As many of us have been hoping and praying, the Super Committee fell of its own weight, making room for a much better debate about where budget cutting fits into a recovery strategy (if at all), and how to raise taxes progressively in order to finance the investments and jobs that America needs.
President Barack Obama was unwise to make this devil’s bargain in the first place; he has since moved on to emphasizing jobs and recovery. The Super Committee crack-up should be the last gasp of the “bipartisan” folly about deficit reduction as key to recovery—which the president himself gave a big boost with his appointment of the late Bowles-Simpson Commission.
Now, mercifully, the Republicans stand exposed as the party that would ravage Social Security, Medicare, Medicaid, and other valued social outlays in order to spare the richest 1 percent any tax increases. Republicans have been in their own echo chamber for so long that they don’t quite grasp that most of the voters oppose this idea. Democrats, in spite of their intermittent death wish, are the big winners from the Super Committee’s collapse.
Much of the mainstream media, however, is still treating the committee’s failure as (a) tragic, (b) symmetrical, and (c) hazardous for the recovery—all mistaken premises. Paul Krugman had a fine column on this last week, making fun of centrist pundits who call for Obama to make more compromises to appease Republicans who won’t compromise at all.
But, true to form, John Harwood’s analysis in The New York Times this morning imagined a happy world of bipartisan compromise, in which Republicans bravely agreed to raise taxes and Democrats bit the bullet and cut cherished social programs. He then quoted several third-way types, bemoaning the deadlock.
Politically, the fallacy in this view is that the playing field has already been tilted so far to the right that “splitting the difference” is only more of a victory for Republicans. Domestic spending is now back to its lowest level since Eisenhower was president. Taxes on the rich are at their lowest level since before World War II.
Economically, the fallacy is that the kind of belt tightening imagined by Wall Street-oriented elites clamoring for “bipartisanship” would only set back the recovery. The Times also ran a full-page ad this morning by the Investment Company Institute, the lobby for the mutual-fund industry, calling on the Super Committee to keep at it. “Last summer,” warns the ad, “we saw how harmful it is when America’s failure to resolve our fiscal crisis is put in doubt.”
Now, this is almost too rich (literally) for words. “Last summer” refers to the Republicans’ totally gratuitous blockage of a routine extension of the debt ceiling, creating an artificial crisis that they hoped to exploit. The implication is that another failure to pursue austerity would be bad for the stock market, another theme repeated through today’s media coverage of the deadlock.
But those in the mutual-fund industry are the very people who have lobbied for the financial deregulation that caused the collapse. They have blood on their hands. Now, they want the rest of the economy to suffer for their sins—or rather, for their bonuses.
Sometimes, Congress blunders into doing the right thing as a last resort. The failure of the Super Committee is one of those times. Let us rejoice, and redouble the pressure on our leaders for a real recovery program.