Now that the academic and evidentiary support for austerity is shot full of holes, President Obama has an opportunity to perform a face-saving extrication from his position. Will he do it?
A recent study by a grad student at the University of Massachussets has pointed out critical errors in celebrated Harvard economists Carmen Reinhart and Ken Rogoff’s study which has been the much-cited intellectual underpinning of the austerity movement. In short R-R’s study showed a correlation between high levels of national debt (with a stated critical threshold point at 90% of GDP) and slow economic growth. The results of the study have been often stated as proof that debt at 90% GDP causes slow economic growth and that austerity measures must be employed to bring down debt.
Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact. For example, a Washington Post editorial earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.
There were good reasons for not accepting the Reinhart and Rogoff results even before this error was uncovered, as many of us had argued. Most importantly there is a serious issue of the direction causation. Countries tend to have high debt levels because their economies are doing poorly.
Unfortunately, there was not much press notice of the causation problem in R-R’s study, probably because it’s the kind of story that the media find too difficult to explain. But when the grad student from the University of Massachussets discovered spreadsheet errors in their work, now there was an issue that our news media could latch onto with confidence that it was within their ability to explain it. Consequently it has gotten quite a bit of coverage and R-R’s study has been discredited.
Surely it has an historical meaning and there are some roundabout descriptions of modern progressivism online like this one from Wikipedia:
Today, members of the Green Party of the United States are most likely to self-identify as liberal progressives. In the U.S. Congress, the Congressional Progressive Caucus is the most liberal wing of the Democratic Party, and it is often in opposition to the more centrist or conservative Democrats who form the Blue Dogs caucus. It is also in near-continuous opposition to the Republican Party.
“The truth of the matter is that my policies are so mainstream that if I had set the same policies that I had back in the 1980s, I would be considered a moderate Republican.”
Further, what does it mean when three quarters of the Congressional Progressive Caucus won’t stand up for the indispensable legacy of the progressive New Deal and Great Society advances, Social Security, Medicare and Medicaid?
For the social compact of the United States, most of the Congressional Progressive Caucus has gone missing.
While still on the caucus roster, three-quarters of the 70-member caucus seem lost in political smog. Those 54 members of the Progressive Caucus haven’t signed the current letter that makes a vital commitment: “we will vote against any and every cut to Medicare, Medicaid, or Social Security benefits — including raising the retirement age or cutting the cost of living adjustments that our constituents earned and need.”
… Addressed to President Obama, the letter has enabled members of Congress to take a historic stand: joining together in a public pledge not to vote for any cuts in Social Security, Medicare or Medicaid. …
The Progressive Caucus co-chairs, Raul Grijalva and Keith Ellison, signed the letter. So did Barbara Lee, the caucus whip. But no signer can be found among the five vice chairs of the Progressive Caucus: Judy Chu, David Cicilline, Michael Honda, Sheila Jackson-Lee and Jan Schakowsky. The letter’s current list of signers includes just 16 members of the Progressive Caucus (along with five other House signers who aren’t part of the caucus).
What about the other 54 members of the Progressive Caucus? Their absence from the letter is a clear message to the Obama White House, which has repeatedly declared its desire to cut the Social Security cost of living adjustment as well as Medicare. In effect, those 54 non-signers are signaling: Mr. President, we call ourselves “progressive” but we are unwilling to stick our necks out by challenging you in defense of Social Security, Medicare and Medicaid; we want some wiggle room that you can exploit.
Now, however, the, “no doubt progressive” President is about to release his budget, which will reportedly contain cuts to programs that have always been the core of progressive policy:
President Obama’s budget proposal to be unveiled next week will include cuts to Social Security and Medicare, according to media reports Friday morning.
The most controversial element of Obama’s proposal is the inclusion of “chained CPI,” the adjustment that would over time reduce cost-of-living increases to Social Security and other federal benefit programs – effectively, a cut to Social Security benefits by tying them to inflation.
Progressives in the Media and the Blogosphere
So while many congressional “progressives” have chosen between their divided loyalties and come up as cowering yes men for the misguided juggernaut of the Obama administration, parts of the progressive media are spouting propaganda:
John Nichols tells only part of the truth in this piece and the failure to represent the whole truth makes it a specious bit of propaganda, that distracts and diverts attention away from those that are carrying out the agenda of the big money forces he decries.
