Austerity

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Revising History’s First Draft: Debt Ceiling Edition

by Elias Isquith on May 18, 2013

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Journalism is the first draft of history. Or something.

OK, well, if that’s true — and despite the rather widespread antipathy most folks have toward The Media, I believe it is — then it’s pretty important that, as much as possible, we get that first draft right. This recent medium-picture piece from WaPo, on President Obama’s relationship to executive power, does not do that:

Some liberals were frustrated with Obama’s unwillingness to use his power in 2011 at the height of the showdown between the White House and GOP lawmakers over raising the debt ceiling. House Republicans were threatening to block the borrowing limit increase unless Obama agreed to major spending cuts to Medicare and Social Security.

Many Democrats believed Obama should have used his executive authority to lift the debt ceiling — a move advocates argued was legal under the 14th Amendment. Former president Bill Clinton said at the time he would have invoked that authority and “force the courts to stop me.”

Even the threat of invoking the 14th Amendment would have neutralized the GOP’s leverage, many felt. And yet Obama, believing such a move to be unconstitutional, ruled out the idea. White House aides said it was not only illegal, but also impractical for the president to take such a drastic step.

I’ve written about this before, and it’s something Digby also harps on, but it’s just not true, the idea that Obama’s timidity is the reason the summer of 2011 descended as it did. For it to be true, we’d have to believe that the president didn’t really want a Grand Bargain; and we’d have to do this in the face of basically all available evidence. Or the fact that he’s trying to get one still!

On the contrary, Obama made a conscious decision during that summer to enter into Grand Bargain negotiations, choosing to use the debt ceiling as a kind of motivator, the idea being that global financial chaos would put the Fear of God into recalcitrants on both sides. Why he wanted a Grand Bargain — whether it was out of political cravenness, principled deficit hysteria, or a combination of both — only he can really say.

But make no mistake: he wanted one. And he was fine with using the debt ceiling to get it.

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There Is No Politics of Austerity

by Elias Isquith on April 29, 2013

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I don’t mean to turn this blog into Shit My Krugman Says, but this, on the underlying politics of austerity, is just too on-the-mark to ignore:

[T]he anti-Keynesian position is, in essence, political. It’s driven by hostility to active government policy and, in many cases, hostility to any intellectual approach that might make room for government policy. Too many influential people just don’t want to believe that we’re facing the kind of economic crisis we are actually facing.

I think you can extend it further. Because the other side, the folks Krugman is lumping together as “pro-Keynesian,” are trumpeting policies they’d support even if the economy was better. (I’m excluding economists from this latter group; for them, the term Keynesian holds a very specific meaning, one removed from partisan politics.) I’d think the idea of giving money to the poor was a good one even if unemployment were at 4 percent. And I’d want to raise taxes on capital gains and sundry financial transactions even if quarterly growth were robust instead of middling.

As a result of my thinking this way, I don’t take seriously any talk of “austerity politics,” as if it were something fundamentally new or distinct from politics during times of plenty. It’s not — not really. Liberals wanted more-active government during the years of bubble-fueled growth, and they still do now. Conservatives wanted low taxes and fewer government services when incomes were rising, and they still do now.

The economy contracts and grows. Individual politicians ascend and fall. The surroundings and the players change. But the song remains the same.

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Class War at the New York Times!

by Elias Isquith on April 27, 2013

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So Paul Krugman got a little pink in his latest column:

The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.

Does a continuing depression actually serve the interests of the wealthy? That’s doubtful, since a booming economy is generally good for almost everyone. What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.

And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?

I hope not; I’d like to believe that ideas and evidence matter, at least a bit. Otherwise, what am I doing with my life? But I guess we’ll see just how much cynicism is justified.

So there you have it, the New York Times, proclaiming class struggle across the land!

It’s definitely a little weird seeing this in the staid, bourgeois pages of the Grey Lady; her audience tends to be on the wealthier side, after all. But inequality has gotten so extreme that even a goodly chunk of the New York Times’ audience can justifiably feel that they’re on the outside, looking in on — or rather up at — the economic party being enjoyed by the select few.

Earlier in the column, Krugman cites a new paper by Bartels, Seawright, and Page which found that the wealthy’s policy preferences diverge considerably from everyone else’s. They tend to care first and foremost about the deficit — and their preferred solution is cuts, cuts, and cuts; to Medicare, to Social Security, to Medicaid. It’d seem odd if it weren’t mirrored in every way by the national dialogue, where the wealthy’s priorities masquerade as the national interest.

