The Faux Deficit Debate
However, since taking office Mr. Obama pushed through a $787 billion stimulus, a $33 billion expansion of the child health program known as S-chip, a $410 billion omnibus appropriations spending bill, and an $80 billion car company bailout. He also pushed a $821 billion cap-and-trade bill through the House and is now urging Congress to pass a nearly $1 trillion health-care bill.
Some of you may have read the above quote — from an editorial written by Karl Rove this past week in the Wall Street Journal – and thought to yourselves, “Karl Rove? Is he still alive?” A very natural question to ask, given the events of the past few years, which saw the Bush administration (and its accompanying historical legacy, or lack thereof) reduced to rubble thanks in large part to the horrific decision to put a purely political animal like Rove in charge of White House policy.
We’d also watched last fall as Rove acolyte Steve Schmidt entered the all-time Hall of Campaign Managerial Shame thanks to his ignominious bungling of the McCain run for the presidency, during which time Schmidt had pulled the trigger on two of the more nakedly cynical vote-getting ploys in our recent electoral history — the last-minute addition of dingbat bible-thumper Sarah Palin to the ticket in a transparent ploy to snatch up votes from the Limbaugh demographic McCain himself reviled, and the late-stage decision to use Palin to run a race-baiting campaign painting their black opponent as not “one of us.”
Not only did neither ploy work, but Schmidt may have ruined race-baiting/guilt-by-association campaign strategies at the national level for a whole generation of corrupt politicians, so badly did all his harping on Bill Ayers blow up in his face.
Karl Rove may have won George Bush the White House two times in a row, but since then he and his minions have been on one of the worst political losing streaks ever, surrendering both houses of Congress to the Democrats and the presidency to a black “community organizer,” to say nothing of how badly all of the policies he encouraged Bush to pursue have fared in reality, i.e. the world out side the voting booth (if there’s any justice, he and Dick Cheney will stand next to each other on the dock in the next world for getting us into Iraq).
And yet here is Rove, talking about the deficit problem in the Wall Street Journal, and watch and see if he doesn’t get some traction with this reappearance on the policy stage. As bizarre as it sounds, the stage is set for Barack Obama, supposedly the most liberal president in history, to march into his second year in office behind a banner being waved by Karl Rove, a political corpse.
The early warning signs on this first popped up a few weeks back, when Obama surprised reporters during his trip in China with an offhand remark about getting deficits under control. That was followed by a carefully orchestrated series of leaks and quotes from senior officials to the effect that Obama’s next State of the Union address was going to be focused on reducing the deficit. Included among those was a quote by Peter Orszag, Obama’s budget director, who said:
“The President strongly believes that as the recovery strengthens and job growth returns, we will have to take the tough steps necessary to return our nation to a fiscally disciplined and sustainable path. We recognize that the projected medium-term deficits are too high, and as part of the FY 2011 budget process, we are committed to bringing them down.”
Anyone who was paying attention might have noticed that almost simultaneous to these pronouncements from the White House came a series of releases from Democratic congressional leaders like Nancy Pelosi promising just the opposite — another deficit-fueled jobs program planned for launch next year. Pelosi openly dropped a turd on all the White House fretting about deficits:
“The American people have an anger about the growth of the deficit because they’re not getting anything for it. … If somebody has the idea that the percentage of GDP of what our national debt is will go up a bit, but they will now — and their neighbors and their children — will have jobs, I think they could absorb that, and then we ride it out and bring money in.”
This divide within the Democratic Party is very notable and is a signal that a lot of Democratic leaders outside the White House have gotten tired of Obama’s economic team, comprised as it is largely of people close to former Clinton Treasury Secretary Bob Rubin.
Rubin is the quintessential “new Democrat,” a Wall Street oligarch who believes strongly in balanced budgets, free trade and a laissez-faire deregulatory posture toward big business but sees himself as a political liberal because he favors minimal social safety nets of the sort dreamed up in cherry-paneled offices at the Brookings Institute, i.e. expanded unemployment insurance or wage insurance. In other words, repeal Glass-Steagall by day, give eight bucks to the soup kitchen by night. The more recent Rubinite legacy has been the push for huge and unrelenting bailouts of Wall Street companies followed by ameliorative and comparatively much smaller one-off bailouts of actual human beings, spread out over the entire population.
I have more about this in the current issue of Rolling Stone, but the Obama administration is filled with people connected to Rubin, including Orszag (who headed Rubin’s Hamilton Project, an economic think-tank founded by Rubin*), NEC director Larry Summers (who worked under Rubin in the Clinton White House), Tim Geithner (ditto), NEC deputy Jason Furman (also from the Hamilton Project), Mike Froman of the NEC and the NSC (tied to Rubin through Citigroup), and others.
This team has stepped in and helped Wall Street rebound thanks to massive government assistance, but now appears to want to pull back on spending. In other words, now that Wall Street is back collecting huge bonuses thanks to the big welfare check they spent most of this year forking over, the Rubinite school in the Obama White House can go back to believing in a capitalist economy that, for everyone else, is wonderfully self-correcting. A hand up, not a hand out!
This is where the new propaganda meme that has been offered by Rove and will now be followed by the White House comes in. There is going to be a lot of noise about how the White House is suddenly responding to voter anger over “deficits,” which of course grew monstrously throughout the Bush administration and spiked to previously unimaginable levels after last year’s rescue of AIG, Citigroup and other banks, but somehow managed to avoid inspiring broad outrage among the conservative talk-radio crowd until last February, after Obama announced his stimulus plan.
Note that in his essay decrying all the deficit spending, Rove lists the stimulus, the child health care bill, and cap-and-trade, but manages somehow to leave out the Wall Street bailouts, which dwarf these other programs combined by a factor of ten at the least (not just the TARP but the whole universe of other lending facilities, including those involving the Fed and the FDIC). That’s probably where this debate is going: the press is going to agree to call the stimulus and health care “spending,” while pundits who discuss the bailouts will just shrug and say, “What was the alternative — letting the economy fail?”
At this point the size of the national debt is so absurd, i.e. has drifted so far in the direction of incomprehensible fantasy, that it’s hard to imagine what the real effect of further bailouts (be they of banks or, through a jobs program, of people) might be. In fact, any economist who claims to know the precise answer to that question, given the number of moving parts to consider, seems to me almost guaranteed to be full of shit.
I do think, however, that it’s time to stop talking in coded language about this stuff and just admit that we’re in a survival drama, with too many mouths and not enough food in the lifeboat. Last fall, when Lloyd Blankfein’s bonus was at stake, the economy was an urgent international emergency and no limit was placed on how much money could be borrowed to stave off The Unimaginable. But now, when unemployment in the general population is soaring and the middle class is quickly turning into an underclass, suddenly we’re putting on our tweed jackets and talking in professorial tones about the dangers of deficits and fiscal irresponsibility.
That’s bad enough, but what’s going to be even worse is when the Obama administration starts pointing to all the Teabagger rallies and waving the “voter anger” card the discredited schmuck Karl Rove is bleating about as an excuse for why the spigot has suddenly been turned off.
When the White House does that, and it will, it’s going to be a lie, and pretty transparent one at that. Obama’s handlers surely know that they’re not going to win so much as one teabagger vote by shaving a few decimal points off this or that stimulus program. They just don’t want to admit what the plan is, which is to save one group of asses, and not another.
* Jonathan Schwarz over at Tinyrevolution.com alerts me to this very interesting footnote — when the Hamilton Project was launched a few years back, only one Senator attended. Guess who? (Video clip included).