Friday, September 14, 2012

Phony "Deficit Hawks" promote the ever-present, shape-shifting interests of the economic elite

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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