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Deficits Fiscal and Democratic: Teapublican Times and the Long Right Tilt in the Age of Obama


Government Money for “the Right People”

Don’t look now but American politics and policy have gone so far to the right – consistent with more than three decades of starboard drift – that we might as well formally rename the United States “Empire and Inequality, Incorporated.” Masses of ordinary Americans are running out of ammunition in the war on economic destitution. The great global slump that started in 2007 – brought to us by the crisis prone and egregiously wealth-top-heavy profits system[1]– continues to ruin millions of lives at home and abroad. The top 1 percent that owns more than 40 percent of the nation’s wealth (and 57 percent of its financial wealth) is getting richer and richer as the official jobless rates goes back above 9 percent (real or functional employment is considerably higher) and millions of Americans face the expiration of extended unemployment benefits (Moody’s Analytics projects a loss of $37 billion from the nation’s purchasing power as a result). Evictions and foreclosures continue to plague America at historically high levels and food pantries are serving record numbers of poor Americans.

But so what? Increased taxes on the rich and corporate Few and expanded protections and opportunities for the business order’s faceless victims are off the table. This is despite the fact that massive tax cuts for the wealthy and rampant tax avoidance and tax fraud by elite investors and multinational corporations are (along with increased war and empire spending and the massive federal bailout of giants banks and corporations associated with the recent financial crisis) the leading causes of the government deficit[2] that Washington politicians claim to abhor. There’s no chance for a meaningful economic stimulus as the federal government stretches to bay pack the opulent bondholders it took loans from to bail out the giant and parasitic firms that did so much to crash the U.S. and global economy in 2007 and 2008. The left hand of the state –the parts of the public sector that serve the social and democratic needs of the non-affluent majority – is starved in the name of “fiscal responsibility.” The right hand of the state – the portions of the state that serve the opulent minority and dole out punishment for the poor at home and abroad – is alive and well.[3] Ordinary Americans continue in the Age of Obama to receive “a blunt lesson about power, who has it and who doesn’t. They [have] watched Washington run to rescue the very financial interests that caused the catastrophe. They [have] learned that government has plenty of money to spend when the right people want it.” 4 

The “right people” under the rule of America’s “unelected dictatorship of money”[5] are those who already have the most money. They include the owners and top managers of leading U.S. “defense” corporations, who profit enormously from an annual global empire budget of more than $1 trillion,[6]which pays for half the world’s military spending and maintains more than 1000 military installations across more than 100 countries the world over. “Defense” spending has increased significantly under Obama, who was advised and agreed before his election that (in the words of researchers at the leading financial bailout recipient form Morgan Stanley) “there is no peace dividend.” [7] Obama’s requested 2012 military budget may go as high as $1.4 trillion.8

 

A Grand Golf Course Bargain to the Right of the Average Republican Voter

Consider the current budget and debt-ceiling drama in Washington. Unbowed by a terrible jobs report that indicates a likely return to technical recession and shows the urgent necessity of major counter-cyclical government jobs and social assistance programs, many important Democrats were recently open to a massively regressive “budget deal” – one that slashes social expenditures and governmental protections (already on the defensive) on a massive scale. Top Democrats played along with the more openly plutocratic Republicans’ ploy of requiring massive social spending cuts if Congress would allow the government to keep borrowing money by raising the federal debt ceiling beyond the current $14.29 trillion borrowing limit. The Democrats have agreed not to raise tax rates and even – quite remarkably – to a 3-to-1 rate of spending cuts to revenue increases. Barack Obama went golfing with the Republican Speaker John Boehner (R-OH) two weeks ago and offered a “grand bargain” to reduce federal spending by $4 trillion over ten years, predominantly on the basis of Social Security and Medicare cuts, including (remarkably enough) a rise in the age of Medicare eligibility. [9] The Senate majority leader, Harry Reid (D-AZ) discussed backing a “debt reduction measure” of $3 trillion or even $4 trillion if the Republicans “meet him part way.” Obama was willing to support an end to Medicare’s longstanding availability to all Americans, regardless of income. As the leading liberal economist and New York Times columnist Paul Krugman notes, Republicans weren’t even suggesting cuts to Social Security; “this is something Mr. Obama and those he listens to apparently want for its own sake.”10 

