ground On Debt Ceiling (The Note)
Would accessible college educations instead of, let's say tax loopholes, be so terrible? An educated, competitive workforce would make a significant improvement to the future of the nation. I'm not trying to be argumentative.
The REAL class warfare is against average Americans. Wall St has bought U.S. Congress over last 40 yrs with every tax loophole, subsidy, there is. As Senator Dick Durbin (I think) said the BANKS own the United States Senate long before that half black man in the WH you hate and fear.
The Am taxpayer is recipient of entitlements that we pay taxes for, but notice that corporate America has siphoned cntry's income and wealth off for last 40 yrs by buying small companies breaking them up instead of injecting investments into them, firing employees, and selling industrial equipment overseas and taking the jobs there as well. No jobs, no revenue = no money to give back to states for funding of public services that keep municipalities healthy.
Sound familiar?? Pres Obama is part of the ongoing system turns out, and had to follow thru on bailouts or economy wld've been a HELL of a lot worse. It was Bush, remember, Hank Paulson, et al who initiated the bailouts??
If this mess had happened in last six months of 2004 instead of 2008, Bush wld STILL have been re-elected..... AND THERE WOULD HAVE BEEN NO TEA PARTY in summer of 2005. WHY, because Bush represents every crooke white guy in business with whom you are much more comfortable.
So maybe when the plan goes into effect 2 years from now - assuming it's not repealed by republicans or repealed by Obama in some other negotiated surrender - maybe it'll start to help more than a handful of people who meet the criteria for the pre-existing condition fix.
Here's what I shudder about - as a nation, we voters continue to pick from horrible and extremely horrible. If you had to pick a babysitter and your choices were between a murderer and rapist, you'd look for more choices. One may be better when compared to the alternative, but you wouldn't trust your kids to either of them. The longer we accept that "we aren't as miserably horrific as the other guys" rationale, the longer we will continue our free-fall toward the next closest thing to civil war as anyone can imagine. May take a little longer to get there with a "Democrat" the likes of Obama, but that conflagration is inevitable without actual changing the country's course.
THAT is the only "danger" to the militant Left.
THAT is why the reframing is so signifigant, and why the shift is more rightward.
If progressive tax policy, sound regulation PRE Clinton signing repeal of Glass Steagall, and a civil society that promotes the Commonweal is "extreme" than I guess I'm an extremist on the Left.
Centralized Health Care is TOO extreme for America.
Federally guaranteed mortgages is TOO exteme for America.
It isn't THAT difficult to define "TOO" extreme.
The only way back to wealth production is through re-industrialization. While it's unlikely we can re-industrialize through tax or spending policies alone, there is another way we can regain our competitiveness, be creating an international level playing field where we can compete on our own terms. "Buy America" is one such approach, but it's highly unlikely our fellow citizens can be motivated to pay more for American goods, especially when they've already tightened their belts. Tariffs might be imposed, and while there's justification for doing so, the international implications aren't enticing.
Instead, we should renegotiate our treaties and international obligations to make sure that no nation can undercut the others through cheap labor and unclean production. A set of tough product standards and labeling program should be created that only permits certified products to be sold in participating countries. No country would permit the importation or sale of products that don't meed these specifications.
These specifications would include that workers are paid at least the US minimum wage, that they receive basic benefits including health and retirement insurance, that workers can organize and unionize as they may decide, that the industrial processes that are used meet minimum pollution prevention standards, and that the products themselves are thoroughly tested and deemed to be safe for general use. With such product standards in place, we'll have created a level playing field, where the natural advantages we have in the US will make us competitive world-wide.
I am entirely in agreement, and your argument is extremely important. The conversation in Washington needs to be widened and refocused on the issues your raise. I am just published 'Making the Progressive Case', and chapters 3 and 6 are entirely devoted to making similar points. Thank you for your comment
David Coates
Bingo. The is the white elephant in the room. NAFTA and the rest of our trade agreements were written by a business lobby that wanted cheap, disposable labor. So every 20 years or so, they find a new set of countries whose workers they can exploit.
If there is a commonly agreed to set of standards and consequences, some of our manufacturing jobs may actually return to our country.
Despite the debate over government debt as the cause of the current recession, we need to focus on the ability of our country to create wealth. We've transferred much of the industrial capacity of our nation to other nations. Although much of this transfer occurred while ownership continued to be vested in the very wealthy, the secondary value of ownership, the interest of workers to be employed, has also been transferred abroad as well. It is this transfer of employability that has devastated this country. Our belief in open world markets, exemplified by GATT, NAFTA, and MFN preferences, coupled with the extreme competitiveness of China that's based on very cheap labor, unfettered pollution, and protective government policies, has left us with a hollowed-out productive capacity. We no longer make steel, small appliances, tools, clothes, and nearly every other product sold through Walmart.
This transfer has been masked by unsuitable stimuli and debt that has kept the effects hidden. These stimuli, including cheap lending and a relatively strong dollar internationally, had, for the interim, prevented the loss from being recognized by consumers. However, this hollowing out of our ability to generate wealth for the broad base of our country can't be hidden any longer.
Cut taxes or deficit spending = economic stimulus and increase debt
cut spending or increase taxes = de-stimulate economy and decrease debt
Increase debt = stimulate the economy now and de-stimulate later
The US has increased debt continuously for about 30 years yet trend economic growth has not been as strong as the 1950's to 70's. Maybe they are trying the wrong approach.
