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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

A Response to Deficit Hawk Fear-Mongering

Any Democrat called to challenge deficit hawk arguments against investing in jobs will find an excellent resource in Ari Berman’s article in The Nation, “How the Austerity Class Rules Washington.” Berman has distilled some of the better arguments from top progressive experts, begining with his stage-setting opener:

In September the Committee for a Responsible Federal Budget (CRFB), a bipartisan deficit-hawk group based at the New America Foundation, held a high-profile symposium urging the Congressional “supercommittee” to “go big” and approve a $4 trillion deficit reduction plan over the next decade, which is well beyond its $1.2 trillion mandate. The hearing began with an alarming video of top policy-makers describing the national debt as “the most serious threat that this country has ever had” (Alan Simpson) and “a threat to the whole idea of self-government” (Mitch Daniels). If the debt continues to rise, predicted former New Mexico Senator Pete Domenici, there would be “strikes, riots, who knows what?” A looming fiscal crisis was portrayed as being just around the corner.
The event spotlighted a central paradox in American politics over the past two years: how, in the midst of a massive unemployment crisis–when it’s painfully obvious that not enough jobs are being created and the public overwhelmingly wants policy-makers to focus on creating them–did the deficit emerge as the most pressing issue in the country? And why, when the global evidence clearly indicates that austerity measures will raise unemployment and hinder, not accelerate, growth, do advocates of austerity retain such distinction today?
An explanation can be found in the prominence of an influential and aggressive austerity class–an allegedly centrist coalition of politicians, wonks and pundits who are considered indisputably wise custodians of US economic policy. These “very serious people,” as New York Times columnist Paul Krugman wryly dubs them, have achieved what University of California, Berkeley, economist Brad DeLong calls “intellectual hegemony over the course of the debate in Washington, from 2009 until today.”

Berman i.d.’s the deficit hawk elite spokespersons and organizations and then he describes how they leverage influence:

The austerity class testifies frequently before Congress, is quoted constantly in the media by sympathetic journalists and influences policy-makers and elites at the highest levels of power. They manufacture a center-right consensus by determining the parameters of acceptable debate and policy priorities, deciding who is and is not considered a respectable voice on fiscal matters. The “balanced” solutions they advocate are often wildly out of step with public opinion and reputable economic policy, yet their influence endures, thanks to an abundance of money, the ear of the media, the anti-Keynesian bias of supply-side economics and a political system consistently skewed to favor Wall Street over Main Street.
Taken together, the various strands of the austerity class form a reinforcing web that is difficult to break. Its think tanks and wonks produce a relentless stream of disturbing statistics warning of skyrocketing debt and looming bankruptcy, which in turn is trumpeted by politicians and the press and internalized by the public. Thus forms what Washington Post blogger Greg Sargent calls a Beltway Deficit Feedback Loop, wherein the hypothetical possibility of a US debt crisis somewhere in the future takes precedence over the very real jobs crisis now.

Behind all of their pretensions to fiscal rectitude, says Berman, “The goal of much of the austerity class is to see government funds redirected to the private sector.” Berman also faults some Democrats for embracing “deficit fetishism,” to use Nobel laureate Joe Stiglitz’s term, as enablers of the austerity class.
Their financial resources are extraordinary, as Berman explains:

The austerity class’s deep pockets can be traced back to Peterson, a GOP billionaire who served as Nixon’s commerce secretary and founded the private equity Blackstone Group. Since 2008 his foundation has doled out $383 million of his promised $1 billion pledge to a seemingly endless number of think tanks, media organizations, advocacy groups and educational institutions to advance his debt obsession [see William Greider, “The Man Who Wants to Loot Social Security [1],” March 2, 2009]. This includes six- and seven-figure donations to groups like the CRFB, the Concord Coalition, the Committee for Economic Development and the Peterson Institute for International Economics. It’s largely because of Peterson that programs like Social Security and Medicare, favored by nearly 90 percent of the public, are savaged as bloated “entitlements” and are consistently on the chopping block.

Berman describes how the deficit hawks successfully pitched the dubious “expansionary austerity” meme that “spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions,” according to deficit hawk economist Alberto Alesina. He notes the Bowles-Simpson report as a reflection of this strategy:

“Bowles-Simpson was not a deficit-reduction package,” says Stiglitz, “but a downsizing-government package.” Instead of rolling back the Bush administration policies that had turned Clinton’s surplus into a deficit–such as the Bush tax cuts, Medicare Part D plan and costly wars in Afghanistan and Iraq–the commission took aim at the social safety net and promoted pet conservative causes, like cutting the federal workforce by 10 percent, cutting funds for the Corporation for Public Broadcasting and capping medical malpractice lawsuits. It called for “serious belt tightening” beginning in 2012, when few economists believed the economy would have recovered from the recession.

“By promoting an age of austerity,” says Berman, “the deficit hawks have enhanced the power of “starve the beast” conservatives like Grover Norquist, whose goal for years has been to shred the New Deal. The austerity class’s infatuation with Representative Paul Ryan is a prime example of this addled love affair.” He quotes John Irons, policy director at the Economic Policy Institute (EPI), “Paul Ryan added a huge amount to the deficit. “To call that even remotely fiscally responsible was not a correct analysis. It’s almost as if they said, We don’t care what your plan does–as long as you talk tough on deficits we’re going to support you.”
Many progressives believe that the Administration has been unduly supportive of austerity polices. But with the launching of the campaign to pass the American Jobs Act, Berman says President Obama’s “energetic campaign in support of the legislation has begun to redirect the debate over the economy away from austerity and back toward jobs.”
Berman worries that “the austerity class has done such a good job of sidelining dissident voices–with the exception of the Times’s Krugman and a few other high-profile Keynesian economists–that the Washington debate seems permanently skewed to the right.” Further, in terms of messaging, adds Berman,

The administration’s schizophrenic approach to the economic crisis has left voters perplexed about where it stands on the biggest issue of the day. “When you ask people, ‘What is Obama’s economic policy?’ they have no idea,” says Democratic pollster Stan Greenberg. “They think maybe it’s healthcare reform.” Obama’s latest position–more spending to boost the economy, followed by deficit reduction once the economy recovers–may be too nuanced for the public to grasp (some in the austerity class, in an attempt to retain credibility at a time of economic peril, now echo Obama’s view). “The Republicans’ message, ‘Government spending is a problem,’ is much easier to penetrate,” says the EPI’s Irons. “The administration is missing a simple point, which is that you need jobs to reduce the deficit.” That’s why the EPI advocates a moratorium on austerity measures until the unemployment rate is back down to 6 percent.

The demonization of deficits has been so effective, argues Berman, “that it’s difficult to make the case for their necessity, even in the short term.” He concludes by quoting progressive economist Jared Bernstein, “…It’s almost unimaginable for a policy-maker to argue that we need a bigger deficit…But there are times when that argument is absolutely correct.” Now is one of those times.”
None of this is to dismiss legitimate concerns about ballooning budget deficits that many Democrats share. But Berman’s case that deficits have been demonized to the point where bold action to reduce joblessness has become all but impossible is well-made.

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