It’s not what the Democratic Party’s “progressive” base and even many Democratic moderates want. In an all-too rare show of independence from Obama, House minority leader Nancy Pelosi (D-CA) came out on behalf of the House’s Democratic mainstream to publicly oppose cuts to Social Security and Medicare. Pelosi drew the line: House Democrats would not vote to raise the debt limit if the final deal were to include Medicare and Social Security benefit reductions, meaning it probably wouldn’t pass. She did not hesitate to angrily note add that she and her fellow Democratic congresspersons were excluded from the Obama-Boehner “negotiations.” House Democrats were “caught off guard by the fact that Obama has essentially locked Congress on a course to make deep spending cuts in popular programs, on GOP-friendly terms, without consulting his own party.”11

Trying to “balance the budget” by slashing social programs is certain to deepen the slump since spending cuts will reduce mass purchasing power and feed unemployment. As Krugman observes, pissing in the wind of the big right tilt in Washington, “businesses aren’t holding back because they lack confidence in government policies; they’re holding back because they don’t have enough customers — a problem that would be made worse, not better, by short-term spending cuts.”[12]  Even the New York Times’ editorial board rightly “fear[s that] the sort of deal [Obama] is willing to consider, based overwhelmingly on spending cuts, could still consign the country to more years of economic stagnation.” [13] As Krugman notes, Obama’s deficit reduction proposals have been well to the right of what the average American voter supports and even “a bit to the right of what the average Republican voter prefers.”14

 

The Language of the Right Wing as the Language of the President

Preparing to run for re-election as a “moderate” in 2012, the supposedly liberal Obama pre-emptively conceded that any raise in the debt ceiling must be accompanied by spending cuts. He appears to very much share Republicans’ preposterous claims that the deficit, not unemployment, is the top economic issue facing the U.S. at present and that what ails the U.S. economy is excessive big government taxation and regulation. In a presidential address two weekends ago, Obama voiced core Republican themes by saying that “Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.” 15

As the activist and writer Shamus Cooke recently noted on ZNet, “This is the language of the right wing, which is now the language of both the Democrat and Republican parties. In reality, the U.S. government could easily access trillions of dollars in revenue; it simply chooses not to. Both political parties refuse to discuss how raising taxes on the wealthy and corporations could easily fix the current deficit issue on both the federal and state levels.”[16] This is quite true, just as the ongoing elite-manufactured “crisis of Social Security” could easily be fixed by lifting the regressive cap on payroll taxes and taxing investment income to adequate fund old age pensions.

The government could take a big step further by making significant cuts to the bloated war and empire budget. Since 2001, total U.S. “defense” spending has nearly doubled; it now represents roughly 20 percent of the entire federal budget. Pentagon spending has risen in real terms every single year since 1998. (Even during the height of the Cold War, the Pentagon's budget never increased for more than seven consecutive years.)[17] As Ronald Reagan’s former Assistant Secretary of Defense Lawrence Korb noted earlier this year, “U.S. defense spending, in inflation adjusted terms, is higher than at any time since the end of World War II. Over the past decade, the U.S. share of global military spending has risen from one third to one half. The United States now spends six times as much as China, the country with the next biggest budget.”[18]

