Paul Krugman’s column today points out an important change:
Over the past few weeks, there has been a remarkable change of position among the deficit scolds who have dominated economic policy debate for more than three years. It’s as if someone sent out a memo saying that the Chicken Little act, with its repeated warnings of a U.S. debt crisis that keeps not happening, has outlived its usefulness….
…There has, of course, been no explicit announcement of a change in position. But the signs are everywhere. Pundits who spent years trying to foster a sense of panic over the deficit have begun writing pieces lamenting the likelihood that there won’t be a crisis, after all.
…What happened? Basically, the numbers refuse to cooperate: Interest rates remain stubbornly low, deficits are declining and even 10-year budget projections basically show a stable fiscal outlook rather than exploding debt.
Krugman goes on to discuss the new rationales now being put forward as replacement arguments for why America needs to immediately and radically cut Social Security, Medicare and other social safety net programs. But, from a strategic point of view, it’s worth pausing for a moment to consider just how much of a setback this change really represents for the forces that were trying to whip up a panic.
There has never been any argument (even from Krugman) that there is indeed a long term need to update and improve the American social safety net – not to dismantle it but to reinforce it for the future. These long-term issues are largely the result of demographic and other gradual societal changes that require carefully structured reforms to current programs.
But the essence of the “debt panic” strategy was to exploit the financial crisis of 2008 in order to demand massive and immediate, ideologically motivated reductions in the funding for those programs or even to achieve their effective elimination. The same groups and individuals that had kept a discrete and diplomatic silence about the ballooning deficits during the Bush era suddenly switched to the “crisis” message the moment Obama was elected. The plan shared by a wide range of conservative and business groups was essentially to “piggyback” the attack on the social safety net on the huge economic dislocations caused by the crisis in order to convince the public that immediate action was required.
It almost worked. Conservatives could have gotten a hugely advantageous deal back in the Spring of 2011 if the congressional GOP hadn’t decided to reject the first “grand bargain” Obama offered and chose instead to bet the farm on defeating him.
You have to put yourself in the debt crisis gang’s shoes to visualize what a huge fiasco this represents for them. Millions of dollars, massive organizational efforts, hundreds of TV appearances and thousands of articles, commentaries and op-ed pieces were all focused on the goal of building support for massive and immediate budget cuts that could be pushed through quickly, before the crisis atmosphere passed. But now, as Krugman says, the moment has slipped by and the debt crisis gang has to start all over again to come up with a basically new rationale.
To put it simply, from their point of view, the 2008 financial crisis offered the opportunity of a lifetime to rip a big gaping hole in the social safety net and because they overreached, they’ve let it slip away. For progressives, a moment of pleasurable schadenfreude is not inappropriate or unwarranted.