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I think this pull by Digby from a post by Steve Benen says about everything you need to say about the longtime party of Austerity, the Democrats:
To add a little historical context to this, over the last four decades, only two presidents have reduced the deficit this much, this quickly: Bill Clinton and Barack Obama.
Benen seeks political advantage from this, but even he would recognize, if you pinned him down, that this is actually a pretty terrible time to focus on deficit reduction. Sadly, he did acknowledge this last week, in a post highlighting the fact that the US budget deficit dropped by $200 billion last fiscal year, only to hand-wave it away:
There’s a competing school of thought — which I’m sympathetic to — that suggests the deficit is currently too small, and that given economic conditions, interest rates, and the current yield of Treasuries, we should be borrowing far more and investing that money in job creation.
But for the purposes of political conversation, such an argument is probably a non-starter; the public has come to believe a deficit that’s getting smaller is good news.
The public has come to believe the wrong thing, and if Democratic partisans refuse to straighten them out on it, there’s no way to change that mentality. Partisans who use the deficit data to bolster the case for their party consign the country to continuing austerity and will make it impossible for government to carry out the functions of progressive policy, or to stimulate the economy when the need arises. It’s an extremely dangerous game.
Digby also correctly makes a distinction between the timing of the deficit reduction in the two separate Democratic Administrations of the modern age:
But in the case of Obama vs Clinton on this, I do have to point out one tiny difference. Clinton’s deficit reduction came about during an historic boom while Obama’s deficit reduction came about during an epic slump. I don’t think I have to explain why this matters, but I’ll just let Krugman do it just in case:
“Let’s look at estimates of the cyclically adjusted budget deficit from the IMF’s Fiscal Monitor, measured as a percentage of potential GDP. I don’t think you want to take these numbers as gospel — for Britain, at least, there’s a very good case that the IMF is greatly understating potential output and hence overstating the structural deficit, and I suspect that this is true to a lesser extent for the US. But in any case the point is that even cheap-money countries facing no pressure either from the market or from external forces to engage in immediate austerity are nonetheless engaged in sharp fiscal contraction…
This is taking place in an environment in which the private sector is still deleveraging ferociously from the debt binge of the previous decade; so we’re creating a situation in which both the private sector and the public sector are trying to slash spending relative to income. And whaddya know, the world economy is sputtering.”
The boom not the slump, is the right time for austerity, as John Maynard Keynes said 75 years ago. Certainly that has played out among these two Democratic Administrations. Clinton closed the deficit (in large part by raising taxes on the rich, incidentally) and the economy moved forward. In fact, the economic boom did most of the closing on its own. Obama closed the deficit in a time where the economy could not take up that slack, and the result has been meager.
There’s a good argument to make that the Clinton surpluses were very damaging. But in general, this point holds. I remember seeing Bill Clinton speak right before the 2008 election, and he said very plainly that Obama will not be able to engage in the same kind of deficit-reducing policies that he did during his Presidency. Initially, that held with the stimulus and some follow-on moves. Our large deficit is the only thing keeping the economy afloat amid weak demand. But for the last couple years, there’s been a noticeable pull back, and we have weak growth to show for it.
The idea that you can generate “credibility” from the serious Beltway people by slashing the deficit is a chimera. They still caricature Democrats as tax and spend liberals, and in this case, the economy suffers as a result of the deficit reduction. What would help politically is a better economy, but the story of the economy is so confused, and Democratic partisans so unwilling to set the story right, that such a prospect seems very far away.
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As Mencken said “No one ever went broke underestimating the intelligence of the American public.” Seems truer now more than ever.
As we’re seeing in Europe. Again. (Interestingly, the reason the US isn’t hurting as badly as most of Europe is precisely because unlike most of Europe, Obama did do a half-assed stimulus. The problem is that it was a third of what it needed to be to get everyone back to work.)
The irony here is that austerity during bust times hurts the economy and in turn leads to bigger deficits. As Keynes said it would.
If Willard and Petey should win, will that automatically qualify them for the Nobel in ….
“economic snake oil salemanship”
There is only one way to characterise the current obsession. Tragic. You just wish the obsession would go away, but it won’t. Only pain and suffering ahead for ordinary working people to look forward to. We used to think we were teaching economics in college so this sort of thing would never happen again. We thought we’d driven a stake through its heart. What happened? How did fiscal heresy get a second life?
Oh Please – the Clinton surpluses were not damaging. What was damaging was too things -
One) That the jobs were all focused inside the very narrow confines of the “dot com” boom. Anyone with an “in” in that arena did very well. But this exclusivity was to the detriment of everyone else. I lived at the time in a seaport town of Sausalito, Calif., and those who were building boats and getting by, although just barely, were nervously awaiting the word from the landlords of their boat hangars. Real Estate was favorable to that “dot com” crowd, and any existing commercial property out was having its monthly rent inflated. With the only people who could really afford the rent hikes being the dot com crowd.
Two) What has destroyed our economy was the Congress putting together two odious “bank reform” pieces of legislation in the last months of the Clinton era. One of those bills stripped away all the protections of Glass Steagall. Abnd Clinton signed these shit pieces of legislation, in large part because the creators of those bills guaranteed him the right to make over $ 125,000 per speech once he became a member of the public. As a result of these shenanighans, within nine years, the American economy took a direct and catastrophic hit, from all the maneuvering that the “banks” were able to do once Glass Steagall was destroyed.
