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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

deficit hawks « Previous | |Next »
July 25, 2011

According to the US Treasury America has to raise its $14.3tn debt ceiling by 2 August or risk defaulting for the first time. However, there is conflict between the Obama White House and the Republican House of Representatives over a 10-year-plan for reducing the country's burgeoning debt by cutting spending and raising taxes. If agreement is not reached it could trigger a US default on its debt payments. The US is a debtor nation like Greece, Portugal and Spain.

However the debt limit crisis in Washington does seem to be more about a political conflict with lots of theatrics posturing and playacting that plays into the American's love of Apocalypse. The end is nigh. The lights will go out. However, the US government will not default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency and the Federal Reserve will continue to purchase the Treasury’s debt.

The debt ceiling has been raised many times since the mid-1970s in order to facilitate the drastic increases in military spending, the major tax breaks for the wealthy and, most importantly, the multi-trillion dollar bailouts of the Wall Street gamblers. So we have the ritual enactment of the fight over the budget--not the trade-- deficit. The debt ceiling is a purely artificial constraint.

The deficit hawks want to gut the welfare state (eg., social security, Medicare and Medicaid. Medicare) in order to get the hawks to agree to raise the debt limit. The global financial collapse, which brought on the worst recession since the Great Depression, crashed the government's tax revenue and generated a huge budget deficit. Given the loss of jobs, and stagnant incomes (at best) for most Americans, households are not going to spend, as they are heavily indebted.

This situation has provided the opportunity to to undermine the Rooseveltian New Deal on the grounds that “entitlements” (Roosevelt’s New Deal) will bankrupt the nation 25 to 50 years down the road. The deficit hawks want deficit reduction of non-military expenditure more-or-less immediately. Many of them hold the position that deficits are always bad because they always cause inflation and slow economic growth. The deficit hawk position is that with official unemployment above 9%, government spending should be reduced. It is the politics of fear mongering.

The deficit warriors insist that cutting government will induce faster growth of the private sector rather than reducing the budget deficit through faster economic growth. The Republicans would like to erode and ultimately privatize Social Security and Medicare. So would Wall Street. The Tea Party elements of the Republican Party are adamantly opposed any change in taxation--Obama wants to increase corporate taxation.

The Republicans have gone from emphasizing balanced budgets — or at least lower deficits — to what tax-cutting conservatives have called ‘starve the beast,’ ’that is, cut taxes and force government to shrink. Their ultimate goal, in the words of their guru Grover Norquist, is to take government down to “the size where we can drown it in the bathtub.” The best way to revive the American economy is to shrink the size of government. They want to shrink what the left sociologist Pierre Bourdieu called the left hand of the state – the parts of the public sector that serve the social and democratic needs of the non-affluent majority--not the giant increases in military spending for the national security state.

| Posted by Gary Sauer-Thompson at 9:14 AM | | Comments (7)
Comments

Comments

If you talk to ordinary Americans with any intelligence, they know it as well. But like us, what can they do against the system?
I agree with some of them, the right are loaded with messianic bs and in that sense we can say that Breivik is not just a nutter in his own right, but a typical recruit for and expression of the psychosis.
He's screwy, but is still within what you'd call the wider right. Be very worried, world..

On the deficit hawks - especially on health care - Krugman is scathing about their Naked Blackmail, but perhaps even more outraged by What Obama was willing to give away....

Oh, and of course, Republicans were also trying to undermine health reform; so seniors would find themselves thrown off Medicare but, in many cases, unable to get private insurance either.

Great work, White House.

Interesting graphs over at Club Troppo which seem to indicate that Bush caused the deficit and Obama has been frugal

One argument is that Obama is part of the manufactured crisis in that he really does want to cut entitlements in Social Security, Medicare and Medicaid and to roll back FDR's New Deal.

Obama's justification for this is straight out Wall Street's neo-liberal play book. The nation’s long-term economic recovery could not be attained unless the government finally got control over its most costly entitlement program. Not to do so means that the budget deficits and government spending are “fiscally unsustainable”; and that too much government spending “crowds out” private investment, and takes dollars out of the economy when it borrows. Consequently, when the government stops borrowing to spend, the economy will have those dollars to replace the lost federal spending.

The debt ceiling dispute is not forcing a compromise on the Obama Presidency, but is instead is viewed by him as a golden opportunity to do what he’s always wanted to do.

Joe Sixpack must be getting a tad worried about his subsidized health care, given the tea party intransigence in the House on the need to cut deep into nonmilitary government expenditure.

Harry Reid's latest plan to solve the debt ceiling crisis essentially gives the GOP everything it has asked for: in exchange for raising the debt limit by $2.7 trillion, Reid promises to cut spending by $2.7 trillion over the next year. There are huge budget cuts and no attempt to raise revenues, either through tax hikes or cuts to tax expenditures.

But they reject it out of hand, because it's a Democratic plan that Obama has spoken of favorably. Republicans aren’t interested in reducing the debt or cutting taxes on rich people as much as they are obsessed with denying a political victory to President Obama.

The large deficit is primarily due to policies pursued by a Republican President--George W Bush – eg., his tax cuts on middle- and high-income earners, and his wars in Iraq and Afghanistan.

The Democrats are offering bigger cuts to the US budget than the Republicans. The Tea Party rebels are demanding deeper, quicker cuts in the Republican plan. No compromise is their battlecry.