November 15, 2012
by Arun Gupta
If you voted this election, whether for Barack Obama, Jill Stein or even Mitt Romney, you did not vote for austerity. But that’s of little consequence to Obama and the Republicans. The two parties are currently drafting measures that will undermine Social Security, Medicaid and Medicare as the economy approaches the “fiscal cliff” at the end of this year when more than $600 billion in tax increases and spending cuts will kick in absent a new budget deal.
They hope to strike a “grand bargain,” but are bickering over how much to increase taxes and cut spending. The spotlight has been on the Bush tax cuts, which Obama campaigned on repealing for the rich, but this issue is a sleight of hand that distracts the public from the bipartisan plotting against your retirement income and healthcare.
Surely, you say, Obama will thwart the Republicans’ scheme to dismantle social welfare. After all, it’s well known that retirement programs are healthy. Social Security is solvent through 2033 and Medicare is solvent through 2024. Both can be strengthened for decades to come with relative tweaking.
Trusting a Democratic president with protecting the general welfare is ill-advised when the last one gave us NAFTA, welfare “reform” and the repeal of Glass-Steagall. Not only has Obama been gunning for retirement programs since 2008 (I’ll explain), he’s so hell-bent on reducing deficits that he’s willing to damage the economy. The Congressional Budget Office estimates if the economy plunges over the cliff, recession will hit in 2013. Interestingly, the CBO calculates that if all the tax cuts are left in place and no spending cuts are enacted the economy will grow by 4.4 percent next year and add 2.3 million full-time equivalent jobs. This would be the highest rate of growth since the late 1990s.
Now, it’s a stone-cold fact that the Democrats are willing to gut social welfare. Listen to New York Times chief political correspondent Matt Bai: “Mr. Obama, during his ‘grand bargain’ negotiations with the House speaker, John A. Boehner, in the summer of 2011, had already signed off on painful cuts to Medicare, Medicaid and Social Security.” Bai says there was “near unanimity” among Obama’s advisers and Harry Reid and Nancy Pelosi said “they would get behind it.” Paul Krugman’s assessment is harsher, saying Obama was “willing to sign on to … draconian cuts in key social programs.”
During the summer of 2011 the Obama White House and the Republican House played chicken over raising the federal debt ceiling. Bai says the two sides were haggling over the amount of cuts, not the question of bleeding retirement programs. Obama was willing to sacrifice $1 trillion in Medicare cuts over two decades, $110 billion in short-term Medicaid cuts, and acquiesced to “changing the Social Security formula so that benefits would grow at a slower rate.”
Mind you, the Budget Control Act Obama and Boehner eventually inked not only put the fiscal cliff in place, it cut spending for a second time in 2011. Over the next decade this will chop $900 billion in “non-defense discretionary spending.” This is wonk-speak for social programs, which will shrink to pre-1962 levels by 2021. Simply put, Washington already plans to roll back the Great Society – even before the fiscal cliff is reached.
But wasn’t Obama at the mercy of a Tea Party Congress threatening default unless he forked over $2 trillion in spending cuts? That’s what Bai argued last April: “Not only was [Obama] bent on avoiding a catastrophic debt default, but he needed to get out from under the debt issue, to demonstrate that he cared about reducing deficits before public concerns about government spending, stoked by rhetoric on the right, overwhelmed his presidency.”
There are more things wrong about this than a penguin in the desert. Allowing Republicans to use “economic blackmail” only emboldens them. The fiscal cliff is the third time the right is using mafia tactics – “Nice country you got here. Shame if something were to happen to it” – as Krugman describes it. The only way to call the right’s bluff is to allow the economy to go wobbly so Wall Street, the GOP’s masters, will bring their attack dogs to heel.
Also, notice that Bai thinks allowing a default is unthinkable, but pilfering food, medicine and money from more than 100 million Americans is perfectly fine. As for Bai’s contention that “public concerns about government spending” stoked by the right would overwhelm Obama’s presidency, it’s utter bullshit.
Take a look at this site, which covers 25 polls on public priorities going back to June 2010. When pollsters list options, which skew responses, the economy and jobs poll close to 50 percent as the top priority, trouncing the deficit, which averages in the low twenties. The latter figure, incidentally, is similar to the percentage of voters in the 2010 mid-term elections who said they supported the Tea Party. In six polls, the response was open-ended, which better reflects what the public thinks. Economy and jobs still notched 49 percent on average. The deficit and national debt was barely a blip, averaging 4 percent.
No matter how the data is sliced then, the deficit is an inside-the-Beltway obsession that at most inflames right-wing firebrands who are never going to support the Democrats.
