Saturday, July 23, 2011

On the brink

The scenario forecast by a Congressional staffer whose interview I linked near the end of last week's post seems to be coming true. The House Republicans have become more and more detached from reality and have refused to let their Speaker agree to any tax increases as part of a compromise. Nor does it seem at all likely that they will accept the McConnell plan to allow President Obama to raise the debt ceiling for the next 18 months while they scream helplessly from the sidelines. Unable to get what they want--massive spending cuts without any tax increases--they seem likely to force the United States into default. In an interesting generational milestone, Silent George Will in yesterday's Washington Post praised the Tea Party to the skies as a transformative, revolutionary force in American politics, while begging their handmaidens in Congress to compromise now, hold off until the next election, and complete their miraculous transformation of the country under a Republican President. Will's conversion to lunacy is certainly remarkable, but he was probably trying to head of catastrophe in the only way he could think of. It may not be necessary to actually reach default, simply because the news of the weekend may be enough to send world markets into a gigantic tailspin on Monday. If not, the tailspin will be delayed until we pass the August 2 deadline. I tend to assume that the tailspin will not produce a repeat of 2008, since the balance sheets of financial institutions are now accepted as sound, and that it will be corrected when some kind of a deal is struck within another week. But I cannot be sure of that. Meanwhile, it is clear that the right wing has unleashed a new propaganda offensive in cyberspace. Various indicators show that the circulation of the fraudulent email attributed to me comparing Obama to Hitler is spiking again. It will surely spike yet again a year from this fall.

The Obama Administration has essentially been the third Clinton Administration, and it seems to be counting on a replay of 1995-6, when the brief government shutdown saved the Clinton presidency and led to his re-election. President Obama has indeed positioned himself as the rational, mature, neutral elder statesman in the crisis, and he has won some points in public opinion surveys as a result. Yet there remains one overwhelming difference between 1996 and 2011. In 1996 we were in the early stages of an economic expansion that lasted the whole of the Clinton presidency. In 2011 we are sunk in something very like a depression and there is no sign of a real recovery. And I am increasingly fearful that that will do the Obama Administration in.
This table, from today's New York Times, tells a terrifying story. (For some reason it will not upload.)

It has been a fantasy both of liberals and political consultants like James Carville that Obama won in 2008 because of a profound demographic shift that would keep the Democrats in power for a long time. The new Millennial generation is very liberal socially and, they thought, politically. It gave Obama his biggest majority. But it turns out that their loyalty--surprise, surprise--depended on his response to the economic crisis, and that response has failed to reverse the economic decline. He has offered just as little way out of our crisis as Herbert Hoover, and it seems increasingly likely that he may pay the ultimate price for that no matter who the Republican candidate is.

Even in the best case--a deal, without a market crash--the country will continue going backwards. We need more spending and more taxes; we will get less of each. President Obama does in fact have one more card he could play. After the ceiling is raised--after, that is, it is raised beyond the next election--he could announce that he will not sign any bill extending the Bush tax cuts further. We need more revenue, he could say--perfectly truthfully--and this is evidently the only way to get it. That would be good policy and conceivably, good politics. Everything we have seen about him so far, however, suggests that that will not happen.

Welcome to the new Gilded Age. I'll have another post tomorrow.

11 comments:

Ed said...

The Obama administration is not the third Clinton administration. Democrats decide that when they selected Obama over Hillary Clinton. Nor is it the third Bush term, voters decided that when they elected Obama over the Republican candidate.

Except that it is both.

Anonymous said...

The current make up of the Congress is the result of the November, 2010 election. Most of the members
were voted into power by voters disagreeing with your particular philosophy of Tax and Spend. Such
members are doing EXACTLY what their constituents
elected them to do.

Learn to live with it.

The time of Tax and Spenders has passed.

Perhaps you will understand some day that, as the
current president had remarked:"Elections have
consequences."

Anonymous said...

Look, it's very important to keep something in mind: Obama is AT LEAST as responsible for this latest crisis as the Republican jacobins. He made this crisis INEVITABLE when he capitulated to them at year's end, over extending the Bush tax cuts. The reduction in federal revenues guaranteed that budget agreements would be death battles. He confirmed (again!) that he's a coward and an opportunist -- thereby inviting further bullying. Perhaps most damning, the Dems still had a majority at the end of 2010. What kept them from raising the "debt ceiling" by a generous amount then? Note also that Obama's "statesman" posture is constructed ENTIRELY around gutting central institutions of the welfare state, institutions that the Democratic Party used to be justifiably proud of.

I'm sorry, but it's simply pointless to cluck about how mean and awful Republicans are. Yes, the GOP is dominated by batshit crazy fanatics. By now, that has been a truism for pretty much all my adult life. They're not doing anything that Lee Atwater wouldn't recognize. The Dems do not deserve any sympathy or loyalty for being outmaneuvered so consistently and easily. At best they're useless. More and more, though, I believe they're actually complicit. You don't blame a mad dogs for being rabid. You blame the moron who insists on treating it like a pet, and taking it out in town without a leash.

So I cannot see a second Obama term as desirable in any sense. If Dems rally around him simply because he wears their logo, they may as well fold up altogether. Hell, they may as well run Bush the Lesser as Obama....

I think there's only one sensible tactic for left/liberals: Register as a Republican, and vote for Romney in your state primary. First, unusually for contemporary Republican, Romney's not a sadistic lunatic. He's a completely uninspiring, plastic and opportunistic center-rightist, i.e., totally indistinguishable from Hope'n'Change. Indeed, I suspect he'd actually be **better** from a standard Dem perspective: I don't think he'd be able to gut Social Security quite so easily, and I can't see Romney stumbling into the idiotic Libya adventure.
-- sglover

Paul Coonan said...

