Read this entire excellent review of the recent books by Paul Krugman and Joseph Stiglitz at NYRB - but I'll post the concluding section that unearths, again, the Big Lie that economic elites or "conservatives" actually care about deficits and fiscal responsibility, as opposed to simply eliminating aspects of government that lessen income inequality on ideological grounds and/or for advancing raw self-interest wherever and whenever they can:
Certainly one of the most striking features of current debates is the
economic hawkishness of the American upper crust...
That powerful CEOs and financial executives could
cause so much damage and yet restore their position (and paychecks) so
quickly suggests an extraordinary culture of self-justification and
demand for deference. Perhaps most telling is the apparently genuine and
widespread fury among financial elites at Obama’s occasional, mild
criticisms of their excesses.
Nowhere are the effects of unequal
power clearer than in the shifting commitment of elites to limited
government and deficit reduction. When many of today’s loudest deficit
hawks had the opportunity a decade ago, they repeatedly chose policies
that worsened the deficit in order to lavish benefits on the wealthy and
powerful business interests. These benefits ranged from two huge tax
cut bills to new subsidies for the oil and gas industry to an unfunded
Medicare drug benefit full of handouts for the pharmaceutical industry.
They were backed by the economic seers of their era, such as former Fed
Chair Alan Greenspan, who insisted, astonishingly, that large-scale tax
cuts were justified in 2001 because then-projected surpluses might
eventually eliminate the federal debt, forcing the federal government to
begin buying up corporate stock. Occasionally the mask slips off
entirely. During the last round of intense fighting over the deficit, in
the mid-1990s, then House Majority Leader Dick Armey confessed:
Balancing
the budget…is the attention-getting device that enables me to reduce
the size of government. Because the national concern over the deficit is
larger than life…. So I take what I can get and focus it on the job I
want. If you’re anxious about the deficit, then let me use your anxiety
to cut the size of government.
America’s long-term debt picture poses serious problems, as both
Stiglitz and Krugman recognize—especially in funding health care, for
example—but Krugman pointedly reminds us that the economic and social
costs of a premature pivot toward deficit reduction are catastrophic.
(He quotes Keynes: “The boom, not the slump, is the time for
austerity.”) The forces demanding major cuts now, however, are immensely
powerful. To take just one example, former commerce secretary Pete
Peterson (with a huge personal fortune built on Wall Street) has
dedicated roughly half a billion dollars to the cause of reshaping elite
and public discussion of deficits. Peterson and other deficit hawks
have funded activities ranging from highly publicized Washington
meetings with administration officials and politicians, to advocacy
organizations insisting that deficits pose the nation’s greatest crisis,
to educational materials for high schools. The latest such effort is a
$25 million campaign led by the Peterson-funded Committee for a
Responsible Federal Budget that includes one hundred CEOs
of Fortune 500 companies. These campaigns are cast as nonpartisan
drives for good governance and shared sacrifice. Far too often, however,
the push for austerity falls on weak claimants rather than weak claims.
The
priorities of the wealthy and powerful show up not only in the
premature focus on deficit reduction, but in the way austerity seems
likely to be targeted. A genuine effort to combat long-term deficits
would address the myriad ways, documented by Stiglitz and many others,
in which the federal government subsidizes economic behavior that has
real costs for our society—whether by failing to require companies to
pay a tax on their carbon emissions or allowing billionaire hedge fund
managers to pay taxes at rates far lower than those affecting
middle-class families.
Most obviously, since projected long-term
deficits are largely driven by rising health costs (which threaten the
private sector at least as much as the public), a serious response to
long-term deficits would address the factors that make our health care
by far the most expensive in the world. We would follow the example of
other nations, using the buy- ing power of government to produce real
cost containment in the medical industry, rather than following the
blueprint outlined in the Ryan Plan, which produces “cost savings” by
simply gutting the programs that give tens of millions of Americans
access to care.
This is the central message of Krugman and
Stiglitz: we have a choice. Politics got us into our economic mess, and
only a revitalized politics can get us out of it.
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