The middle class is shrinking. Those in power have run up enormous debts on public credit while shoveling most of the money into private pockets. The corporations that have benefitted from this borrowing binge, meanwhile, leverage the global trade system to transfer their profits beyond the reach of national governments.

Meanwhile, we have been told lies by Democrats and by Republicans, divided into artificial camps and led into debates that are either irrelevant or so dramatically scripted that we fail to realize every choice leads to the same result: the dismantling of the social framework that defined and sustained the opportunity of the last century. National mobilization of resources has given way to radical individualism under a narrative that, in the wealthiest nation in the world, we must always expect less.

In this tumultuous time, we search for a way forward - a new Square Deal for the American people.

Sunday, August 7, 2011

The Audacity of No

Last week, the two great political parties of the United States came together to adopt a bill that raised the so-called "debt ceiling," the statutory limit imposed a century ago by Congress to cap how much the country could borrow.

Throughout its 94-year history, the debt limit has been noteworthy for its complete uselessness as a control.  It has been raised 106 times since 1940.  Ronald Reagan presided over 18 separate hikes to U.S. borrowing authority over his eight-year presidency; George W. Bush oversaw 7 increases.  In recent years, the votes have become opportunities for partisan grandstanding, with politically vulnerable members voting against the inevitable as a token gesture to ease their reelection campaigns.

This time was very different.  Having endured a damaging battle with Republicans just seven months ago in which an extention of unemployment benefits was tied to an extension of the 2001 tax cuts of the Bush administration, Barack Obama inexplicably opted to leave the debt limit out of that vote, intoning instead a claim that Republicans would do the responsible thing and approve a debt-limit increase when the time came.  They did not.

Months ago, the Republican leadership staked out a position that any increase in the debt ceiling would come only with deeper cuts to spending.  The President staked out his own position that mounting debt called for increased revenue.  Negotiations got underway.

They were on, then off, then on.  Then off.  The President was negotiating with John Boehner, Speaker of the House.  But then Eric Cantor, the House Majority Leader, made his own demands.  He stormed out of talks.  Weeks passed.

The President remained resolute--about getting something done.  What that "something" was proved surprisingly malleable.  Instead of tax hikes, we would eliminate loopholes for corporate jets.  No deal; anything that restricted deductions was a "job-killer."  We would enact sweeping cuts to Medicare and Social Security as part of a $4 trillion budget cut over ten years, with just $1 trillion in new revenues.  No deal; anything that added revenue was a "job-killer."

Boehner was back to center-stage.  He offered, perhaps, $800 billion in revenues.  The President, perhaps, wanted $1.2 trillion.  We can't know, because the talks were private.  They always are.

The Speaker walked out.  The click ticked.  Markets started to get nervous.  Tea Party leaders had asserted months earlier that there would be no default; the United States had ample tax revenue to cover 56% of all obligations, well beyond the amount required for interest payments.  They were right; in fact, there would be enough to pay the interest, send out Social Security checks, pay the soldiers, and even fund most Medicare reimbursements.  The rest of it, the other 44¢ of every dollar, would go unpaid, but what of it?  That was just the wasteful bloat of an inflated government--ridiculous spending like salaries for the civil service, pensions for Federal retirees, transfer payments for unemployment and Medicaid, and the operations of eleven of the twelve departments of government.  That, and the money owed to Federal contractors.  The contractors could wait; the rest was just liberal handouts to lazy people anyway.

A bipartisan initiative was whispered.  Obama quickly praised the "Gang of Six;" support evaporated.  The Speaker introduced a very partisan bill and scheduled a vote; he was obliged to withdraw it on Thursday to move it further to the right as it became clear that the Tea Party would not back it.  A revised bill passed the Republican house on partisan lines; it died the same way in the Democratic Senate.

Underpinning it all was the Tea Party.  The freshmen Congressmen were unique among their fellows: elected by angry populists, they had little interest in a compromise that would only see them swept aside in 2012.  For many, reelection itself was not as important as doing what they came to do.

Obama had several times made the same claim, that he would rather be a good one-term President than a bad one who was.reelected.  Negotiations spanned the weekend.  The markets and the world watched and waited.

What might have been?