If this doesn’t sound like many people you know — or if you yourself are lucky enough to be financially secure, but still don’t particularly yearn for the return of social contract circa 1896 — it’s probably because you think you’re what the authors would consider “wealthy.” But when they say wealthy, they mean wealthy: the average wealth for those the study categorized as wealthy? Fourteen-million dollars.

And that, friends, is how you get the New York Times to sound like a gateway drug to Pravda. (Except, y’know, not really.)

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What Shared Sacrifice Looks Like

by Elias Isquith on April 26, 2013

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If we’re being jaded realists, this is totally believable. But if we pretend we still believe in the whole equality-fairness-democracy thing, this is unbelievable:

In a quick and unanticipated session on Thursday night, the U.S. Senate approved a resolution that would allow the Federal Aviation Administration budget flexibility to stop furloughing air traffic controllers.

The measure, approved by unanimous consent, came just days after forced unpaid leaves for controllers began, delaying thousands of flights — 876 flights were delayed on Wednesday alone, the FAA said. Titled the “Reducing Flight Delays Act of 2013,” the resolution provides the Secretary of Transportation the power to transfer up to $253 million in pre-existing funds to “prevent reduced operations and staffing” at the FAA.

Senate Republican aides were quick to note that the resolution would not change the $637 million reduction in the FAA budget mandated by sequestration. Instead, it would allow for the cuts to come from programs other than the operations account, 70 percent of which is devoted to salaries. One top aide said airport improvement program funds would likely be used to stop the furloughs. The bill only says that the money will come from “grants-in-aid for airports.”

The bill still has to pass the House of Representatives, though it’s likely that chamber will approve it. A House vote could come as soon as Friday. After that, the measure will go back to the Senate for approval (for procedural purposes) and then to the president’s desk for his signature.

Needless to say, this is quick fix for the FAA is occurring in large part because it’s elites who are feeling the “pain.” At least that’s what common sense — and political science — would say. As Larry Bartels has found, Congress basically only listens to economic elites; they couldn’t care less what working or lower class folks think. So, boom, a bill is rushing its way to the president with more urgency and speed than any other I can think of during the Obama presidency. Seriously. Can’t think of one.

Next time you hear a big pro-austerity type (or the president!) go on about how the pain will be widespread and shared by all, that the wealthy and elite will have to sacrifice just the same as the rest, keep this in mind as something of a case-study. There will be pain, sure; but it won’t be for everyone. Not for long, at least.

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The Other Half of New York City

by Elias Isquith on April 22, 2013

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For anyone living in New York City, or even vaguely familiar with the city and its mayor, this is not surprising news. But it’s still unwelcome:

The rise in New York City’s poverty rate as a result of the recession has apparently eased, but not before pushing nearly half of the city’s population into the ranks of the poor or near-poor in 2011, according to an analysis by the Bloomberg administration.

That year, according to the city’s measure, about 46 percent of New Yorkers were making less than 150 percent of the poverty threshold, a benchmark used to describe people who are not officially poor but who still struggle to get by. That represents a rise of more than three percentage points since 2009, when the nation’s recession officially ended. 

After a huge economic catastrophe, brought on thanks to the shady dealings of a certain financial hub in southern Manhattan, this is to be expected. And it’s also worth noting that the City’s definition of poverty is more inclusive than the federal government’s: “The city says a two-adult, two-child family is poor if it earns less than $30,949 a year. The federal government sets the level at $22,811.”

If you’re wondering which measure is closer to reality, remember that at a lot of federal spending on the poor is tied to these poverty level estimations. The more people that are officially poor, the more programs like Medicaid, for example, are expected to do (read: spend) in response. Since at least the 90s, experts have argued that the way Washington measures poverty — first established in the 60s — was outdated. But, a generation later, the method is unchanged. You can probably guess why.

Back to New York: as The Nation explores at length in its latest issue, NYC is what you could call a Gilded City. Being home to Goldman Sachs as well as Queensbridge, the City holds a particularly stark example of the yawning chasm that now separates the hyper-rich from the rest. It’s a mirror of the country at large, and, barring an unlikely series of changes, it’s something of a look into the future, too. On that score, the report’s lead researcher doesn’t like what he sees:

“In the very short term, I’m sort of an optimist,” Dr. Levitan said. “Looking further, I see storm clouds with tremendous pressure for austerity. My fear is that we are moving to another dynamic where employment and earnings are rising and the safety net is contracting.”

It’s a totally valid worry; and with Governor Andrew Cuomo seemingly intent on presenting himself as the next best thing to a chryogenically frozen 1992-era Bill Clinton, I see little reason to believe austerity isn’t coming — and relatively soon. Maybe I’m wrong; I have a habit of assuming the worst when it comes to Mario’s son. But if a little good economic news sends Cuomo and others rushing to cut like it’s 1996, I won’t be surprised.

