Extremists tried to destroy the US, now it’s the moderates turn

It may have cost the US economy $24bn, as Standard & Poor’s calculated the cost of the just-concluded government shutdown, but that 0.6 percent loss in GDP growth due to Tea Party extremists pales in comparison to the damage that more “moderate” politicians may do over the long run, if they’re able to strike deals without Tea Party intransigence to derail them.

Austerity policies have already cost the weak recovery at least 3 million jobs, according to the Economic Policy Institute, and long-term growth will continue being crippled if so-called “moderate” politics continues to prevail.

Chief among those moderates is President Obama, whose obsession with striking a “grand bargain” that would slash Social Security and Medicare benefits has been an economic idée fixe throughout his entire presidency, as signalled in pre-inauguration coverage in the Washington Post (here and here). Ironically, he could have a willing partner in House Speaker John Boehner, if Boehner’s fruitless fight over the past half-a-month has gained him enough support within his caucus to deliver the votes he couldn’t deliver the first time he and Obama tried to do it.

If the biggest conceptual mistake in covering the shutdown was a form of the false balance fallacy – treating both sides as equally to blame – the biggest mistake in the aftermath is another fallacy: a false dichotomy of treating Tea Party extremism and “adult bipartisanship” as the only, mutually-exclusive alternatives. 

Of course it’s true that the Tea Party has been extremely damaging to the US. But the “adult” alternative to it offered by the GOP establishment and President Obama alike, would also be extremely damaging as well. It’s already crippled the recovery, reducing the public sector workforce by over 700,000 jobs, when public sector employment has grown substantially in every previous recession. Going forward, it would severely cut back social spending in what’s already the smallest welfare state in the Western world, impoverishing a middle class that’s already more embattled than it has been since World War II, and in turn eroding consumer demand that’s the primary stimulus for economic growth.

Worse yet, the damage would impact the entire global community as the US’ many trading partners would all suffer from eroding market demand as well.

Political dichotomy

The danger of “adult bipartisanship” that lies ahead can clearly be seen in the statements of the budget committee chairs of the House and Senate on October 17. On the one hand, Democratic Senator Patty Murray said, “Chairman Ryan knows that I’m not going to vote for his budget. I know that he’s not going to vote for mine. We’re going to find the common ground between our two budgets that we both can vote on, and that’s out goal.” This was a quintessential articulation of the “adult bipartisan” outlook, which contained not a hint of Murray’s own policy outlook. It was all about the process of compromise. There was not a hint of the policy substance involved.

On the other hand, Republican Congressman Paul Ryan said, “I want to have a budget agreement that gets this debt and deficit under control, that does right by future generations, and helps us grow the economy, and we’re going to try to find if we can get a budget agreement to do that.” Ryan’s statement was as consciously and consistently framed in terms of his policy rhetoric as Murray’s was devoid of it. This is entirely typical of how Democrats and Republicans routinely present themselves and their positions.

Of course, Ryan’s policy rhetoric was profoundly misleading. The US’ debt and deficit had been relatively well-controlled for 30-odd years after the end of World War II, up until the time that Ronald Reagan took office. From Truman through Carter, the size of the debt relative to the economy had fallen in every 4-year presidential term but one, starting at 117.5 percent and falling to 32.5 percent. Under Reagan, and his massive top-heavy tax cuts, that trend sharply reversed itself, with ratio rising to 53 percent when Reagan left office, and 66 percent when Bush left office four years later. When Clinton came in and raised taxes, he did so without any Republican votes. It would destroy the economy, conservatives said.

But it didn’t. Clinton left office with the ratio cut down to 56 percent – and George W Bush promptly got his tax cuts passed, plunging the nation back into debt, and leaving office with the ratio higher than ever at 84 percent.

It’s no surprise that the ratio has risen even more under President Obama, given the disastrous economy he inherited, and the miniscule size of the tax increases he’s passed – not to mention the tax cuts he’s also passed. Even so, the record is quite clear: Five out of seven 4-year terms in which the debt/GDP ratio has increased since World War II, have been under conservative Republican presidents, zero out of the nine terms in which it has decreased have been under conservative Republicans. Whatever their image, whatever talk they talk, conservative Republicans are the biggest deficit spenders on the planet.