The real reason the GOP will not budge is not being mentioned by the mainstream media nor will Obama discuss it and in fact he pretends to be confused about it.

The GOP has a bill ready to be signed by Obama, where the Gang of 6 is nothing but a rough draft. The bottom line, the GOP wants a long overdue amendment to the Constitution to force the federal government by law to balance the budget. The dems do not want that collar. That is am empire killer.

The dem's GO6 'propasal' is nothing but Reaganomics repackaged, where back then, the new taxes came, and the cuts never did. The GO6 proposal is raise taxes now and make cuts 'later' or at least 'work on them.'

Savings over '10 years' is meaningless when the budget is decided on annually for the following year without oversight such as a balanced budget amendment.

Without an amendment, in the words you have used many times, it will only be history repeating itself.

There won't be any default as the scaremongering suggests. That could only happen if the physical choice to not write a check happens. With $200 billion a month in 'revenue' every month, there is plenty money where the interest on the debt alone is $20 billion.

The only thing that could potentially stop if the the ceiling were to not be raised is the expansion of the American Empire. Would that be so bad? Supporting 900+ US bases in 130 countries, there is plenty to be cut there alone.

Anonymous said...

David: I am pleased that you have finally acknowledged that Obama is more or less a third Clinton administration; I would say more Herbert Hoover with a tan, but why quibble?

As a social democrat of the old school - a very rare breed in America today - I am horrified by the general Obama program, since it's the same old thing with a patina of pregressivism and very little substance. The Republicans have successfully shifted the socio-economic argument profoundly to the Right in the last 30 years with a lot of help from Democrats, and Obama is not going to change that.

Sure, Barry did his little temper tantrum on Friday night - it was beneath him and the office - but we will be waiting forever if we expect Obama to actually be the progressive we wanted him to be.

He is nothing of the sort. He is a typical late Boomer/early X-er careerist with a bit of soft racialism for, ahem, color. About the latter, some on the Right were sadly correct: he is much more concerned with maintaining his semi-black credibility than actually doing anything for working people of any color. The case of the Rev Wright ought to have been instructive about Obama's loyalty to anyone but himself and his ambition. And anyone who read his two (!) autobiographies ought to have noticed a degree of self-absorption shocking even in the political class.

Obama wanted to be the canvas anyone seeking economic justice, after a generation of regression for working people, could paint there fantasies on, and he succeeded marvellously. Actually as President, less so. He cannot pull off that same sleight of hand again in 2012, and a lot of very unhappy under-30s have seen through the mirage.

Moreover, Obama has demonstrated the essential bankrupcy of the Democratic Party, which is just as beholden to the banksters as the GOPs. Beneath a patina of identity politics which is of course grating to working white Americans - still the biggest group in the electorate, by far - is the same pro-Wall Street cadre you get with either party.

Small wonder that working whites, who voted for Obama in record numbers in 2008, actually buying the Hope and Change BS, are turning away and will not come back. If you're gonna get screwed by the banksters, you might as well get screwed by people who at least look like you, and don't constantly make you feel bad about being white and heterosexual.

This script writes itself ... best we can hope for is a non-insane GOP nominee in 2012, since barring a truly deus ex machina event, Barry Soetero is done.

I'm glad you've seen the light, David, why did it take someone of your profound intellect and historical sense to get it?

Anonymous said...

“As I read the Constitution, the Congress writes the
laws and you get to decide what you want to sign,”

Boehner said, recounting what he told the president,
according to two sources.

http://www.politico.com/news/stories/0711/59718.
html

Anonymous said...

If in this fragile time Social Security cheques are even slightly delayed , the vast majority of Americans will blame the GOP and the Tea Party . At the same time the Rupert Murdoch scandal could not come at a better time to generally discredit the main apologists for the GOP's current tactics.
Alohamac

Anonymous said...

Your analysis that Obama looks like the rational elder statesmen in this is bizarre to say the least. If anything he looks completely lost and the polls reflect it. While I would agree with your comments about the Republicans you seem to think the Democrats offer some kind of enlightenment panacea but just coming up short politically. More precisely they are now demonstrating their inability to actually govern and accomplish anything beyond university slogans.

Anonymous said...

I absolutely disagree with Alohamac.

The GOP Congress is the only body that has made
ANY proposals towards the resolution of the debt
ceiling.

Neither the Democratic led Senate, nor the White
House have a SINGLE proposal to their name. All
they have to show is the REJECTION of whatever
the Congress has proposed/passed.

It is quite clear who will be blamed if the debt
ceiling issue is not resolved on time.

Anonymous said...

Even Soros is doing his best to avoid regulation
and increase the number of unemployed, cutting
off 200 employees.

"The decision comes as the Obama administration
has been taking steps to bring the secretive hedge
fund industry into the regulatory fold. Soros Fund
Management will become a so-called family office,
defined as an entity managing an individual family’s
money. The move will enable it to avoid impending
hedge fund regulations like registration, according
to a letter the fund sent to investors on Monday."

"When it transitions into a family office, the
operation, which now has more than 200 employees
and 100 investment professionals, will continue to
employ some 100 people. In the letter to investors,
the firm also said that Keith Anderson, chief
investment officer at Soros since 2008, would be
leaving to seek other opportunities."

http://dealbook.nytimes.com/2011/07/26/soros
-to-close-fund-to-outsiders/

Gerald Meaders said...

Professor

Many thanks for this reality check.

My thoughts veer into related issues, when issues like 'debt ceiling' are broached.

I prefer not to clutter your site; or detract from a theme; for those interested, see my site.

All the best,
GM