Obama's Austerity Altar

The right has succeeded in dominating the framing of the entire budget issue, and tragically they have the perfect accomplice in Barack Obama. President Obama's willingness to throw crown jewels like Social Security onto the austerity altar grows more flagrant by the day.

The press--even some of the progressive press--is treating the main issue as whether we include significant tax increases as part of the package of $4 trillion in budget cuts over ten years. But even that issue is a sideshow.

Fallacy number one is that we need anything like $4 trillion in budget cuts, and fallacy two is that it's reasonable to devise a ten-year budget path.

Both of these premises are traps. Even if by some miracle Democrats in Congress hang tough and insist that half of the total deficit reduction comes from tax hikes, $2 trillion in program cuts would be immense.

A further trap is the Republicans' success in connecting the budget talks to the debt ceiling extension. Throughout the Reagan and Bush eras, Congress and the White House fought fiercely about budgets, and routinely extended the debt ceiling. The Republican refusal to do so this time is a form of blackmail--and it's working. If Obama had some spine, he would refuse to negotiate on the budget until the two issues were de-linked.

Where the deficit is in 2021 is mainly a function of whether we can get a real recovery going. That goal is a moving target. Deep program cuts or tax increases on the middle class would make a recovery harder to achieve. They would kill all of Obama's spending public investment and social reform initiatives, including ones that create jobs. The story that a ten-year deficit reduction plan will somehow aid recovery by building confidence is as fairy tale.

The June jobs numbers just came out, and they signal the need for a recovery program, not deeper austerity. As EPI reports:

Virtually every single measure was devastatingly weak: only 18,000 payroll jobs were added, average hours declined, nominal wages fell, unemployment was up in almost all age groups, over a quarter of a million workers dropped out of the labor force altogether, and the public sector continued to bleed jobs. Furthermore, a downward revision to last month's data means that this is the second month in a row with job growth at 25,000 or less. This is a remarkable, across-the-board backslide.

Hidden in the fine print of a likely deal is a "trigger," which would require automatic cuts if Congress failed to hit the target. A trigger mechanism is a long-standing goal of the fiscal right. But whether Congress hits a predetermined target is partly a function of whether we have a double-dip or triple-dip recession.

There are two sides of the budget equation. One is what the government spends. The other is what the government takes in. Government's projected revenue depends partly on the tax system but also on the state of the economy. In a recession, tax receipts fall.

So the whole idea of an austere, mandated, ten-year path to budget balance is perverse. And if the economics are nuts, the politics are worse, because the entire enterprise plays into the hands of the fiscal and ideological right. Once you set a goal as extreme as $4 trillion in cuts over a decade, it's hard to reach it without violating Social Security, which of course has nothing to do with the current deficit or even the one projected for 2021.

The only hopeful sign is that Obama's rolling capitulations in advance of a deal have emboldened Congressional Democrats and grass roots progressives. For more than a year, Democrats in polite company have tried to paper over the widening chasms that separate them, their politics and principles, from their President.

But Obama's willingness to make an essentially Republican deal blows those differences into the open. And it's about time.

Even Kent Conrad, the very conservative chairman of the Senate Budget Committee is now somewhat to the left of Obama with his widely leaked insistence that a budget deal has to be 50 percent revenue increases. But Conrad does embrace the premise of $4 trillion in deficit reduction. His own plan for the 2012 budget, which was supposed to be released mid-week, has now been delayed because of differences within the Senate Democratic Caucus and between the Caucus and the White House.

Obama's shift to the right has even smoked out the always opportunistic AARP, which a month ago was playing footsie with the idea of Social Security cuts. John Rother, the organization's policy chief (and usually its designated liberal) floated the idea of agreeing to cuts, because AARP loves to be at the table. But the pushback from the membership was so fierce that Rother was overruled by AARP chief executive, A. Barry Rand, who said Thursday that the organization would oppose any cuts.

Despite all the talking-head blather about a failure to meet the August 2 deadline portending catastrophe, the best outcome now would be for progressive Democrats in Congress to hang very tough on four issues: no cuts in Social Security; no deal without substantial tax increases on the wealthy; no automatic triggers; and a more flexible trajectory than $4 trillion in cuts over ten years.

That's a far better politics than an austerity program that sandbags the recovery and slashes social insurance for good measure.

Obama is a weathervane, and all the wind so far has come from the far right. It's about time for a storm system on the progressive left.

If we miss the August 2 deadline, and the dollar starts wobbling and the bond-market goes haywire, that might finally put some salutary pressure on the Republicans to meet the Democrats more than halfway. They control just one house. The Democrats have the Senate and the White House. They should start acting like it.

Alternatively, if Obama "succeeds" this weekend in brokering an austerity deal, the Democrats, American progressivism and the economy will all be the losers.

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