The deficit scolds strike

What really amazes me about this piece on federal budgetary deficits is that it’s written entirely from the hysterical deficit scold’s point of view. The writer is careful to quote two Republicans and two Democrats, but it never seems to occur to him to quote any economists.

Why is the deficit a problem now? Well, Republicans are “…stirr[ing] up their core voters and [are making] inroads with independents by accusing Democrats of profligacy…” and “Facing a rank-and-file revolt, Democratic leaders began trimming the measure…”. I can understand why Republicans would be making inroads with deficit fear-mongering among their own membership and among uninformed independents, but I can’t imagine why the Democratic rank-and-file would have a problem with deficits, unless they were being fed a steady diet of baseless fear-mongering. The author doesn’t appear to feel the need to quote anybody on the Democratic side, either a rank-and-file member or someone who might know what the rank-and-file actually thought.

If we observe another member of the NY Times’ writing staff, Paul Krugman, an economist who, unlike many other people, saw the housing bubble, his views on the deficit worries of Congress are not at all in agreement with that of the deficit scolds. Sure would be nice if the NY Times used what it supposes are the natural advantage that traditional media has over bloggers, i.e., editors. An editor with some competence and ability would have been able to take a broader view than the writer could and could have said “Gee, maybe we ought to account for what the economists think and not just rely on the hysterical deficit scolds.” Krugman is amazed and flabbergasted (As am I) that “inflicting economic pain has become the accepted thing” and states that the danger of a double-dip recession (A wiping out of all of the fragile gains made so far) is very real.

This fear of the deficit is having immediate, real, and very destructive effects.

Deficit hawk Democrats forced the excising of two health care-related programs – a subsidy for the jobless to keep them on the insurance of their former employer, and increased funding for state Medicaid programs so they can keep up with increased demand during a time of mass unemployment – because they feared the price tag and the cost to the deficit in the short term.

*snip*

Adding further injury, the proposal from Tom Harkin and George Miller to spend $23 billion dollars keeping teachers employed looks dead and buried, for the same reasons that the COBRA subsidy and state aid for Medicaid went by the wayside. State budget shortfalls could cost up to 900,000 jobs this year alone.

Economist Dean Baker adds:

The plans by the deficit hawks seem likely to trim $30 billion in unemployment benefits and aid to the states from the bill. Using the methodology in the Romer-Bernstein paper put out by the Obama administration to promote its stimulus package, the cuts will reduce GDP by approximately $50 billion. This will correspond to a job loss of more than 300,000 people. It is irresponsible to report on plans to reduce deficits without noting their likely impact on the economy.

What could account for such hysterical, baseless fears? Krugman says:

The answer, as best I can make it out, is that the organization [The O.E.C.D.] believes that we must worry about the chance that markets might start expecting inflation, even though they shouldn’t and currently don’t: We must guard against “the possibility that longer-term inflation expectations could become unanchored in the O.E.C.D. economies, contrary to what is assumed in the central projection.”

My own guess is that the billionaire deficit scold Pete Peterson and his deficit commission that couldn’t win enough votes in the Senate, but was established by President Obama’s Executive Order anyway, is the real culprit here.

The commission, which began meeting on Tuesday, has been barraged with letters demanding that it conduct all of its meetings – including those held by subgroups of the 18 commissioners – out in the open. One came from Michigan Rep. John Conyers and 15 other Democratic House members, another from House Republican minority leader John Boehner of Ohio. The third was signed by 77 social service organizations ranging from the NAACP to Vietnam Veterans of America.

What are they so worried about?

That’s an extremely good question. One shouldn’t need secret, closed-door meetings for a commission whose business was legitimate and whose goal was an honorable and legitimate one. Unfortunately:

…the White House appears to be using a self-described “independent, non-partisan” group, called America Speaks to carry out what appears to be an “astro-turf” campaign to simulate public discussion of these issues. Heads up, folks. They announce on their website:

On June 26, 2010, thousands of Americans, in hundreds of locations across the United States and online, will weigh-in on strategies to ensure a strong economic recovery and a sustainable fiscal future.

Sounds like a cool, grassroots, online democracy kind of project - until you read further and find one of their big funders: the Peter G. Peterson Foundation.

Just as with the Tea Party, progressives aren’t faced with just fear and panic. We’re facing fear and panic backed by the deep pockets of corporate astro-turf operators. How will the commission go about making its case?

Obama’s deficit commission will be participating in a 20-city electronic town hall meeting, put together by an organization called America Speaks. It is financed by Peterson, along with the MacArthur Foundation and Kellogg Foundation. This is a truly unusual event because it marks the first time a presidential commission’s activities are financed by a private group that has long been lobbying the government on the very subjects the commission is supposed to “study.”

As has been pointed out, Obama seems to be awfully comfortable dealing with the big money people in industry and finance. His statement upon learning that BP didn’t have a working plan to deal with undersea catastrophes was:

Where I was wrong was in my belief that the oil companies had their act together when it came to worst-case scenarios.

Let’s hope he’s not similarly misguided when it comes to the financial security of regular Americans.

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Oh, and a piece from firedoglake on what the wars in Iraq and Afghanistan are costing the US as a nation.

This entry was posted on 31. May 2010 at 22:34 and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.