THE BLOG
11/30/2010 11:28 am ET Updated May 25, 2011

The High Costs of Cheap Talk

Perhaps the best that can be said about President Obama's preemptive sacrifice to the deficit-reduction gods -- a two-year freeze on pay for non-military federal workers -- is that it represents small change. Amid widespread calls for big immediate cutbacks that could endanger a painfully weak recovery, the president's proposal might seem a modest offering to calm the screeching deficit hawks.

But the price isn't as small as the numbers suggest. In one fell swoop, the president has validated three dangerous myths that, if accepted, are likely to consign the United States to years of economic struggle and a continued widening of the huge gap in our society between the richest and the rest.

Myth #1: Public-sector workers are the root of our economic problems

Anyone who watches Fox on a regular basis might be forgiven for thinking that the biggest problem facing our nation is overpaid public workers. So it's worth pointing out that study after study has shown that public workers are generally underpaid. Yes, federal employees don't receive the bottom-floor wages seen in private service jobs -- a border patrol agent may well make more than a private security employee -- but neither do we see the exorbitant pay at the top. As the economist Nancy Folbre puts it, "Some oinking can definitely be heard out there in the labor market, but anyone willing to follow the numbers can tell that the biggest piggies are not those employed by the federal government."

But these statistics are somewhat beside the point. The deeper problem is that there's no credible case that the pay of public-sector workers has anything to do with our current crisis. After all, if public-sector workers are overpaid today, they were also overpaid a year before the economy tanked. By contrast, we know that many of the private-sector "piggies" on Wall Street had a lot to do with our current crisis. Their pay, however, is not freezing, but getting hotter and hotter.

Myth #2: The number one priority is to cut spending now to reduce the deficit

Most Americans think that getting the economy back on track is far more important than the tackling the deficit. In Washington, however, fiscal austerity--or at least lip service to it--has become the defining test of seriousness. Perhaps it's easier to feel this way when your family, friends, and neighbors are not among the millions of Americans who are out of work or working part time despite wanting a full-time job. How else can we explain why Congress cannot muster sufficient support to extend unemployment benefits to the two million Americans whose benefits are set to expire at the end of this month even as its leaders are poised, with the president's tacit support, to extend the Bush tax cuts for the wealthiest Americans -- at a cost that vastly, vastly exceeds the savings produced by a federal spending freeze?

Getting the deficit under control requires an economic recovery. After all, this was the story of the 1990s. The real work of tackling the national debt is figuring out a long-term plan that will bring spending and revenues in line over the coming decades, and this work will only succeed against the backdrop of a reasonably strong economy. In the current context, deficit fixation is actually a dangerous distraction from the real and present danger that our economy will slip into stagnation.

Myth #3: There's no will or ability to challenge the runaway gains at the top of the economic ladder even as middle-class Americans lose ground

Many who accept arguments #1 and #2 nonetheless call for "political realism." They say we have to take into account that there's not sufficient political support for any proposal that involves tackling inequality or raising taxes, even taxes on those who have done the best over the last generation. The blueprint released by the bipartisan cochairs of the president's deficit commission--which will slash spending on Medicare, Social Security, and vital public services while tilting the tax code in favor of the top -- appears to buy into just this sort of depressing realism. Perhaps this is also the president's rationale for reinforcing the two bad arguments just discussed; he has to bow to the new priorities.

But it is simply not the case that Americans' priorities are Washington's. Even among the more conservative electorate that went to the polls in November, the majority was against extending the Bush tax cuts for the richest, and the number one concern by far was the economy. Making the case for a strong response to our present crisis and criticizing those who talk about the need for immediate restraint yet continue to shower tax cuts and other goodies on the most fortunate wouldn't just be good economics. It would also be good politics. Too bad it's a course the president seems reluctant to take.

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