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Money Can't Buy Them Love

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It is literally possible to have more money than you know what to do with. Take the case of the private-equity billionaire Peter G. Peterson, who has bankrolled much of the austerity crusade.

Peterson has now spent over half a billion dollars out of his personal fortune to persuade Americans that austerity is the necessary road to recovery. But the debate seems to be getting away from him. Peterson was heavily involved in the corporate-led group, "Fix the Debt." That effort has increasingly backfired. In Peterson's world, CEO spokesmen are a source of great credibility. But out in America, it doesn't looks so good when the millionaire CEOs who cut jobs and pay low rates of taxes lecture others to tighten their belts.

Time for a new set of spokesmen. Peterson's latest front group is something called the Coalition for Fiscal and National Security, which ran full-page ads in major newspapers last week. The gimmick, as the ad declared, is that "U.S. National Security in the 21st century rests on both economic and military strength." So if you want to keep al-Qaeda at bay, it logically follows that we need to cut Social Security and Medicare. Well, it does in Peterson's circle.

The ad was signed by doddering former national security officials such as Henry Kissinger, Zbigniew Brzezinski, James Baker, Sam Nunn, et al. They should know plenty about national security and the debt, having run up trillions of dollars in excess military spending.

Poor Pete Peterson is running out of categories of concerned citizens to associate with the austerity cause. What will it be next? Poodle breeders to cut the debt? Nascar racers?

At this rate, Peterson will soon join the club of people like Sheldon Adelson, the Koch brothers, and Karl Rove, who spent hundreds of millions of dollars and had just about zero influence for their trouble. Sometimes, money can't buy you love. Sometimes, it only buys poor judgment and makes you look faintly ridiculous.

The idea that recovery depended on austerity was always foolishness. Peterson's ploy was to make it a bipartisan cause, with Democrats agreeing to slit their own throats by agreeing with Republicans to cut Social Security and Medicare for the sake of reassuring the bond markets. But the bond markets are doing just fine, thanks to record low interest rates that turn out to have a lot more to do with Federal Reserve policy than with deficit projections. And President Obama has belatedly realized that the Peterson-Simpson-Bowles austerity axis doesn't exactly serve his political self-interest.

Meanwhile, it is dawning on Peterson's Republican Party allies that they are painted into a corner of their own creation. The Bush tax cuts expire January 1. If the Republicans hold out for tax cuts on the top two percent, they are responsible when taxes go up on everyone else -- and this time President Obama isn't blinking first.

Today, on Fox News, one of the Republican leaders, Sen. Bob Corker of Tennessee, went wobbly on taxes because he had a Eureka Moment. If Republicans agree to raise taxes on the richest, he said, that puts away the tax issue, and "all of a sudden, the [debate] goes back to entitlements and maybe it puts us in a place where we actually can do something that really saves the nation."

Uh, no it doesn't. Alas, the Republican version of entitlement reform is built on some really unpopular measures that don't even save much money, such as raising the Medicare eligibility age to 67, while Obama has moved away from the austerity kick.

Which is more popular and more sensible -- raising the Medicare eligibility age, or allowing Medicare to negotiate bulk discounts with drug companies? How does a truly unpopular Republican position translate into good politics? Look how quickly the Republicans dropped the Medicare voucher idea.

Obama's old position, echoing the line of the Peterson crusade, was that we needed to get $4 trillion in deficit cuts over a decade. Now, however, Obama has sensibly recognized that the budget has already been cut by at least $1.5 trillion by recent budget deals, most notably the very 2011 budget legislation that gave America the fiscal cliff.

That means far less deficit reduction, Obama is proposing to get most of it from tax increases on the wealthy. If Republicans stick with a larger deficit reduction number, that requires more unpopular cuts in Social Security and Medicare, and more "reform" of tax breaks that the middle class receives, such as the mortgage interest deduction. Uh-oh.

The fiscal cliff has had the opposite effect from the one that its too-clever sponsors intended. It has revealed the backward economic assumptions of the Peterson austerity crusade and the self-serving motives of its sponsors. And it has thrown into sharp relief the political unpopularity of Republican positions on taxes and on social insurance.

As Republicans try to walk back their position of no tax increases on anyone, any time (even billionaires, even if the result is cuts in Social Security and Medicare), watch for Republicans to turn on each other.

It's December. Maybe there is a Santa Claus.

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. Follow Robert Kuttner on Twitter: www.twitter.com/rkuttner and on Facebook:www.facebook.com/RobertKuttner