JONATHAN CHAIT AUGUST 6, 2011
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S&P's argument contains a crucial flaw, but its ultimate conclusion is right. The American political system is much riskier and less stable than it was before.
The basic situation is that we have a political system that, in most cases, requires both parties to agree on major policy changes. One of those parties is only willing to bring revenue in line with outlay if the ideological terms of that adjustment are 100% congenial to their demands -- and even then, it is far from clear that the Republican approach would actually succeed in stabilizing the deficit. In the short term, action on a fiscal adjustment is hopeless.
Now, what about that flaw? The flaw is that the S&P seems to believe that Republican opposition to tax increases can block any fiscal adjustment indefinitely. It writes:
Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.
That is a total misread of the debt ceiling showdown. It did demonstrate Republican opposition to increasing revenue. But the crucial reality is that the Bush tax cuts expire after 2012 barring action by Congress. What's more, Republicans have signaled that they will not extend the tax cuts on income below $250,000 a year unless the tax cuts on income over that level are extended as well. As I've argued endlessly, this provides a huge opportunity to the Obama administration. It can simply refuse to extend the tax cuts for the rich, demand a clean tax cut bill for income under that level, and when Republicans refuse, blame them for hiking middle class taxes while taking quiet satisfaction as projected revenue increases by $4.6 trillion, solving the medium-term deficit problem. I can't be sure by any means that this will happen. But this is an open question, and the debt ceiling deal did not reduce the likelihood of a tax stalemate.
So the risk does not lie between now and the end of 2012, and there's a decent chance that the stalemate will actually solve the problem. However, the long-run political risk is quite severe. No other advanced country has a major political party influenced by supply-side economics and the moral teachings of Ayn Rand, and therefore, no other major political party can match the GOP's theological opposition to revenue. One result is that the Republican Party is always going to use its political power to reduce revenue, which means that the U.S. budget can never be stable for an extended period of time. If a center-left coalition succeeds in stabilizing the budget, Republicans will eventually destabilize it. It is difficult to imagine the GOP, as it's currently structured, encountering conditions in which they believe taxes are not too high.
Presidential systems of government, with the legislature and the executive often representing opposing parties, are inherently prone to crises of legitimacy. The declared Republican goal of using the debt ceiling as an instrument to extract policy concessions on a regular basis adds an explosive new element of long-term risk.
In a nutshell, when you have a political party that does not agree that revenue levels must bear a relationship to outlays, and is willing to foment a systemic crisis in order to maximize its leverage, you're in trouble.
56 comments
The Democrats had their opportunity to let ALL the irresponsible Bush43 tax cuts expire as planned December 2010. The moment to re-seize the mantle of fiscal responsibility that Clinton made a Democratic Party trademark has been destroyed by Obama-Pelosi 2009-2010. Harry Reid's contribution to the debacle was to NOT raise the debt ceiling in December 2010.
- K2K
August 6, 2011 at 1:02pm
I quite agree, K2K. But then we had to listen to all sorts of friggin' nonsense about Obama's "deep plan" to exploit his failure of nerve for ultimate political gain. We see how well that went.
- roidubouloi
August 6, 2011 at 1:19pm
Chait is right. How can you have a great country with a two party system, when one of the parties is essentially an Ayn Rand/Grover Norquist Party and looks to a fantasy and idealized 18th century for its ideals? Something has to give. And it looks like it did. Roid, for the good of America, we won't be a great country until these teabags are utterly crushed.
- MikeB.
August 6, 2011 at 1:33pm
- They believed they could meet the burden to tell the truth without explaining the details within the conditions which led them to that conclusion. They issued an opinion, included some facts but drew a line at including that which would bind the guilty politicians to a remedy. They don't like what they see, they said they know what needs to be done and that's it. They give scores, assign rankings provide part of the why it happened and none of the how to fix it. Nice work if you can get it.
