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Hullabaloo


Friday, November 09, 2012

 
Fiscal Cliff notes

by digby


James Galbraith lays down some truth on the Grand Bargain nonsense:

That the looming debt and deficit crisis is fake is something that, by now, even the most dim member of Congress must know. The combination of hysterical rhetoric, small armies of lobbyists and pundits, and the proliferation of billionaire-backed front groups with names like the “Committee for a Responsible Federal Budget” is not a novelty in Washington. It happens whenever Big Money wants something badly enough.

Big Money has been gunning for Social Security, Medicare and Medicaid for decades – since the beginning of Social Security in 1935. The motives are partly financial: As one scholar once put it to me, the payroll tax is the “Mississippi of cash flows.” Anything that diverts part of it into private funds and insurance premiums is a meal ticket for the elite of the predator state.

And the campaign is also partly political. The fact is, Social Security, Medicare and Medicaid are the main way ordinary Americans connect to their federal government, except in wars and disasters. They have made a vast change in family life, unburdening the young of their parents and ensuring that every working person contributes whether they have parents, dependents, survivors or disabled of their own to look after. These programs do this work seamlessly, for next to nothing; their managers earn civil service salaries and the checks arrive on time. For the private competition, this is intolerable; the model is a threat to free markets and must be destroyed.

You have to read the whole thing to understand just how much of a scam this deficit nonsense really is.

They've ginned up this "fiscal cliff" as a Shock Doctrine tactic to create a sense of emergency in which to push through some shock therapy. They're saying they want to avert a near disaster of their own making --- by creating a slow rolling disaster as our income inequality, starved education system, degraded safety net and dilapidated infrastructure get worse and worse.

Krugman said this morning what the administration should do:

Just say no, and go over the cliff if necessary.

It’s worth pointing out that the fiscal cliff isn’t really a cliff. It’s not like the debt-ceiling confrontation, where terrible things might well have happened right away if the deadline had been missed. This time, nothing very bad will happen to the economy if agreement isn’t reached until a few weeks or even a few months into 2013. So there’s time to bargain.

More important, however, is the point that a stalemate would hurt Republican backers, corporate donors in particular, every bit as much as it hurt the rest of the country. As the risk of severe economic damage grew, Republicans would face intense pressure to cut a deal after all.

Meanwhile, the president is in a far stronger position than in previous confrontations. I don’t place much stock in talk of “mandates,” but Mr. Obama did win re-election with a populist campaign, so he can plausibly claim that Republicans are defying the will of the American people. And he just won his big election and is, therefore, far better placed than before to weather any political blowback from economic troubles — especially when it would be so obvious that these troubles were being deliberately inflicted by the G.O.P. in a last-ditch attempt to defend the privileges of the 1 percent.

I just don't know if that's what he wants to do. It is just as reasonable to think that he wants to make this Big Grand Bargain Deal that is a "balanced approach" where everyone's got "skin in the game" and "the rich pay a little bit more." He's said so many times ever since the beginning of his first term.

Erskine Bowles is being talked about very seriously as the next Treasury secretary. And yesterday, he said this:

What does that alternative look like? We already have the blueprints.

It’s the type of bipartisan package toward which the fiscal commission I co-chaired with former senator Alan Simpson, the Domenici-Rivlin group, the Senate’s “Gang of Six” and the Obama-Boehner negotiations all worked. It’s a package large enough to put the debt on a clear downward path, relative to the economy, and designed well enough to promote, rather than disrupt, economic growth. It’s a package that includes real spending cuts and structural entitlement reforms to make Social Security solvent while slowing the growth of federal health spending while protecting vulnerable populations. And it’s a package that institutes fundamental tax reform that simplifies the code and encourages economic growth by cutting spending in the tax code and generating additional revenue for deficit reduction...

I have been saying for months that the deal that's emerging is for (temporary) chump change from millionaires in exchange for cuts to "entitlements." When the Democrats made revenue the hill they would die on rather than cuts to SS, Medicare and medicaid, it was baked in the cake. Indeed, from the sound of it, the Democrats are so wedded to calling "revenue" a victory that they'll do almost anything to get it.

What we can hope for is that both the left and right wings balk at this Big Deal. The centrist majority insisted on a bunch of phony deadlines and are acting as if they are written in stone. They aren't. They created them, they can change them. We don't have to do this.

Update: The president just spoke and indicated that he wanted to extend the middle class tax cuts right now but that he wouldn't cut entitlements without asking the wealthy to pay a dime more. I'm guessing that's what they'll go for. A dime from the rich in exchange for cuts in social security, Medicare and medicaid.

I hope I'm wrong. But the Villagers are all saying that the country voted for bipartisanship. They always do. And the consensus among Andrea Mitchell's NBC sewing circle of Chuck Todd, Chris Matthews et al, the "word" is that the GOP is ready to accept some vague "revenue" (as long as it's not rate hikes) in exchange for a hike in the retirement age. If I had to guess at this moment, I agree that that's the pound of "skin in the game" they really want. Whether they get it will depend on how demoralized the Norquistian Tea Partiers are and whether the progressives have any muscle at all.

Update II: James Clyburn says that they have to tweak Medicare and Medicaid. He says he can deliver the votes for the president if the right wing Republicans won't play. So ....


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