Nate Silver crunched the numbers on the debt deal in July 2011 – if there’s only one lesson from this election, it’s that Silver’s number-crunching is unparalleled – and found House Republicans to be “extremely conservative on fiscal matters and … significantly out of step with the public as a whole.” As for the mix of spending cuts and tax increases Obama put on the table, it was “quite close to, or perhaps even a little to the right of, what the average Republican voter wants, let alone the average American.”
So why didn’t Obama tune out the chattering classes and stare down the Tea Party? It would have strengthened his standing with the public going into the 2012 election. From this evidence, it’s impossible to claim Obama is hostage to the right. The truth that remains, even if it seems improbable, is that Obama is a right-wing politician who has had the welfare state in his sights from day one.
Don’t take my word for it. Obama said it on January 15, 2009, in a “wide-ranging” interview with the Washington Post five days before his inauguration. The article was headlined: “Obama Pledges Entitlement Reform; President-Elect Says He’ll Reshape Social Security, Medicare Programs.” Obama said this was part of his legacy, declaring that he was “willing to spend some political capital” so that the “the hard decisions are made under my watch, not someone else’s.”
This was not idle chatter. Here is a sampling of what Obama said and did the next two years.
In February 2009 Obama held a “Fiscal Responsibility Summit” at the White House, in which he issued dire warnings of future generations being “saddled with our debts.”
In his 2010 State of the Union Address he proclaimed, “Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t,” and called for a three-year spending freeze that fell heavily on social programs.
On February 18, 2010, Obama signed an executive order creating the “Simpson-Bowles Commission” tasked with making “recommendations that put the budget in primary balance.” In November 2010, right before the midterm elections, it proposed reducing corporate tax rates by 20 percent and on the wealthy by 30 percent while raising rates on middle incomes and the retirement age to 69. Remember, this was in the name of cutting the deficit.
This is before the Tea Party swept into Congress, so there was no pressure on Obama to appease the right. By adopting Tea Party talking points on spending and comparing government to a family – what family do you know that has 8,100 tons of gold reserves, a space program and embassies in some 200 countries? – Obama legitimized debt as a major concern going into the 2010 election. A little more history. Obama ran in 2008 on repealing the Bush tax cuts. But he reneged on his promise just one month into his presidency even though he was gushing with political capital, the right was in disarray and the Democratic-controlled Congress was ready to pass it. (After campaigning in 2012 on abolishing tax cuts for households earning more than $250,000, Obama indicated he was willing to renege once more days after being re-elected.)
For his first term Obama followed the script penned by Larry Summers, his chief economic adviser in 2008 and the Clinton-era architect of the financial bubble that exploded four years ago. Writing on September 28, 2008 in the Financial Times, Summers outlined the Rosetta Stone for Obama’s presidency.
Summers’ article was published right after Lehman Brothers’ collapse, the financial Pearl Harbor that threatened the global economy. It was a classic case of The Shock Doctrine: using the meltdown to go after social welfare. He argued for a stimulus, while taking pains to mention, “We still must address issues of entitlements and fiscal sustainability.” He also said no “new entitlement programs or exploding tax measures,” which included “healthcare restructuring,” but not single-payer healthcare. Summers’ silences were notable: nothing about regulating finance, strengthening labor organizing or addressing the home foreclosure crisis.
Fiscal sustainability is simply a euphemism for cutting social spending to pay for deficit reduction. Economists like Dean Baker and Paul Krugman have demolished every rationale for deficit reduction under present circumstances: with interest rates below the rate of inflation, bondholders are paying the U.S. government to hold their money; reducing the deficit would strangle growth; the best way to reduce the deficit is through growth and inflation; and the plan to hack away $4 trillion in a decade will not reduce the national debt meaningfully.
Even if the deficit does need to be reduced, then the reasonable course is to have the Pentagon and wealthy pay for the two unfunded wars, Bush tax cuts and Wall Street crash that blew up the national debt. Which is why Obama’s song and dance about “shared sacrifice” is so grating – and probably music to granny-starver Paul Ryan’s ears. Obama and Boehner are wrangling over whether or not the Gulfstream set has to part ways with a 4.6 percent nudge in income tax, but they agree that grandma must skimp on food, heat and her meds. “Hey, we’re all in this together.”
Whatever your politics, you’ve probably been savoring the humiliation of “the biggest loser” Karl Rove, cackling over Bill O’Reilly’s lament that “the white establishment is now the minority” and sharing “White People Mourning Romney.”
Well it’s time to wipe the gloating off our faces and get to work stopping Obama from stealing our healthcare and retirement income, otherwise it will be Wall Street’s turn to gloat. Yet again.