Even a month ago, polls were clear in showing support for the President's position.  The debt was a problem.  Spending cuts were needed; so were tax increases.  A majority indicated that they supported broad-based tax hikes, not just increases on the rates paid by the highest earners.

There would be enough to pay the interest.  There would be no default, and as the President, it would be in his power to prioritize the spending by directing his Secretary of the Treasury who would have to wait.  He could minimize the pain; he could also show the American people in no uncertain terms what it would really mean to cut 44¢ of every dollar from government spending and adopt a "live within your means/no new taxes" position.

The Tea Party had written a narrative that government was only waste.  Mere days would expose that as a lie.  Obama could challenge that narrative, rewrite it and break the grip that this handful of idealogues was holding on power.

On Sunday, a deal was announced.  Republicans would get their spending cuts, more than $2 trillion.  They would get their vote on a specially written Balanced Budget Amendment, one that mandated balance and created an unprecedented "super majority" requirement for any increase in taxes.  There would be no consequence should the amendment fail, but Republicans would get two additional opportunities to vote on spending cuts based on incremental increases in the debt limit.  It was an amazing bounty for a party whose own usual backers had in recent days begun questioning their sanity as opportunities slipped by.

The President's take was no less breathtaking: coming in with all of the cards, he got a three-part process to keep spending money, an ability to define his Presidency solely in terms of borrowing, and a convoluted committee that would yet again study how to cut the budget.  If a deal were not reached, automatic spending cuts would allow him the distinction of slashing the Department of Defense during time of war.  There were no tax hikes; corporate jets kept their special loopholes.

The deal was immediately recognizable after three years as the outcome of an "Obama Compromise," the sort of abject capitulation that was matched only by the President's adoption of new criteria so that he could call it a success.

To be sure, many Democrats deserted the President.  In the House, the Monday-night vote was 269-161.  The Senate vote, held early Tuesday morning, was 74-26.  A fair number of Tea Party Republicans also voted against the deal, outwardly bothered that it did not cut more.

After signing the bill, thus returning the world's largest economy to a financial status quo under which it has existed for ten decades, President Obama gave remarks to the press and the American people.  He spoke of compromise and disappointment on all sides.  He affirmed that he was committed to new revenues, which were "only fair."  He sought to move on.

It is impossible to misunderstand what happened here: with control of less than half of the caucus, the Tea Party directed the Republican Party, and with only the lower house of Congress, the Republicans directed the country.  Digging in over a manufactured crisis, one in which the majority of Americans clearly opposed their agenda, Republicans forced the President to surrender.  Again.

From Guantanamo to the Public Option, the Bush tax cuts to the budget, Barack Obama has consistently failed to hold his ground.  He has staked out reasonable positions to be overcome by unreasonable people, ultimately "compromising" on deals that are mere giveaways.  He is following a narrative written for him by people who publicly brand him as a Communist, foreigner, and traitor.

What can possibly lie ahead for the President?  Certainly, there will be no director for the Consumer Financial Protection Bureau; he jettisoned Elizabeth Warren for nothing.  When unemployment benefits run out, or the next budget comes up for debate -- or even when the highway funding bill comes up next month, carrying with it a need to renew the 18.4-cent Federal gas tax -- why would anyone even listen to what he "insists" be done?

August 3, 2011 may well have marked the start of a 17-month lame duck term, the longest in U.S. history.

1 comment:

  1. Have to disagree with you here - you say surrendered - I say lived with the political reality that the minority party, if sufficiently distributed in the right locations can spike the political process and not suffer for it because 1) American public generally doesn't give a damn about political process debates; 2) has a fairly complicit media coverage, that at best is simply he-said/she-said, and at worst actively working against due to corporate influence; 3) the minority party says that government doesn't work, makes government not work, and gets rewarded for it.

    The Republican purity debates has similarly streamlined the party - if you don't toe the line you get kicked out. Which means for Republicans who want to get re-elected, they toe the line. It has been amazingly to watch the changes that happen the minute that a Republican retires.

    Yesterday, I saw someone commenting that John Kyl of all people might be an ally on the "Super Committee" because he's retiring and thus doesn't give a damn anymore.

    The alternate to Obama surrenders is the destruction of the United States. I know that you were willing to go through that as the lesson for the American people that electing Republicans has consequences; but Obama obviously wasn't.

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