Similarly if you cut spending or massively increase taxes on the middle class (raising taxes on the wealthy wouldn't really impact the economy at all, not until you are taxing them much more than they are currently taxed) you won't decrease debt because you will cause revenues to collapse. Generally, when in precarious economic position, as you put it "de-stimulating" the economy will lead to a much greater decrease in revenues than the amount you reduce spending by. So in actuality you will end up increasing the debt by an even larger amount.
When the government starts paying down the debt, taxes will go up and spending will go down - that means people lose their jobs and yes revenues go down - so will economic growth.
The second effect from high debt is interest expense. As debt goes up these payments crowd out spending on programs.
The debt increased one deficit at a time. When a government spends more than it takes in it is stimulating the economy - whether they call it stimulus or not.
There were recessions in the post war period - and trend economic growth (average growth rate) was higher then than now. The last three decades have seen slower growth and increasing debt - what happens when it starts getting paid back?
I have explained this repeatedly now. Debts can be "repaid" ie reduced as a percentage of GDP, the salient metric, through having the rate of GDP growth exceed the rate of Debt growth. . . . .
No, there are no "assumptioÂns" about the strenght of the multiplierÂ. These things have been the subject of signficant study for over 70 years and we know what we are talking about. Spending on infrastrucÂture and jobs has high multiplier values. These arent assumptionÂs but empiricallÂy demonstratÂed facts.
Tim said:
Yes and the rate of debt accumulation in the US increasing not decreasing. It has been increasing as a percent of GDP for quite some time. Please show me a study 'proving' the multiplier and I will show you the assumptions that underlie it. It is an economic concept that is past its best-before date.
I do not deify Keynes - he is just a good economist that was largely misunderstood. Keynes made some mistakes, like anyone and he did have some very good ideas. In the Keynesian sense the US has been in a low-level equilibrium trap for a number of years - building some bridges and fixing potholes are not going to fix it. Deficit spending has not affected growth; neither has low interest rates, low taxes, deregulation or lower real wages for the average American. Sometimes real-world events tell us the theories are lacking - this is one of those times.
Excellent analysis unfortunately buried at the bottom of the page.
Forget about it.
It is also complex because the current problems have their origins in the recomposition of the Republican Party following LBJ's support of the Civil Rights Act. Prior to this, the Republicans were mostly a party of business w/o religious influences. The Democrats were the big tent of Evanglicals, Populists, pro-farm, pro-labor, etc. Then when LBJ supported the Civil Rights Law, the Dixiecrats (who were the Southern Evangelical component) finally forgave the Republican Party for Abraham Lincoln. They switched parties. When the Moral Majority happened, a crusade began to purify the Republican party of all Moderates; Christianity became a litmus test. The party moved further right. As Moderates left to become Independents, only far Right candidates could get past the primary elections. Therefore, the Center is now farther right than Moderate Republicans like Eisenhower and way further right than Teddy Roosevelt. For a while, Big Business used the Far Right - with slogans like "Ownership society" and "Deficits don't matter", now they are reaping what they sowed.
But first, did the Democrats abandon labor? I believe so. Of course, I'd rather a Democrat than a Republican set the minimum wage, but have the Democrats advanced the rights of labor over the past 30 years? Hardly. We don't even have mandated vacations, and the 8-workday is largely an illusory right. It's not enforced, and if you insist it be, you lose your job. So, yes, I think it's fair to say that Democrats have abandoned labor.
But why did they do that? I think it's because when the Democrats started their big push on a bunch of "social" causes that are not just about money (feminism, gay rights, civil rights, environmentalism, etc.), they were disgusted by the bigotry they discovered among the working classes when they tried to get the working classes interested in these new causes.
Basically part of it is that the old saying "the South will rise again," was not what people supposed. It was supposed that it would be economic. Instead, the South's dogmas of private property, self-responsibility, Fundamentalist Christianity, and bigotry morphed and migrated into areas that had previously been quite Progressive, until progressives, whether rural farmers or blue collar factory workers, were affected by integration.
Back when you had FDR Democrats with Dixiecrats and Blue Dogs on one side and Republicans with the financial conservatism, but progressive ideas on social mores and non-religiosity on the other. There was always the ability to compromise. The conservative Democrats would sometimes side with Republicans. The Progressive Republicans would sometimes side with Democrats. Now, the Republican side is so dogmatic that there can be no compromise on much of anything.
I think another very real factor is what Cokie Roberts talked about at Betty Ford's funeral. Families now stay in the home state and member commute on weekends. Therefore there is no such thing as Reagan and Tip O'Neill's regular Friday night drink. Congressional members do not know representatives of the opposing party in any other way but confrontational.
I can tell that you've been paying a bit too much attention to Saints Limbaugh and Beck. If not, you certainly lived a different parallel universe. My mom's family was largely Dixiecrat. They became Republican almost in masse. Most have since shifted to being Independent. My area was integrating before Nixon was elected. I was a year ahead of bussing. Otherwise my parents were going to pull me out of school and put me in a religious school.
My father was born in Illinois a few miles from Reagan, a couple of years after Reagan. His background was almost identical... only his mother was Boston Irish.
I remember an interview that Tip O'Neill did while he was still Speaker. He was talking about Reagan and called him a "very stubborn man who stands his ground"... He described their relationship as 2 Irishmen having a barney and like 2 Irishmen they wash down the dust with a drink, then start all over again.
The Boston Irish version of a "very stubborn man who stands his ground" in private would be "dumb SOB." Dumb SOB because he won't give in or back down. That's not an insult in Irish. That's a compliment.