- michaelg
August 6, 2011 at 1:36pm
http://www.facebook.com/pages/Draft-Robert-Reich-for-President/209636949062758
- IggyPop
August 6, 2011 at 1:42pm
K2K, the price for letting the tax cuts expire would have been leaving the jobless people without unemployment insurance. IN any case, the Republicans think that low taxation and high unemployment will be to their benefit. In this they are mistaken. One of the side effects of our economy of "borrow and spend" has been that many lower middle class voters have had the luxury of voting Republican for many years without being severely affected by their economic policies. That time is over. Once these voters see the consequences of Republican economic policy on their own lives they won't have the luxury of voting for "smaller government."
- arnon
August 6, 2011 at 1:43pm
Chait, how many times does Obama have to tell you: he does not want to restore Clinton-era tax rates? He only wants 1/5 of the revenue back. That's probably, ultimately what he'll drag home in one form or another: $800 billion -- $1 trillion in new revenue over ten years. taken from the wealthiest. I suspect that the busted grand bargain you decried will be the endgame, delivered in pieces.
- adsprung
August 6, 2011 at 1:45pm
MikeB: it isn't just the Tea Baggers who need to be crushed, it's the whole Republican Party. The entire GOP is deranged. The Tea Party just represents the farthest-right segment of this collection of anti-tax maniacs. The Republicans were impossible to deal with long before the Tea Party arose. adsprung: Obama is just SAYING he doesn't want to restore the Clinton-era tax rates. He says he wants to retain the lower tax rate for people making less than $250,000 a year to gain support from middle-class voters. But he's counting on Republican intransigence on this issue to bring an end to all the tax cuts in order to bring in a torrent of needed revenue. This stance is what any savvy politician would take. For you the Democrat, it's win-win-win: You look good in standing up for the middle class, the Republicans look bad in standing up for the rich, and the deficits finally decline dramatically. The Bush tax cuts simply have to be ended in their entirety to keep the government from going over a financial cliff.
- DAVIDDREIER@EARTHLINK.NET-old
August 6, 2011 at 2:08pm
"That time is over. Once these voters see the consequences of Republican economic policy on their own lives they won't have the luxury of voting for "smaller government."" Unfortunately, because Obama keeps adopting Republican economic policy -- with whatever excuse -- the voters will not see what is occurring as the consequences of supply-side nuttery. They will, and should, blame Obama. Had he let the Bush tax cuts expire, citing the importance of returning to some fiscal sanity so that we can face our economic challenges, had he then put forward a bill to extend unemployment and further stimulate the economy with direct spending and traveled the length and breadth of the country explaining the urgency of the situation, had the Republicans turned him down, as they would have, had the inevitable pain, suffering, and downturn then followed, as it would have with the withdrawal of so much demand, had he refused to countenance spending cuts or any price for raising the debt ceiling, had the Republicans either blinked or pulled the trigger, had Obama, in the latter case, pro rated all Federal payments to military families, suppliers until the Republicans were crushed, . . . might Obama then have been in the position to rally public opinion to overwhelm the Tea bag lunatics? Wkwami would say things might have been worse. Actually, he would say that things would have been worse because this is the best of all possible worlds and Obama does the best possible job in this the best of all possible worlds. But I think we would have been standing at the threshold of the road to political recovery. The only thing worse than Republican dirty deeds is Democrats doing it for them. Because then the public cannot understand who is responsible for what and cannot vote accordingly.
- roidubouloi
August 6, 2011 at 2:15pm
"Unfortunately, because Obama keeps adopting Republican economic policy -- with whatever excuse -- the voters will not see what is occurring as the consequences of supply-side nuttery. They will, and should, blame Obama." I was thinking about "the long run." I don't expect much change in voter sympathy in this upcoming election. Still, if the economy worsens suddenly and severely (I am anxious to see how the Stock Market react on Monday to the S&P downgrade and China's warning) voters may wake up sooner. Since Obama is incapable of fighting back, it's up to the rest of the Democrats to make sure voters know why this is happening now. Democrats also need to make sure Obama get the message that he either stands up for his Party's values or else. My own preference is that Obama decline to run for re-election and that he let Biden or Hillary become the nominee in 2012.
