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Robert Kuttner

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The Gang of Six and Other Rogues

Posted: 06/12/11 11:00 PM ET

If we can just get Congressman Anthony Weiner off the front pages, the Democrats should be enjoying a nice political windfall thanks to the Republicans' blunder on Medicare. Republican Rep. Paul Ryan's proposal to end Medicare as a public program is monumentally unpopular. Budget Committee Chairman Ryan's plan also has the added benefit of dividing Republicans, and usefully contributed to Newt Gingrich's self-immolation.

But watch for the bipartisan Gang of Six, and their conservative allies at Tim Geithner's Treasury Department, to snatch defeat out of the jaws of victory.

In the most likely budget compromise that saves the country from defaulting on the national debt, the differences between the parties will collapse in a largely conservative direction. If the current script is followed, Republicans will be the big winners. They will win on gutting social spending, aborting a fragile recovery, humbling the president, and undercutting his re-election chances. Heckuva job, Gang of Six.

Zachary Goldfarb's recent Washington Post profile confirmed Geithner's role in persuading President Obama to give deficit reduction priority over job creation. With the resignations of senior economist Jared Bernstein and more recently chief economist Austan Goolsbee, no senior economic adviser to the president is pushing jobs over budget cutting.

Even with the withdrawal of Senator Tom Coburn, leaving just five bipartisan stalwarts, the Gang of Six (minus one) claims it is on the verge of agreeing to a deficit reduction plan that proposes $4.7 trillion in spending cuts over a decade. If the test is how much to cut, this plan goes both Obama and Ryan one better.

But is that really the right test? For most Americans, the federal deficit is an abstraction. The problem is too few jobs, flat wages, declining home equity, unaffordable health care, rising college costs, diminished opportunity for the young.

The entire political class has convinced itself that the way to economic recovery is via deficit reduction. The only problem with that is that no known theory of economics can plausibly demonstrate the connection. Debt financing is not crowding out private investment -- interest costs are at record lows. The problem is that business doesn't see enough customers to increase investment, because of the recession itself.

No amount of deficit reduction between now and November 2012 will improve the jobs picture. On the contrary, by denying the government money to invest in projects that could create jobs, the deficit obsession will worsen the economic picture -- and the Obama Administration's re-election prospects.

Alan Simpson and Erskine Bowles, former chairs of Obama's commission on fiscal reform, could not win the necessary super-majority support for their draconian plan, which included Social Security cuts, but they just won't shut up. They recently published a fatuous op-ed piece in the Washington Post assuring readers that the Gang of Six would soldier on and find a budget compromise. The oped concluded with the immortal words, "Pray for the Gang of Six."

Well, if you believe in the power of prayer, it would be better to pray for the Gang to splinter over partisan differences -- because those differences actually play to the strength of progressives.

Most Americans don't support cuts in Medicare or Social Security. Most are opposed to the kinds of savage cuts in programs for the poor and the working middle class that are at the core of the Ryan budget and that will be part of a Gang of Six package if the Gang ever agrees. Most would like to see investments in infrastructure to put Americans back to work -- the very investments that would be ruled out as part of a Gang of Six austerity budget.

If those differences are submerged in a frenzy of bipartisanship, mainly along fiscally conservative lines, we lose and the right wins.

The Republicans on the Gang of Six -- senators Saxby Chambliss of Georgia and Mike Crapo of Idaho, as well as their absent colleague Tom Coburn, are against tax increases on the well off. They are also opposed to more than token cuts in the military. So any Gang-of-Six deal accepted by the group's fiscally conservative Democrats will be mostly domestic spending cuts. That, in turn, will up the pressure on President Obama to accept what is basically a Republican budget and an unpopular one at that.

But what about the debt and the risk of a default? The debt is a modest problem, over the long term, but the urgent crisis right now is a flat economy. The better way to reduce the burden of past debt is to get a serious recovery going. That will take more public investment, not less.

As for the debt ceiling, why is it that only Republicans and fiscally conservative Democrats get to play chicken with the risk of a default? It would be better for President Obama to make clear that he is not about to sacrifice valued social outlays for far-right ideology, and hold Republicans accountable for spooking the money markets.

Most of the debt increase was caused by the recession itself, by the Bush tax cuts, and the military buildup. The simplest way to tame the debt would be to revert to the tax code of the 1990s (a decade of prosperity), to shift military spending to domestic uses, and to increase federal revenues via a strong economic recovery.

The final budget agreement will necessary be a compromise. But if Democrats give away their principles before the final negotiations even begin, they should not be surprised when the compromise looks mostly Republican.


Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril.