The Price of the Debt-Ceiling Deal
The Price of the Debt-Ceiling Deal
Nick Serpe: The Price of the Debt-Ceiling Deal
About three years into the Great Recession, the U.S. federal government has fully embraced the logic of austerity. For a brief moment?before the Simpson-Bowles deficit commission was announced, before the media lavished the Tea Party with attention, before the GOP took the House?it seemed that Keynesian stimulus, and a humane approach to alleviating economic suffering, would win out. But the 2009 stimulus shriveled before it even saw daylight, the Democratic government of 2009?2010 failed to take the boldest actions it could, and the sustained movement for economic justice of which leftists dream did not materialize.
Progressives rightly criticized the Simpson-Bowles proposal, the bipartisan deficit-reduction plan tossed around last year, not only for being the wrong medicine at the wrong time?austerity in the midst of an economic recession that had nothing to do with federal debt?but also for its regressive tax-policy suggestions and major cuts to social services. Compared to the deal that looks likely to pass in order to avoid federal default and resolve the debt-ceiling crisis?a crisis entirely manufactured by the Republican Party?the Simpson-Bowles plan looks more reasonable than it should. This new plan will bring in no new tax revenues; any hopes that the Bush-Obama tax cuts will actually expire in 2012 are just that: hopes. The cuts will be somewhat delayed, which is good, but they are steep, and more are promised down the road, whether by ?bipartisan? agreement (one can guess which side will win out in those discussions) or automatic ?trigger.?
The new economic growth figures for 2011, in a sick coincidence, emerged just as the deficit-slashing craze of the debt-ceiling fiasco was coming to a head. They aren?t good. Those who doubted a double dip in this recession are now less certain. We might be months away from once again hitting double-digit unemployment rates. The downward cycle in aggregate demand looks likely to spiral further. And yet we are cutting trillions in government spending, so that the Job Creators (who?ve so far been happy to use the cash they?ve received from their post-2008 tax breaks for anything but expanding payrolls) can get to all that job creating. A good number of economists still remind us that austerity is the opposite of what we need, but in government only the Congressional Progressive Caucus has articulated that view, and the producers of Sunday morning news programs aren?t exactly clamoring to feature its members on air.
The debt ceiling has been a costly distraction from what ails us. The GOP has succeeded in using it to further its Ayn-Randian social project?the dismantlement of the regulatory and welfare state and the upward redistribution of income?under the guise of responsibility in the face of profligacy and economic recovery in the face of government-induced stagnation. Probably the only way out of this would have been for the president, either by invoking the Fourteenth Amendment or by declaring his intent to execute faithfully budget bills already passed, to raise unilaterally the debt ceiling, without allowing Republican extortion. But while he seems perfectly content to wield the national security state like an absolute monarch?the electorate has no problem with that?Obama apparently refused to take on sole responsibility for averting the crisis on his own terms, either because of his constitutional scruples or his fear of being punished for it next November.
Without any real opposition from prominent Democrats (or at least from Obama) to the Republican terms of the debate, the public has more or less accepted them, so long as the Republicans? uttered those terms in the most dissembling and poll-engineered fashion. Some say that the American People, for whom everyone now speaks in general, suffer from cognitive dissonance: they uphold ideals that are libertarian while supporting interventions in the economy and social safety nets that are anything but. Few living remember a time when large swathes of the elderly lived in penury, or when they couldn?t count on federal food inspectors to keep them safe. But the popular sentiment that the government hasn?t been looking out for the general interest, and that our politicians have been bought, is far from wrong.
According to Robert Reich, some of the far-from benign ratings agencies have suggested that the massive cuts promised last night might still not be enough to avert a downgrade in the U.S. credit rating. It?s hard to say what the effects of that would be; other countries have obviously defaulted in recent decades, but given the role the dollar plays in the international financial system, there might be some American exceptionalism at work, most likely for the worse. But we don?t need to speculate about the more predictable outcomes of the cuts that staved off that downgrade for the time being: greater unemployment, continued private-sector reluctance to hire, and the postponement of the radical rescue and recovery policies that we need to climb out of the hole we?re in.
When the Republicans took the House in 2010, progressives? best hope was that the Democrats, still in control of the White House and Senate, could at least prevent the GOP smashers from wreaking havoc on a fragile economic recovery. Nothing productive or good would come out of Washington for two years, but perhaps the economy would still begin to bounce back. Things haven?t turned out so well. The economy appears in decline once again, and the Republicans have won their battle to cut down government. If in 2012 all the stars align and the Democrats take back the House, recapture the White House, and get sixty Senate seats, perhaps they can begin to repair the damage. But in the throes of this austerity-crazed moment, it should be clear that the entire framework for understanding our economic crisis needs to change, too, if we?re to regain the urgency of 2009.
But more than that, the institutions of American government need to be reworked, as authors like Eric Alterman have been arguing, if we?re to achieve the kind of practical changes that we desperately need, and if the American People are ever to believe in the beneficial power of government again. This ideological and practical project will be long in the offing, and it will take a lot more than a good election year. Without saying that it has to get worse before it gets better, we can at least say that there are more bad times ahead. But there?s no sense in mourning a country not yet lost, even when organizing is much easier said than done.
