Destroying the Economy and the Democrats
Amid disappointing jobs numbers, the president's budget proposal gives away his party's crown jewels: their defense of Social Security and Medicare.
By Robert Kuttner
April 06, 2013 "Information Clearing House" -"The American Prospect" - Job creation slowed to just 88,000 in March, signaling a sluggish economy. And President Obama, with unerring timing, picked this moment to put out an authorized leak that he is willing to put Social Security and Medicare on the block as part of a grand budget bargain that will only slow the economy further.
Amid disappointing jobs numbers, the president's budget proposal gives away his party's crown jewels: their defense of Social Security and Medicare.
By Robert Kuttner
April 06, 2013 "Information Clearing House" -"The American Prospect" - Job creation slowed to just 88,000 in March, signaling a sluggish economy. And President Obama, with unerring timing, picked this moment to put out an authorized leak that he is willing to put Social Security and Medicare on the block as part of a grand budget bargain that will only slow the economy further.
The
deterioration in economic performance was all too predictable,
given the combined lead weights of the March 1 $85 billion of
budget cuts in the sequester and the January deal to raise
payroll taxes by about $120 billion. (The tax hike on working
people was almost double the much-hyped tax increase on the top
one percent, which totaled a little over $60 billion.)
Taken
together, these twin deflationary deals cut the deficit by
around $270 billion dollars this year. That’s close to two
percent of GDP. And according to the Congressional Budget
Office, this combined contractionary pressure will cut the 2013
year’s growth rate in half. So the slowdown in job creation is
just what you’d expect.
The grand
bargain that, for the moment, is mercifully eluding President
Obama and the Republicans, would apply the same sort of medicine
for nine more years, and with the same results—a
prolonged slowdown growth and jobs. Obama and the Republicans
are talking of a decade of cuts in the 3 to 4 trillion-dollar
range.
Has
everyone lost their minds? No, but the entire elite has been
influenced by the economic myths of the Robert Rubin-Pete
Peterson-Fix the Debt propagandists.
You can
understand Republicans wanting to crush government and hoping to
slow the recovery in a way that harms the Democrat in the 2014
midterm elections. But what is the president thinking?
Listen to
a “senior economic official,” as quoted in today’s New York
Times’s authoritative story revealing that the
administration will offer to cut Social Security (by the
backdoor method of reducing the cost of living adjustment via
the “chained” Consumer Price Index) and Medicare if the
Republicans will reciprocate with tax increases. “[T]he things
like C.P.I. that Republican leaders have pushed hard for will
only be accepted if Congressional Republicans are willing to do
more on revenues.”
According
to the Times story, the president has decided to pick
up where he left off with Speaker John Boehner and put the final
deal on the table, opening with big cuts in the two most popular
programs that voters count on Democrats to defend. Reporter
Jackie Calmes
tells us, “In a significant shift in fiscal strategy, Mr.
Obama on Wednesday will send a budget plan to Capitol Hill that
departs from the usual presidential wish list that Republicans
typically declare dead on arrival. Instead it will embody the
final compromise offer that he made to Speaker John A. Boehner
late last year.”
What could
possibly go wrong with this bold, new strategy? (Actually the
same strategy that has failed Obama since January 2009). Just
about everything.
First,
even if works, the ten-year grand bargain that results will
condemn the economy to a decade of low level depression.
Second,
the Republicans have a well-established history of taking the
White House final offer as the starting point. As any smart
negotiator knows, you don’t offer your final position in the
opening bid.
Last, the
strategy gives away the Democrats’ crown jewels—their defense of
Social Security and Medicare, which should not be part of a
budget deal in the first place. Now voters can conclude that
they can’t trust either party.
Is their
any silver lining? Maybe House Speaker Boehner, once again, will
save the president from himself by failing to deliver enough
Republicans for a tax increase. Maybe outraged rank and file
Democrats in the House and Senate will get energized and refuse
to support Obama’s proposed deal. And maybe the slowing of the
economy, after this year’s down-payment on a grand budget
bargain, will get Obama’s attention.
How much
evidence do we need that neither austerity nor appeasement is
smart strategy?
Robert
Kuttner is co-founder and co-editor of The American Prospect, as
well as a distinguished senior fellow of the think tank Demos.
He was a longtime columnist for Business Week and continues to
write columns in The Boston Globe. He is the author of
Obama's Challenge
and other books.
© 2013
The American Prospect
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