The government would easily attain Obama’s $4 trillion in spending cuts by returning to the enormous empire budgets of the Clinton era. The “defense” industry, already nervous about “the business impact of the winding down of wars in Iraq and Afghanistan” (the Wall Street Journal) and lame duck Defense Secretary Robert Gates’ call for a reduction of $400 billion in “security spending” over 12 years, worries about “drastic cuts in military spending” in connection with the current deficit drama. The Aerospace Industries Association, anchored by such noble global war masters as Boeing, Lockheed Martin, and Raytheon, has recently launched a major lobbying push to defend their interests on Capitol Hill.[19] But it has little to worry about in the political culture of Washington, where the Pentagon never has to worry about fiscal solvency even as Social Security is regularly said to be nearing bankruptcy.[20] The military system enjoys an essentially open-ended entitlement to tap the treasury of a government that has spent decades raiding the Social Security trust fund to offset deficits caused by the War and Empire budget and by giant tax cuts and loopholes for the rich and corporate Few.21

 

Delaying the Full Rightward Resolution

But even all this hasn’t been reactionary and regressive enough for the Republican Party. Briefly tempted by the historic opportunity to lock in deep, long-term spending cuts with a president who “wants a right-leaning deficit deal,”[22] Boehner pulled back last Saturday, citing the White House’s supposed “insistence on tax increases” (a curious take on the administration effort to close some longstanding business tax loopholes). He determined that agreeing to Obama’s right-leaning plan would have undermined his leadership position in the Republican Party, where recently elected hard right legislators are determined to fight to the death. The nation appeared headed to a potentially disastrous suspension of its ability to borrow and spend. Moody’s Investors and Standard & Poor’s have warned of a historically unprecedented downgrading of U.S. debt if the crisis is not resolved.23

It seems likely that the debt-ceiling crisis will be averted, thanks in no small part to the intervention of the financial and corporate elite, which has the most at stake in the drama.[24] Big business movers and shakers have commanded Republican leaders to call off the current game of chicken by advancing a way for Obama to lift the ceiling. As left economist Jack Rasmus notes:

“Enter now the past weekend and the real power behind the Republican Party—the moneybag campaign contributors—i.e. the powerful big bankers, Chamber of Commerce, Business Roundtable, big corporations and institutional investors. They had the most to lose should the debt ceiling not be raised. We’re talking real money here if bond prices collapsed and the stock market, already in decline, accelerated. …Pressure on Republican Senate, and to some extent House Republican leadership, intensified this past weekend. House leader Boehner and Senate leader McConnell blinked. In so many words, they agreed to allow the debt ceiling to be raised and will no longer hold the raising as a tactic to extract ‘no tax hike’ concessions from Obama.”25

As Rasmus ads, this hardly means that the assault on Social Security and Medicare is over. “The negotiations have just begun anew. All that’s changed is that big money bag corporate campaign contributors arm-twisted their Republican politicians to drop the debt ceiling as hostage factor in the debt debate and negotiations.” Once the ceiling is raised, quite soon, “the real negotiations will begin… On the table once again will be the President’s proposals to cut $3 trillion in entitlements. That will be the start point for negotiations, not the end point” – negotiations that Rasmus expects (and I concur) to culminate precisely in very serious increases in the retirement age, a significant reduction in Social Security disability benefits, and a significant passing of Medicare cost increases on to retirees.26

The likely specifics of the short debt-ceiling deal – proposed by McConnell – are that the president will be free to raise the debt limit. Congressional Republicans will then vote against the action with chest-thumping resolutions of harsh disapproval. Republican opposition will be vetoed by Obama. Republicans will be unable to override the veto (thanks to the Democrats’ numbers in Congress). This will strike many pundits as a victory for Obama, but Republicans will get to “vote against raising the debt limit without bearing the horrendous consequences of a government default.” It’s called kicking the can down the road in the interest of capitalist stability: “No budget cuts. No tax increases. No clear plan for deficit reduction. Nada. The entire, huge, mind-boggling, wildly partisan, intensely ideological, grandly theatrical, game of chicken miraculously vanishes,” Robert Reich notes.27

 

