The Crypto-Reactionary Deficit Rumbles – The American Prospect

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Most Democrats agree that President Obama’s biggest mistake during his presidency was trying to secure a big deficit reduction deal with Republicans in 2011. This not only set a precedent in negotiating with an extremist party holding the nation hostage, but also Obama. put on the table radical cuts in social security and health insurance. It was the wrong tactic with the wrong objective, and at the wrong time to start, unemployment in July 2011 was still 9%. The only reason the cuts didn’t pass is because the far-right House GOP caucus wouldn’t take even a slight concession of small tax hikes on the wealthy.

Obama deserves most of the blame for this mistake. But national political discourse was also a major contributor. As a small-time journalist in Washington at the time, current complaints about the national debt do not compare to the absolute frenzy of debt hysteria that has gripped the conventional wisdom of the elite in the US. inside the Beltway after the Great Recession. After the official recession ended in early 2009, but a decade before anything like full employment was achieved, analysts, journalists and pundits from across the political spectrum had a year-long meltdown about loans.

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One of the main reprimanding organizations was the Committee for a Responsible Federal Budget (CRFB). Throughout the 2010s, they played a prominent role as a supposedly bipartisan organization seriously concerned about excessive borrowing. In the 2016 elections, for example, candidates were asked four different questions. But today things have changed. We still hear President Biden talk about the need to cut borrowing, but not with the vehemence of President Obama and he speaks at a time when unemployment is low and interest rates high, rather than the other way around.

Partly because of this, the CRFB has shifted to a more open alliance with the far right, to the point where the organization tacitly endorses the legislative terrorism of House Speaker Kevin McCarthy and his right-wing extremist allies, seen as a reasonable proposal, according to a statement from CRFB President Maya MacGuineas.

It’s hard to overstate the damage that the CRFB-style deficit rebuke has inflicted on the United States. This ideology was a major reason why the Recovery Act stimulus package in 2009 was so undersized and why virtually no additional stimulus packages were passed. As a result, unemployment has been chronically high for a decade. Growth has been roughly halved, and in 2019 US GDP was 15% lower than it would have been on its pre-crisis growth path, meaning output above that of the California and Virginia combined was thrown in the trash. Viable careers and economic ecosystems have been permanently interrupted, with disastrous effects on social cohesion, opioid addiction and alcoholism, and endless other social ills.

For Democrats, the failure to resolve the Great Recession was also politically disastrous, which is one of the reasons even many centrist liberals have become aware of the CRFB routine. It is now widely accepted in Democratic political circles that the Recovery Act being much smaller than it should have been, which meant unemployment was 10% on Election Day 2010 instead of 5-6 %, which severely worsened the ensuing Democratic defeat, which helped cement a decade. of Republican victories across gerrymandered district lines.

The Dems have corrected course with the gigantic US bailout in 2021, which, although it is accused of fueling inflation somewhat (the jury is all out on this point compared to the shocks of supply caused by the pandemic and the war), helped ensure the restoration of full employment in two years instead of a decade. This led to a much more satisfying mid-run performance.

So even if Biden utters the usual cliches about deficit reduction (which is actually shrinking quite rapidly), the FBRC must look elsewhere for a friendly audience for its brand of extreme austerity. MacGuineas found one recently on Fox News, where she had a friendly chat with conservative former congressman Trey Gowdy about the House Republicans debt ceiling ransom note, the Limit Act, Save , Grow, which she called a serious plan, a solid plan. She proposed that it was not an illusory plan because it was not trying to balance the budget in ten years.

It’s obviously dishonest. The House debt ceiling list of demands is a right-wing wish list. They would reduce federal spending to 2022 levels and impose an absurd 1% per year growth cap (except at the Pentagon, of course), stop student loan forgiveness, add work requirements to Medicaid and food stamps, and repeal the green energy tax. the appropriations that are at the heart of the Cut Inflation Act, not only Bidens’ greatest achievement, but the only major action the United States has taken to address climate change. I guess drowning Florida is a small price to pay to lower a number on a spreadsheet.

We see the same dishonesty in MacGuineas’ initial statement referenced above. The Limit, Save, Grow Act is a reasonable proposal to raise the debt ceiling and begin to address our nation’s serious fiscal challenges, it reads, to quickly backtrack: We must not threaten to default or gamble chicken with the full faith and credit of the United States. dollar. This is to say that The Jokers Make the Schools Laugh plan is a reasonable proposal to address fiscal imbalances in the Gotham City School District. We must not threaten to gas the children or play chicken with Batman. The whole point of the House GOP move here is to try to gain concessions by threatening national default and playing chicken with the dollar.

By way of conclusion, if the budget deficit were really a problem, the appropriate way to solve it would be through the normal budget process (coming in just a few months) in which the House, Senate and President negotiate budget levels. funding. for agencies and programs, not by one party taking the full faith and credit of the government hostage to push through its agenda.

But in truth, there is no evidence that America is borrowing too much. The deficit is shrinking, debt service costs as a percentage of GDP are only at modest levels and, in any case, it is just as dangerous to borrow too little as too much. Because the dollar is the world’s reserve currency, the world needs a large supply of dollar-denominated assets to lubricate the flows of global trade. If these are not available as US government debt, then market forces will work to create them by increasing the trade deficit, which kills US jobs. America doesn’t have serious fiscal challenges, and there’s no reason to think it will anytime soon.

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