Wednesday, May 26, 2010

The Great Three-Way Deficit Con

It's bad enough that President Obama and the Democratic Congress are even considering the economically suicidal idea of cutting spending in a recession.

It's even worse that they are letting the financial vultures use that deficit hysteria as an excuse to realize their 75-year-old dream of destroying Social Security.

But it's absolutely inexcusable that in doing so, this majority Democratic administration will give repugs the political advantage they need to take over Congress in November.

Digby explains how the Democrats are going to destroy the economy and put repugs back in power for a generation at the same time:

If you've ever wondered if the sad truth about our ruling elite is that they are so myopic and cramped that they are intellectually stuck in a groove like one of those figurines in a cuckoo clock? Think no more. They are:

Over the past week, top White House officials have been floating a trial balloon for their strategy on the economy. At its core is a decision to put deficit reduction ahead of job creation.

The premise is that the bond markets and allied deficit hawks are demanding action to cut the budget, that Obama lacks the votes in the Senate for a serious jobs initiative, and that polls show voters care more about deficit reduction than about jobs.

So the plan, modeled closely on the work of the Peter G. Peterson foundation and the anticipated report of the president's own fiscal commission, is a deal that includes cuts in Social Security plus a new Value Added Tax (VAT), in order to get deep cuts in the deficit. As a sweetener to get Republicans to back the VAT, White House officials would cut the corporate income tax.

It just doesn't get any better than that does it? So, why do I think they are repeated themselves in a trancelike fashion? Well, everything is going exactly as it was ordained before the election:


Kuttner continues:

The plan is dubious economics and worse politics. You could hardly hand the Republicans a better gift for the fall election. Imagine the GOP TV spots, Fox talking points, and Wall Street Journal editorial: Obama Administration Has Secret Plan to Raise Your Taxes and Cut Your Social Security.

White House officials are working closely with the president's new fiscal commission in the hope that the bipartisan commissions final report will provide Republican cover for the deal. The commission, due to report by December 1, needs fourteen out of its eighteen members to make an official recommendation. One hope of the deficit hawks is that a super-majority report could steamroll a lame duck session of Congress to act quickly, pending a more Republican Congress in January.

Of the eighteen members, thirteen are fiscal conservatives. Only four are liberals -- Reps. Jan Schakowsky and Xavier Becerra, Sen. Dick Durban, and Andy Stern of the SEIU. A swing vote is Sen. Max Baucus, who is something of a deficit hawk, but defends Social Security and doesn't like automatic fiscal formulas that weaken his jurisdiction as Senate Finance Committee Chair.

Stepping back from the fiscal wonkery, this astonishing White House course is root canal economics as well as political suicide. If the unemployment rate is still close to 10 percent in November, Democrats in the House and Senate face a bloodbath. Yet Larry Summers has ruled out any new large jobs initiative before the election, according to several well placed sources. And if the White House is planning to hit the middle class with a double whammy of increased taxes through a VAT plus Social Security cuts, that's like handing the Republicans a loaded gun.

The GOP, please recall, came within a whisker of killing health reform because of the diversion of Medicare money. If any program is more sacred to older voters, swing voters, and the Democratic base, it's Social Security.

What can the smartest guys in the room be thinking?

He goes on the explain that our faith based best and brightest are convinced that they don't have the votes for anything but advancing the Republican agenda. (That whole "majority" thing? It is inoperative.)

The good news is that we can probably rely on the Republicans to save us:

Finally, it is wildly improbable as a political proposition to think that Republicans, either on the fiscal commission or in the Congress, will vote for a VAT. This version of a grand bargain has been promoted for years by Pete Peterson and Robert Rubin, and has now been embraced by Rubin's protege, budget director Peter Orszag. The fiscal conservatives who dominate the 18-member presidential commission hope to co-opt the commission's four liberals.

In the end Republican opposition to a VAT is likely to save the Democrat budget hawks from themselves. But along the way, this politically bizarre fantasy will do real damage -- by preventing the White House from embracing a strong recovery program, by frightening both Democratic base and swing voters, and by giving Republicans even more ammunition to use in November.

Read the whole article. Every word is important and it spells out the alternatives that a liberal administration could undertake to reduce the deficits, the first and most logical being to increase revenue by reducing unemployment and then taxing billionaires and corporations instead of cutting their taxes in dubious "grand bargains." This is going to be an epic battle and one that if we lose will end up directly hurting tens of millions of people.

The plans they envision for cutting social security are harsh, they aren't tweaks. Raising the retirement age is the least of it. The only way they can really make the kind of dent in the deficit our "bond vigilante" overlords insist upon without raising taxes, is to cut back hard on people who will be living on 30,000 a year or less in retirement. That's a hell of a legacy for the party of Franklin Roosevelt.

Zandar has a shorter version:

Here's what you can look forward to with a GOP Congress again, folks.

Q: Senator Gregg, is there a point, you think, when the government has to sort of end these ever-continuing (unemployment) claims?

Gregg: Yeah, right now. This week, however, we’re going to extend it again. And this has become counterproductive. We’re basically undermining the cyclical event. Because you’re out of the recession, you’re starting to see growth and you’re clearly going to dampen the capacity of that growth if you basically keep an economy that encourages people to, rather than go out and look for work, to stay on unemployment. Yes, it’s important to do that up to a certain level, but at some point you’ve got to acknowledge that we’re not Europe.

This is what I mean by "austerity measures are coming to the United States." They will be a certainty if the GOP regains control of Congress. And the Teabaggers are leading the way in cutting the net out from under everyone. This makes sense after all, as they tend to be rabidly conservative older, wealthier white Americans. They got theirs. They're coming for yours.

Call or write your members of Congress and tell them the quickest way to pay off the debt is with a trillion-dollar jobs bill that will restore the economy.

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