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Reinhart and Rogoff Don’t Matter

by Elias Isquith on April 17, 2013

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Paul Krugman echoes my thoughts about Reinhart and Rogoff and austerity — basically, if the austerians hadn’t picked them as their intellectual cover, they would’ve chosen someone else:

Again, however, the larger story is the evident urge of Very Serious People to find excuses for inflicting pain.

Actually, it’s not even enough to say that austerians would’ve found someone else, because part of the power of the idea of austerity is its intuitive — and even moralistic — appeal.

Spending is gluttony, redemption for which can only come through suffering. You don’t lose weight by eating more. You don’t manage your personal finances by spending more. The “easy” or painless route can’t be the right one. Life should be hard. And so on.

The confluence of these deeply ingrained cultural suppositions — and you best believe I’m blaming you, Protest Work Ethic — leads to a powerful desire on the part of some to inflict economic suffering, or “tough medicine.”

Not incidentally, the strongest proponents of austerity tend to have little to lose as a result of their chosen policies. But even if they did, I think most of them would still be arguing for pain. It just feels right.

UPDATE: Be sure you read this report from Tim Fernholz at Quartz. His selection from Senator Tom Coburn’s recent book is just devastating:

Johnny Isakson, a Republican from Georgia and always a gentleman, stood up to ask his question: “Do we need to act this year? Is it better to act quickly?”

“Absolutely,” Rogoff said. “Not acting moves the risk closer,” he explained, because every year of not acting adds another year of debt accumulation. “You have very few levers at this point,” he warned us.

…

Reinhart…echoed Conrad’s point and explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous to let that much debt accumulate. She said, “If it is not risky to hit the 90 percent threshold, we would expect a higher incidence.”

Senator and former governor Mike Johanns, a Republican from Nebraska, asked, “Is there a point at which the debt market rebels?”

“I don’t want to be fire and brimstone,” Rogoff said. “No one knows when this will happen. ” Yet, he added, “It takes more than two years to turn the ship around … Once you’ve waited too long, it’s hard to take radical steps.”

 

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On Reinhart and Rogoff

by Elias Isquith on April 16, 2013

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Big news on Tuesday as an influential 2010 study by professors Carmen Reinhart and Kenneth Rogoff was found, to put it lightly, to be deeply flawed. The paper’s conclusions were well received by the austerity camp — Paul Ryan, David Brooks, Joe Scarborough, Erskine Bowles, Alan Simpson — for finding a high GDP-to-debt ratio was associated with (not the cause of, its authors inconsistently maintained) low growth rates. The magic number was 90 percent; pass that, the paper implied, and your economy was toast.

The Roosevelt Institute’s Mike Konczal has the definitive post on the issue, but this Jeff Spross roundup at ThinkProgress is great if you just want the 101:

First, Reinhart and Rogoff excluded the post-war years for certain countries that enjoyed robust economic growth despite debt levels well over 90 percent. They also chose a skewed method of weighting the data: for example, New Zealand’s single year of terrible growth while over the 90 percent threshold wound up counting just as much as Britain’s 19 years of healthy growth. And they even incorrectly input at least one Excel spreadsheet formula, wrongly excluding several countries form their calculations.

I couldn’t help but notice that all of these wrong signs were pointing in the same direction (to-the-right, to-the-right), so I asked Spross what he made of Reinhart and Rogoff and how conscious they might be of the way their paper’s been turned into a political shibboleth. But in way fewer words because, y’know, Twitter. His response:

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I guess I’m cynical because it’s hard for me to see the authors as such passive bystanders in this sudden farce. Again, if their mistakes were more varied, if some pointed toward Keynes while others toward Hayek, it’d be easier to imagine they were too intoxicated by the attention and praise to caution restraint.

As it looks to me now, the two of them made some very questionable decisions; and then they allowed themselves to be made the fig leaves for an austerity movement whose fundamental goals — cutting social services (and, in Europe, raising taxes) and breaking unions — were determined long, long before either professor made their first Excel fuck-up.

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The Grand Bargain’s Best Last Chance

by Elias Isquith on April 13, 2013

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I’ll be honest: when it comes to President Obama’s willingness to use Social Security as a bargaining chip, my outrage reserves are tapped. I understand why people are upset over the New York Times report that Obama’s budget will include cuts to Social Security; and I wouldn’t ask folks to be quiet since causing a ruckus is the essence of activism. I’m also on-record (a.k.a. the internet) in my belief that progressives should go total Tea Party-level obstructionist in the face of such a cut.

