11/24/2010 01:43 pm ET Updated May 25, 2011

Distention Deficit

The deficit is now all the rage. Though post-election polls show it's jobs and economic certainty that voters want most, it's the deficit that's getting the attention. The influx of anti-government-and-taxes patriots has something to do with this, and since the votes have been cast all parties can express their true interests, or surely those of their favorite interest group. The republicans now claim a mandate to balance the budget. But were they reading tea leaves instead of learning what the ballots really say, perhaps to get a fix on how to pass off a political agenda as an economic program?

With the deluge of hype and twisted messages, were voters informed enough to give these angry revolters a real mandate?

Whatever the mandate, their arrival certainly gives veteran lawmakers the bravado to try and cut their way to prosperity. They can piggyback the populist tide and resell the idea always on the table that making the debits and credits match for the nation has to be right. And who out in the heartland won't buy a balanced budget!

An unbalanced budget has been the Republicans' perennial peeve, though it's the Democrats who've cleaned up the fiscal messes, at least in recent generations, while continuing to be pilloried by the right's disinformation dittos as tax-and-spenders. Many out in the heartland are amnesiacs when it comes to such matters, but this gives the spin a better chance of sticking to the ribs. What's clear is that there's much more at stake here than simply getting our financial house in order, and now we'll see how the victory-giddy republicans smear the red ink.

Unfortunately, the Democrats have been ever willing during the past decade's shift right to let them frame the agenda, an art form Obama has refined in the past two years. His choice of Alan Simpson and Erskine Bowles to direct the Fiscal Responsibility and Reform Commission fits the playbook perfectly.

But the real issue is the lack of a jobs program and a credible narrative about how to change the economy. Those dangling percentages of unemployed out there in the heartland translate into the revenue shortfalls forcing the downward spiral and imploding the economy. Keeping folks working means keeping the taxes flowing into government coffers, and a greater means to pay for healthcare, war, stimulus and all the other needs the budget commissioners say we can't now afford.

So is the refusal to develop a jobs program, the refusal to use any economic model other than the filter-down fantasy from the Bush years that it's the elite who create jobs if we can just give them more free money, proof that the democrats really relish the opportunity to switch gears?

There was a window of opportunity with the recent robo-foreclosure scam to begin getting to the root of the economic crisis. This might have even turned the election around for democrats. A passionate Obama pushing left of the center where he's waffled forever to place a moratorium on foreclosures, like many hoped, might have kept independents, Reagan democrats and the party's alienated base on board. Some commitment to something that might at least stiffen the flagging vocabulary of hope and change. How many times can you move to the center and still be in it? Obama's rhetoric is liberal enough for the right to call him one, but he folds on issues faster than his language can be decoded.

Mark Shields asked on The News Hour recently if Obama's post-election momentum will bring on the policies and poses of Harry Truman or Bill Clinton. He's already had lots of practice shadowing the latter, so it's hard to imagine him bypassing bogus bipartisanship and going straight to the people to salvage campaign promises in the fashion of the former. His staff is already leaking his willingness to compromise and extend the Bush tax cuts, just like he was so quick to say that single payer and the public option were not viable courses to pursue in advance of any debate.

So if the deficit is replacing the "debate" on the economy, under the guise by the center-right that correcting that problem will get the unemployment rate back to "normal," then how exactly will this work? The dearth of credible economists front and center in this "debate" is not helping us understand. If the recession is due to the repression of demand, then how will cutting more jobs and taking more resources away from those most affected pull us back from the brink of economic disaster and stabilize American society?

Public sector cuts at the state and local levels are dampening the employment picture. This spending is what's needed to kick-start the recovery. The cash-rich financial sector is not loaning to those who can, so it's absurd to think that more tax cuts or free money from the Fed will in any way solve the problem.

Are debtors' prisons next? What do they propose to do with the unemployed while the post-cutting wait-game plays out? Perhaps put them in the space void created by the budget-strapped prison system? Maybe these hawks will take their cue from those early American puritans who felt they had to finger transgressors in public, expose them as dead letters, non-beings, and make em pay over and over again.

It's like they want to cease doing what can eliminate the need for cuts in the first place; convince us to accept the current economic situation as permanent. When revenues reverse, the cuts will be history. But policies themselves can help reduce deficits.

It's right out of the shock doctrine playbook: bleed 'em on the way up, bleed 'em when they're down. Take advantage of your superior resources at the moment of the adversary's greatest weakness to redistribute wealth upward. Jam the need for long term down their throats so often they'll confuse it with the short term. Keep the budget-balancing idea in their faces while slipping in another agenda.

