President Obama summoned congressional leaders to a Friday summit at the White House in a last-ditch effort to protect taxpayers, unemployed workers and the fragile U.S. recovery from severe austerity measures set to hit in just four days. Also Thursday, House Speaker John A. Boehner (R-Ohio) announced that he would call the House back into session this weekend. And in perhaps the most significant development, Senate Minority Leader Mitch McConnell (R-Ky.) for the first time was engaged directly in talks with the White House. He signaled an interest in cutting a deal. [Emphasis supplied.]The negotiations, carried out this weekend between Senate Leader Harry Reid and GOP Senate leader Mitch McConnell (no doubt the president was fully involved as well), have broken down.
You've read so much about the so called 'fiscal cliff' that I doubt it requires much elucidation: On January 1, 2013, the Bush tax cuts, extended for 2 years in the 2010 lame duck Congress, expire and automatic spending cuts put into place to resolve the debt ceiling hostage situation of August 2011 kick in. The 'fiscal cliff' did not fall from the sky, it was created by the Tea Party fueled GOP House and served by the phony fiscal scolds like the Fix the Debt group and other Pete Peterson financed organizations.
The insanity of it all is this mad dash is all centered on replacing the existing "severe austerity measures," as the Washington Post called them, with different severe austerity measures. This is Very Serious People thinking at work.
In a rational world, the discussion would be about short term economic stimulus, and if we must, long term deficit reduction. But there is nothing rational about the Beltway or the world inhabited by Very Serious People. Thus, while the President proposed short term economic stimulus in his plan to address the fiscal cliff, it never even got a cursory hearing. We are now debating which least bad option to go with. In my view, the least bad option now is going over the cliff.
(Continue reading below the fold.)
While the primary blame for the state of the debate goes to mindless Republicans, fearful of the Tea Party, a great deal of blame must go to the Very Serious People who are decidedly unserious about policy. Consider Fix the Debt, led by the most ridiculous fiscal scold of them all, Maya MacGuineas. This absurd NYTimes Fix the Debt puff piece inadvertently demonstrates the problem, which starts with the opening lines:
Maya MacGuineas has been ringing alarms about the nation’s growing debt for 15 years, imagining a day when a president and a Congress might finally work together to curb deficit spending. After watching President Obama and Speaker John A. Boehner once again come close to agreeing on a plan, only to see a deal slip away, she is troubled but undeterred.15 years ago, the federal government was on the way to budget surpluses as far as the eye could see:
President Clinton today projected that the United States will have a $1.9 trillion budget surplus over the next decade. He said the increase in the expected surplus means the government will be debt-free by 2010. The fiscal 2001 budget surplus was projected at $256 billion, White House officials said. The fiscal 2000 surplus was $237 billion, officials said, which capped four straight years of budget surpluses.
This was the first time the country has had four straight budget surpluses since 1930, officials said. The increase in the surplus [...] marks the ninth consecutive year in which the government’s bottom line has improved, a first. In June, Clinton projected a 10-year surplus of $1.87 trillion. The new figure was $300 million higher. [Emphasis supplied.]
A fiscal scold should have been pleased and worked hard to maintain the policies that led to this policy result: to wit, the policies of the Democratic President Bill Clinton, which focused on economic growth and a fairer tax system.
But we all know what happened next: George Bush was named President by the Supreme Court, and Congressional Republicans, enabled by "fiscal scold centrists" like Max Baucus enacted the Bush tax cuts and approved of disastrous budget busting wars. Throw in the worst economic calamity since the Great Depression, and now we can see the return of Maya MacGuineas, after the fiscal horse left the barn.
Where were Pete Peterson and Maya MacGuineas then? Nowhere to be found. Indeed, their cohort Alan Greenspan supported the Bush tax cuts:
Alan Greenspan, the chairman of the Federal Reserve, defended himself on Tuesday against Democratic lawmakers who say he contributed to soaring budget deficits by endorsing President Bush's tax cuts in 2001. "I look back and I would say to you, if confronted with the same evidence we had back then, I would recommend exactly what I recommended then," Mr. Greenspan said. "It turns out we were all wrong." [Emphasis supplied.]Not all of us Mr. Greenspan. Just the Very Serious People. As bobswern remarked, ""Experts are people that make quiet mistakes." And after the "quiet mistakes of Alan Greenspan and other Very Serious People like Maya Macguineas, who should we listen to?
“For the longest time, nobody cared, nobody listened,” she said. “It was 15 years of irrelevancy.” [Remember that 15 years ago, President Clinton had led the federal government to an unprecedented string of budget surpluses]. Two years ago, things changed. With the country adding more than a trillion dollars a year to its debt, more members of Congress became interested in budget data and advice, Ms. MacGuineas said. Corporate leaders and the American public also began tuning in to the looming debt problem.
The Campaign to Fix the Debt started to come together at a salon dinner held in the backyard of Senator Mark Warner, Democrat of Virginia, in the fall of 2011. An influential group of economic, political and business leaders — including the former Federal Reserve chairman Alan Greenspan and Mark Bertolini, the chief executive of the Aetna insurance company — huddled in a too-small tent in the pouring rain. [Emphasis supplied.]
Yes, let's listen to Alan Greenspan AGAIN. That worked out so well before. And who does Maya Macguineas' phalanx of Very Serious People think should suffer? Certainly not rich people:
After two decades of being “obsessed” with the country’s long-term debt problem, Ms. MacGuineas said that at this point any deal that could get bipartisan backing and avoid big tax increases and spending cuts at the beginning of January might be the right one. But while Fix the Debt has not advocated for a specific solution, it has pushed for a “balanced” plan, which is Washington-speak for one that includes significant entitlement cuts as well as tax increases. It describes Social Security solvency as a long-term goal, even though many Democrats say that the program, which has a dedicated financing stream from payroll taxes, should not be a part of the broader debt negotiations. [Emphasis supplied.]Who should suffer? Of course not the rich! Just old and poor people. Job creators!
And this is why going over the cliff is the least bad option. Under the current scenario, half of the spending cuts would go to defense, making Maya Macguineas' Very Serious People suffer (the defense industry is a major player in Fix the Debt). Let the Bush tax cuts expire so that rich people suffer too. Do working Americans also suffer pain? Of course. Is this bad economic policy? Of course. But it is less bad than what Fix the Debt and other Very Serious People propose. And what Republicans will accept is even worse.
There is an argument to be made for President Obama's proposed small bargain, but that postpones the major fight for later.
Beyond that, there is serious doubt that Republican will even agree to the 'Small Bargain." In any event, good public policy is not even on the table. In no small measure due to the stupidities and corruptions of groups like Fix the Debt.
At some point, 'No' must be the answer to Republicans, 'fiscal scold' Democrats AND the Very Serious People like Maya Macguineas and Alan Greenspan. No more quiet mistakes from these 'experts' please.
After there is realization that Democrats finally will say No, then, perhaps, a true 'balanced approach' -- one that recognizes that economic conditions, coupled with policies that favor the rich, are the problem, can emerge. Then, maybe, good public policy will be adopted.
But it appears going over the fiscal cliff must occur first. It is the least bad option.