[Perhaps this is a problem created by editing as Nichols is generally a reasonable guy, who has written a number of articles calling for opposition to President Obama’s Chained CPI plan. This was a publication of The Nation magazine, so perhaps they edited it and it represents their editorial position more than Nichols’ opinions and position. Since Nichols is the face, name and voice of this piece, however, the criticism will be directed at him and presumably if he gives a damn about what some blogger says, he can assert that the blame lays elsewhere.]
Nichols explains that in, as he puts it a, “Dollarocracy,” the ideas that get put forward are the ideas that have big money behind them, like cutting Social Security. He goes on to highlight the fact that austerity-loving-corporate-greedheads were able to get, “one of their own,” Paul Ryan on a ballot to run for Veep to push their plans. What Nichols fails to mention is that those austerity-loving-corporate-greedheads were going to win no matter what this election. They already have a Democratic president who is promoting their agenda on the other ticket. Guess what, they won! And there was no chance that they wouldn’t!
How is it that Nichols could have failed to notice and call out the Obama administration and the many Democrats that are performing the bidding of the, “Dollarocracy” with such alacrity these days? Nichols is an experienced pundit, he certainly has been around and allegedly paying attention long enough to know who has been pushing the 1%’s, “Dollarocracy” agenda.
Let’s take a trip through some of the evidence that one would have to ignore to create that Dollarocracy video with such a glaring omission in it…
U.S. Treasury Secretary Timothy Geithner recently suggested the Simpson-Bowles deficit reduction framework is the way forward in terms of balancing the federal budget. [..]
“We need to take advantage of the incentive created by the sequester and these expiring tax cuts to force this town to confront and take on the things that divide us now in these long-term fiscal reforms so we can go ahead and govern,” he said. “This is a place where people spend a lot of time worrying whether Washington can work again and for Washington to say, ‘We’re going to defer,’ I don’t see how that would be helpful to confidence.” [..]
The lame duck session has so many fiscal issues expiring at the same time that many view it as an opportunity to put together the long-sought “grand bargain” on deficit reduction. Erskine Bowles and Alan Simpson have recently come out of their shells and resumed a high-profile media tour in an effort to get their framework into the discussion for the lame duck session. The Bowles-Simpson plan does include tax increases of hundreds of billions above the Bush tax cut rates, albeit lower than what would occur if the Bush tax cuts were allowed to completely expire.
Because of this, Democrats like Nancy Pelosi have embraced Bowles-Simpson to tease Republicans for their opposition to higher tax rates. But that also puts Democrats on the hook for embracing cuts to the social safety net, including Medicare and Social Security. And on Wednesday, Geithner said that Bowles-Simpson is “the only path to resolution politically [and] growing essentially economically, and I think that’s where it’s going to end up.” He didn’t make the caveats on Social Security or other entitlements.
David also noted that Sen. Max Baucus (D-MT), chairperson of the tax writing Senate Finance Committee, would hold hearing in the next few weeks on Bowles-Simpson and Domenici-Rivlin, which combine revenue-raising tax reforms with restraint on entitlement spending. Baucus told The Hill:
“My view is everything’s on the table,” Baucus said. “That’s a psychology which I think is very important to keep people talking, keep people working.”
In his comprehensive article on Geithner’s alliance with JP Morgan CEO Jamie Dimon and Cat Food Commission co-chair former Sen. Alan Simpson (R-UT), Richard (RJ) Eskow had this to say about the coming of Simpson-Bowles:
Geithner said Simpson-Bowles was the perfect recipe: “tax reforms that raise a modest amount of revenue tied to spending savings across the government that’s still preserving some room to invest in things that matter to how we grow moving forward.” He added, “There’s no plausible way to get there economically or politically without that kind of balanced framework again that marries tax reform with broader spending reforms,”
Geithner is joining leading Democrats on the Hill like Sen. Max Baucus and Rep. Nancy Pelosi in backing the plan. And take careful note of the fact that they’re all using the phrase “tax reform” instead of “tax increases.” They don’t just plan to pay for the wealth and misdeeds of the Dimon crowd with your Social Security and Medicare benefits. They also plan to raise your taxes, not theirs. The Simpson Bowles plan would actually lower the top tax rate for people like Jamie Dimon, while “tax reform” would tax away tax deductions for the middle class’s health insurance, mortgages, and other expenses.
All our elected officials are completely out of touch with what Americans want and need. Yes, indeed, something wicked this way comes.
The extreme right wing’s attacks and deceptive campaigns over the course of decades are now close to fruition with the help of neoliberal Democrats.
President Obama has come very close to helping right-wingers realize their long-desired goal; only the incredible intransigence of congressional Republicans has saved the social safety net thus far.
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