Brooks: Blame the Tea Party

How did this disgraceful episode happen? The conservative Times columnist and Milton Friedman fan David Brooks calls the potentially epic “deal” Boehner rejected “the mother of all no-brainers… If the Republican Party were a normal party,” Brooks argues, “it would take advantage of this amazing moment.” It would “seize the opportunity to put the country on a sound fiscal footing.”  Like many in the media and political classes, Brooks blames the Tea Party. “Over the past few years,” Brooks writes, the Republican Party “has been infected by a faction that is more of a psychological protest than a practical, governing alternative. The members of this movement do not accept the logic of compromise, no matter how sweet the terms. …If you ask them to raise taxes by an inch to cut government by a yard, they will…say no…The members of this movement talk blandly of default and are willing to stain their nation’s honor.” Brooks thinks the G.O.P., once “a normal conservative party” has been excessively influenced by “an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.” Though he doesn’t actually say so, this “protest movement” Brooks references is of course “the Tea Party,” formally unveiled in February of 2009.[28]

But along with his failure to understand the need for government stimulus amid the current slump, Brooks is missing the real and bigger picture. The Republican Party couldn’t care less about “putting the country on a sound fiscal footing.” Part of its ultra-rejectionism, no doubt, is all-too sadly normal hyper-partisanship of a modern G.O.P. that simply “does not accept the legitimacy of a Democratic presidency – any Democratic presidency. As a result,” Krugman explains, “Republicans are automatically against anything the president wants, “even if that president advances something their party supported in the past (Obama’s health reform measure is a perfect case in point).[29]The Republicans quite normally want Obama to fail in 2012 and to place one of their own in the White House. (U.S. Senate Minority Leader Mitch McConnell has explicitly stated more than once that the Republicans’ top priority is to make Obama a one-term president[30] – a rather brazen thing for him to announce as the country struggled with its worst economic crisis in 70 years). They therefore wish to deny him the appearance of bold leadership and of having reached out across ideological barriers to shed his (false) identity as a “big government liberal” to win the strategically significant Independents and moderate votes that were so critical to his 2008 victory.

 

“Starve the Beast”

Partisan goals aside, the Republican Party’s official goal of “deficit reduction” is cover for its deeper, ideologically driven, and arch-plutocratic agenda. It doesn’t matter how far right the Democrats tilt in a rightward direction. The Republicans want nothing less than complete destruction of the last remnants of the liberal state. Their proclaimed concern for sound public finance and economic expansion are smoke and mirrors disguising their deeper political agenda. They are driven not by serious concerns for fiscal health but rather by the desire to wage hard-right ideological warfare, demolish social welfare programs, smash workers’ organizations, concentrate political power, and advance the interests of their big money backers. As the Times’ former liberal Sunday columnist Frank Rich explained while G.O.P. legislators threatened to cause a government shutdown last February, the Republicans’ proclaimed concern for sound public finance and economic expansion is smoke and mirrors. They are driven not by serious concerns for fiscal health but rather by the desire to wage hard-right ideological warfare, demolish social welfare programs, smash workers’ organizations, concentrate political power, and advance interests of their big money backers. The Republicans’ “real goal,” Rich noted. “is to reward the G.O.P.’s wealthiest patrons by crippling what remains of organized labor, by wrecking the government agencies charged with regulating and policing corporations, and, as always, by rewarding the wealthiest with more tax breaks” The leading corporate Tea Party Republican backer Koch Industries (owned by Charles and David Koch), Rich noted, stood to profit handsomely from the Republicans’ budget bill last February, which promised to reduce funding for the Environmental Protection Agency (EPA) and to prohibit the EPA from regulating greenhouse gasses. “The dollars that will be saved,” Rich observed, “are minute in terms of the federal deficit, but the payoff to Koch interests from a weakened E.P.A. is priceless.”  In a similar vein, the newly Republican-controlled House’s proposal to reduce spending for the Securities and Exchange Commission and the Commodities Futures Trading Commission (tasked with regulating the complex Wall Street derivatives that fueled the 2008 financial crisis) promised minimal deficit-reduction but a significant bottom-line boon for the financial elite.31

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