As a result of this, 49 cents of every dollar of profit made in this nation now goes to the banking class. Until we seize the assets of those banks, we are doomed, as a free society. The middle class is totally gutted. You have to be a defense contractor or some type of financial entity to be assured of making it. As our elected officials employ the strategies of “Too Big To Fail” they also enforce a new corollary of “too Small To Survive.”
Look at who benefits financially from deficit-mania.
It goes to the top. After the debt ceiling debacle, here’s what the White House had to say; “Bipartisan Debt Deal: A Win for the Economy and Budget Discipline” with the triumphant bullet point “Domestic Discretionary Spending to the Lowest Level Since Eisenhower.” Yay! …yay?
Can’t help noticing that China isn’t playing this stupid austerity game. They are printing money, shipping product, and raising the standard of living of their people.
G_d forbid we take any lessons from China.
I’d give it to them.
With it clear that progressives are in favor of lower and lower taxes, how can Democrats be in support of spending cuts.
Progressives attack Democrats, but not Republicans, on tax and spend policies, so Republicans suffer nothing at the hands of progressives for declaring they will never hike any taxes ever.
Clearly, progressives do not want their taxes hiked, so they will not go after Republicans who signed the no tax pledge, but will go after Democrats who will not sign the no tax pledge.
More than half of the members of the House are determined to cut taxes and not increase the debt which requires slashing spending, and they clearly have the implicit support of David Dayen, because he mentions none of them.
Bill Clinton used all his political capital to hike taxes on everyone. He hiked the gas tax by 35% along with other taxes. The reward was the biggest losses by Democrats until 2010. Were progressives outraged at the no-tax Republicans taking control? No! Were progressives outraged that Republicans tried to cut spending on the people at every turn? No!
Instead of condemning the Republican Congressional majorities that were strengthened in 1996 and 1998, and suffered only a minor setback in 2000, it is Clinton who stood almost alone against the Republicans who is condemned. Progressives did not go after Republicans in Congress, so one must conclude progressives liked the free lunch politics of Republicans where you get everything you want plus tax cuts on the backs of others.
When Congress cut taxes in 2001, progressives didn’t attack Republicans but let them gain greater control over Congress in 2002, and again in 2004.
Progressives didn’t act to defeat Republicans in 2006. It was the failure of Bush and his Republican Congress to deliver the free lunch prosperity of tax cuts and wealth and prosperity and higher Social Security and Medicare. Time for Democrats to cut taxes and expand entitlements and bring unlimited wealth and prosperity.
Progressives, to be honest, have been irrelevant. If progressives are in favor of tax cuts, then they might as well be conservatives. Taxing only a small group is not going to solve the problem. Tax the 1% won’t do it. Romney is going to tax the 47% who no one knows because they don’t live in progressive’s neighborhood, and that won’t do it. Don’t tax me, tax the man behind the tree is not a solution.
And borrow and spend never worked either. FDR was able to borrow because he agreed to tax and by taxing the debt could be serviced and it was. The debt did not increase as a share of the economy while FDR was president until Congress committed all the resources of the United States to victory in December 1941 – what followed was 80% of the US economy devoted to government. After victory, the taxes remained to service the debt that was easily recycled to catch on building the nation. The debt that built the nation post WWII was possible because of high taxes on everyone.
To fund debt, taxes are required, and until Republicans are removed from Congress for being anti-tax, there can be no progress.
If you want progress, turn your anger to Republicans and remove them from Congress and office.
Trickle down doesn’t work and never did. The top .1% increased their net worth by over 7% last year while the rest lost 4%. We will fall into a Great Depression no matter how the PTB play with the statistics and the propaganda machine. The stock market is up artificially right now and as soon as the election is over and the Euro fails (can’t go another way) the market will collapse (I bet gold goes into the toilet too).
Will we then experience debauchery and rampant promiscuity????
Americans are truly ignorant and stupid, for sure. Just was in an antiques store where the owner , a woman well into her late 60s, was given a commemorative coin by a customer seeking an estimate of its value. “Oh,” she said, “this is something to do with who was president in 1940. Who was president in 1940? Now, let’s see.” Sheesh, someone collecting SS doesn’t even know who was president in 1940? And she’s assessing valuables? And she’s voting??!!
The fed gov budget is just like that of a family, that would be:
–a family that has a printing press in the basement of their house that prints money, and then can loan that money out to all the people in the neighborhood to start businesses and make things, buy new houses, learn new skills, build better schools, hire teachers, see a doctor when they’re sick, bring drug addicts and convicts back into society, make sure the disabled and elderly get half a chance, do important research, etc.
or,
the family that owns the printing press prints up the money and only loans (gives) it to local mafia chieftans. The local crime families then take that loaned money and keep a big chunk for themselves, pay bribes to politicians to keep the racket going, and “re-loans” the money back to the family that printed it in the first place, at about a 3% premium, and pockets the profit.
So yes, the American economic budget is just like a family’s budget
Anyone in their 60s has spent fifty years absorbing industrial society’s pollutants, and is probably in the throes of dementia as a result.