The proposals of Obama's commission are actually not so hidden. Deficit-cutting appears seventh on its list of priorities! What it really proposes, according to Paul Krugman, is a "mixture of tax cuts and tax increases--tax cuts for the wealthy, tax increases for the middle class." They want to eliminate the ability of middle class Americans to deduct health benefits and mortgage interest, staples for keeping this mass of citizens in the game. Much of the revenue however will not be used to reduce the deficit, but "to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate" Some conservatives!

This means they believe no real recovery is necessary. They've tested the patience of the public already, pushed the credit card rates to usurious levels with mostly a whimper, jacked up the gas prices to nearly $5 per gallon with barely that, and are banking on complacency during the adjustment stretch when they can roll back wages and bennies to the stone age. They must feel we'll soften faster than Obama's left brain.

There was a time after all, before Reaganomics rooted and routed our institutions, when the idea of a permanent temporary work force seemed unthinkable to most everyone. Since at the current rate of job creation in the private sector it will take many years to merely replace the losses since the recession began, absence external stimulus, we're going to likely see a pretty creative gulag evolve very soon.

The assumption at the core of such a feat of social engineering must be that this group of unemployed is undeserving, and that they will define themselves accordingly. Above all that our system no longer functions through a social contract. It works like a lottery. Winners are celebrated and losers are ignored, each occupying a different economy.

The diehard cutters and balancers are not supercharged patriots who really care about the imminent threat of inflation, or the burden of debt on our successors. If you've got little income, the fear of inflation has yet to make it onto the backburner. They want to micromanage our great, great grandchildren's retirement prospects now because it will divert attention from macromanaging the fates of those who are retiring now. As Robert Kuttner notes, "the projected budget in 2030 will be far more influenced by whether the economy recovers any time soon than by what cuts are imagined for 20 years in the future"

So this is not just wrongheaded stuff, but a very calculating matter. The pundits from the right wing think tanks who sit in for the economists on mainstream news shows, and are disproportionately represented, harp away with a list of generalities and clichés that make them seem barely able to master Econ 101 because they know they can get away with acting dumb in a dumbed-down climate. The moderators will likely not ask them hard questions anyway. They usually let the big-government-is-taking-away-my-freedom claims ride, offering little if any challenge.

But the government expansion that so many talk about, the big bureaucracies and major new programs most point to, is an illusion. The bank bailouts and the safety net spending are outlays resulting from the recession. The number of workers in the public sector is declining.

The hawks are virtual partners with the Chicago School but perhaps know Keynes better than Smith, Von Hayek and Friedman. They must know that budget deficits are the vehicle to prosperity for the middle class; the means to capital they'll never get from Wall Street. Fed-directed investment in the private sector, along with a progressive tax structure dismantled in the early Reagan years, were the basis for the great expansion of our middle class and the tremendous productivity and wealth of the post-WWII era. The red ink trumped the red scares.

Capital in the pockets of those without it can be the vehicle for multiplying it through the system, and help prevent recession, which is after all a subtraction that becomes a downward spiral and encourages hoarding and stockpiling by those who claim they can't find places to invest their reserves.

This explains the criticism Obama got from the G20, that we're slaves to primitive economic models proven faulty for sure with the demise of the Bush regime. The fact that they're still in force is disturbing since Obama railed against the bankruptcy of filter-down economics, the centerpiece of the Reagan revolution, during the 2008 campaign. But this gives the snooty scolding from Europe, that our wild west approach may retard the global system, greater credibility since its safety nets and high wage structure offer a successful alternative for the world to see.

How are so many underdeveloped economies, aka former banana republics, buffering the recession so much better than we are? They're even making improvements in healing the literacy and inequality gaps, and despite high tax rates and government spending.

Warren Buffett broke ranks this past weekend (11/12/10) on "This Week," weighing in on the debate about whether to extend the Bush tax cuts. Echoing the substantial research done already on what their effect has been on job creation, by Larry Bartels and others, he soundly rejects the notion that these cuts lead to job creation. The rich always say this, he claims! The filter-down policies of the past 10 years simply haven't worked. Business people like himself have never had it so good in recent times, and they don't pay enough taxes!

Since the value of these cuts would effectively cancel the "deficit problem," we'll see how these ideas play out in the minds of the Congressional austerity-hawks in the weeks to come.