All the same, I related to Jonathan Chait’s response to the news, which was to call Barack Obama’s willingness to trade Social Security for higher taxes no news at all. Obama’s said as much for years. Examples are easy to find, and Digby has been tracking them since at least 2009. What they all show is that this news is not news. And it’s certainly not a reversal; or at least it’s not a reversal from the position taken at the beginning of the first term. As long as he’s been president, he’s been this way.

My take on the partisan politics is similar to Chait’s, too. There’s a flailing characteristic to the leak. For one thing, the proposal is a textbook case of lipstick on a pig politics; Republicans already turned this framework down during the fiscal cliff negotiations. As Chait puts it:

Mainly this appears to be a message strategy aimed at advocates of BipartisanThink, who have been blaming Obama for failing to offer the plan he has in fact been offering. The strategy is that, by converting their offer to Boehner from an “offer” to a “budget,” it will prove that Obama is Serious…

[T]his strikes me as completely ridiculous.

It is completely ridiculous. But if Republicans were to actually realize what’s within their reach — getting a Democratic president not only agree to cut but offer to cut Social Security — and took yes for an answer, the ridiculous would become the real all too quickly.

But a Grand Bargain can’t become law unless it gets through the House. And no bill that conservative Republicans regard as a sell-out to Obama would get out of the House without significant Democratic support. Without the Party’s Progressive Caucus’s support, the numbers even on the Democratic side don’t add up.

What it all means is that if third time’s the charm when it comes to Obama’s Grand Bargain, there will be an empire’s worth of pressure on Congressional liberals to get with the program — even if the program is cutting a sacred Democratic-created program. The logic will somewhat approximate that described so memorably by Heath Ledger as the Joker in The Dark Knight and his monologue about “the plan”:

On that score, Greg Sargent of the Washington Post reports progressive leader Raul Grijalva laying down a line in the sand, refusing to vote for a cut, full stop. But it unfortunately sounds like Grijalva is speaking very much for himself:

Asked if he would vote against any deal containing Chained CPI, Grijalva said: “I’ve made the commitment that if this is part of it, I will not vote for it. I can’t support it.”

However, asked if he thought a sizable bloc of liberals would vote No, Grijalva demurred, and — in something that will bring back bad memories for the left — cited the health care debate as an example. “At this point, I don’t know,” he said. “We’ve been through this before with the public option. The motivation will be there to close ranks and support the president.”

Oh, Tea Party Republicans, don’t fail us now…

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The GOP’s Self-Inflicted Wound

by Elias Isquith on April 13, 2013

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Ezra Klein flagsan interesting Gallup result showing rare uniformity in American public opinion. Turns out near everyone, Republicans included, thinks the GOP is intransigent. And they don’t like it:

[Twenty-two] percent of Democrats, 17 percent of independents, and fully 26 percent of Republicans complained that the GOP refuses to compromise. That’s rather remarkable: It turns out that the GOP’s rigidity is the top complaint of both Democrats and Republicans. It easily beats “nothing,” even among Republicans!

This reminds me of a Twitter back-n-forth I had last week with frequent commenter and blogger in his own right, CK Macleod. Specifically, we were talking about Ben Carson; but the general topic was same-sex marriage (SSM) and the odd spectacle of seeing the conventional wisdom shift right in front of our eyes. Not even 10 years ago, campaigning for a constitutional amendment banning gay marriage was a clear winner for an embattled incumbent Bush.

And now? Now most Republicans — excluding the Bachmanns, the Kings, the Brouns and basically all the Congresspeople ThinkProgress makes bank shaming every single day— greet expressions of homophobia with silence or vague distaste. Cool. But their fundamental opposition to SSM is unchanged. Their silence is not their assent to changing social norms over sexuality and marriage. It’s much more like closing one’s eyes and hoping the world outside can’t see, either.

Anyway, as CK and I note, Republicans made a strategic error in regards to gay marriage when they settled on total opposition. Rather than get pro-family policy concessions along the lines of those advocated by Rick Santorum — things like tax credits for children — Republicans have simply stood athwart history, yelling no, and losing ground bit by bit. The same can be said of the GOP’s response to Obamacare, financial reform, Lilly Ledbetter and dozens of other Obama initiatives.

Republican obstinance hit its tragicomic peak-nadir, of course, during the summer of 2011, when the GOP said no to a Grand Bargain well to the right of anything remotely acceptable to any Democrat not experiencing abject terror over the prospect of losing reelection. I shudder to think of the consequences if that “deal” had been struck. But thankfully Republican intransigence has been liberals’ best friend as much as conservatives’ worst enemy. And if these Gallup results are to be believed, none have internalized that fact more than Republicans themselves:

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