The ‘flim-flam’ man

And what about Paul Ryan, specifically? Most recently, he voted with the Tea Party extremists to destroy the economy by not raising the debt ceiling, thus sending the nation into default. That ought to mean he doesn’t get to turn around and play “adult bipartisan”, but the rules don’t apply when you’re a Republican. President Obama knows this. He once told supporters, “When Paul Ryan says his priority is to make sure, you know, he’s just being America’s accountant, trying to be responsible …. This is the same guy who voted for two wars that were unpaid for, voted for the Bush tax cuts that were unpaid for, voted for the prescription drug bill that cost as much as my health care bill – but wasn’t paid for. So it’s not on the level.”

PolitiFact  fact-checked Obama, and determined that everything he said was true, except for the cost of the prescription drug bill, which was unpaid for, but only cost about two-thirds of the cost of Obama’s healthcare act. Unfortunately, Obama has not regularly been so blunt in public – and Ryan’s budget proposals for the future have been even less believable than his actual record in the past.

Ryan’s budget proposals began in 2010, when Nobel Prize-winner Paul Krugman famously described him as “The flimflam man“. There was so much deception, so many hidden surprises in Ryan’s budget it was challenging to know where to start. The massive tax cuts for the top 0.1 percent – an average of $1.7m a year? The new consumption tax on most goods and services, a measure that would increase taxes on about three-quarters of Americans – those with incomes between $20,000 and $200,000? The elimination of traditional Medicare, most of Medicaid, and all of the Children’s Health Insurance Program? The fact that the budget would not  balance until 2063 – even under Ryan’s own unsubstantiated assumptions? Or that, under more realistic assumptions, the debt/GDP ratio would still be 99 percent in 2080?

Fast forward to 2013, and of course Ryan can no longer wait till 2063 to balance the budget. He now promises to do it in 10 years – so you can only imagine how much more draconian his budget is. Yet, it’s still considered “serious” and “adult”, and Ryan still pretends to be driven only by the desire to reduce government debt and deficits.

And Obama, for one, is disturbingly in sync with Ryan, despite what he said above. Just before Obama’s inauguration in January 2009, the Washington Post ran a story, “Obama Pledges Entitlement Reform”,  which detailed “a wide-ranging 70-minute interview with Washington Post reporters and editors”, in which the president-elect endorsed efforts by congressional Republicans, and “the Blue Dog Coalition of fiscally conservative Democrats”, to cut Social Security and Medicare – and this in the depths of the deepest recession since the Great Recession, when all attention ought to be on stopping job losses and getting people back to work.

It was, as I argued, the exact opposite of what he had actually run on – a promise to increase the health and economic security of the American people. A USA Today/Gallup poll which found a majority saying that the following priorities were “very important” priorities for Obama’s first term:

• Ensure all children have health insurance coverage 73 percent
  
• Double the production of alternative energy 70 percent    
• Reduce healthcare costs for the typical American family by up to $2,500 per year 70 percent
  
• Enact a major spending program to strengthen the nation’s infrastructure  60 percent
  

A third way forward

Since that time, Obama has repeatedly tried to push his “grand bargain” forward, and ironically, Tea Party fanaticism has been one of the main reasons his efforts have been repeatedly derailed. Now that Reid and Pelosi have once again waged an epic battle to beat back Tea Party extremism, we have every reason to fear that Obama will once again return to his cherished goal of gutting the core legacies of Franklin Roosevelt and Lyndon Johnson.

After all, it’s the adult thing to do.

What would actually work is something else entirely, of course. As I described in November 2011, the House Progressive Caucus had produced a “People’s Budget” that would have eliminated deficits by 2021, more than 40 years faster than Ryan’s plan. It raised taxes on the wealthy – though still nowhere near the pre-Reagan levels – while cutting fossil fuel subsidies, taxing financial transactions, and investing in infrastructure. It represents a return to what’s worked for the US and the rest of the advanced economies for most of the past 60-odd years – a combination of regulated capitalism and the welfare state.

It does have some new features, specifically responding to the destructive role the financial sector played in creating the Great Recession. But the essential economic logic is confirmed by more than half-a-century of experience in dozens of the most broadly successful economies the world has ever known. Yet, it remains virtually ignored in the political discourse of the day.

Sometimes, adults just don’t know what they’re talking about. Usually, it has something to do with kids’ culture. This time, it has everything to do with their future.

Paul Rosenberg is the senior editor of Random Lengths News, a bi-weekly alternative community newspaper.