- arnon
August 6, 2011 at 2:29pm
"I quite agree, K2K. But then we had to listen to all sorts of friggin' nonsense about Obama's "deep plan" to exploit his failure of nerve for ultimate political gain. We see how well that went." I have to confess, roid, that until the debt ceiling debacle I was one of the folks who bought into at least the possibility of the supposed "deep plan." I had my doubts, but was willing to give Obama the benefit of the doubt. Not any more. His political judgment is questionable, his economic policy prescriptions Hooveresque. As for your piece, Jonathan, you hit the nail on the head of why S&P's conclusion is correct. (Though don't get me started on why in the world we're still in thrall to the corrupt clowns who assessed Wall Street's pre-crash financial shenanigans as AAA.) But I have to agree with others that, after the past few surrenders by Obama, it's a better than even chance that he'll cave yet again on extending the Bush tax cuts if he's re-elected.
- Thunderroad
August 6, 2011 at 2:48pm
JC, I get the logic of your point about ending all Bush tax cuts. However how can you be sure Obama sees eye to eye with you on this?
- MikeB.
August 6, 2011 at 3:20pm
"might Obama then have been in the position to rally public opinion to overwhelm the Tea bag lunatics? Wkwami would say things might have been worse. Actually, he would say that things would have been worse because this is the best of all possible worlds and Obama does the best possible job in this the best of all possible worlds." More trash talk resulting from political astigmatism. I've addressed this point several times, the latest being: http://www.tnr.com/blog/jonathan-chait/93270/1933-2010-obama-roosevelt#comments That alternative strategies might have a worse outcome is not the main point, but you keep focusing on it. Why? While I acknowledge that an alternative strategy can in fact result in a better outcomes as well as a worse outcomes, we cannot assume certainty of any particular outcome from the onset, hence the strategy being proposed must be appropriately scrutinized and let facts and realities inform our judgment. For example, if you think the debt ceiling debate was the wrong strategy as opposed to the 14th Amendment option, the question then becomes why didn't previous Presidents exercise that option? It may be that they were too timid, but given the facts, we can surmise that it is more likely they weren't willing to put to the test the economic, legal, and constitutional/political firestorm that might ensue, even in the much tamer political environment of those times. Secondly, even if Obama prevails in the legal arena, you cannot account for the potential unintended economic and political consequences. To channel Donald Rumsfeld, why increase your known unknowns and unknown known when you don't have to? In short we are in the position to KNOW that the 14th Amendment strategy would be equivalent to jumping from the frying pan into the fire, without actually doing it. So why hammer Obama as a feckless and failed leader, for not using a strategy that we KNOW is more likely than not to fail. I am not against speculating on alternate strategies, I'm merely saying let's not assume a better out without questioning the soundness of the strategy.
- wkwami
August 6, 2011 at 3:28pm
- We do know that Republicans are beside themselves because they've tried everything to create unfavorable conditions for President Obama and they still may suffer for it. Why get in the way if any of this S&P mess falls on them? And some on the left think it's possible to set about replacing Democrats, beginning at the top of the ticket, with other Democrats while replacing Republicans with Democrats. While you're at it, show me your money to replace the war chests of those you plan to eliminate. Careful, your margin for error is small and you see what the loss of one branch can do. Oh, open seats vacated by a Democratic favor the GOP.
- michaelg
August 6, 2011 at 3:36pm
The problem was that in order to increase the debt ceiling you needed the house plus 60 (plus the President). Now, as Mr. Chait aptly notes, the shoe is on the other foot. You need the H +60 +P to not raise taxes. Mr. Chait has been making this argument for awhile, but for some reason, this time it really makes sense to me because the downgrade has highlighted the value of resisting continuing the tax cuts.
- Nusholtz
August 6, 2011 at 3:53pm
"Had he let the Bush tax cuts expire, citing the importance of returning to some fiscal sanity so that we can face our economic challenges, had he then put forward a bill to extend unemployment and further stimulate the economy with direct spending and traveled the length and breadth of the country explaining the urgency of the situation, had the Republicans turned him down, as they would have, had the inevitable pain, suffering, and downturn then followed, as it would have with the withdrawal of so much demand, had he refused to countenance spending cuts or any price for raising the debt ceiling, had the Republicans either blinked or pulled the trigger, had Obama, in the latter case, pro rated all Federal payments to military families, suppliers until the Republicans were crushed,..." Where do I even begin? If only the feckless LBJ had nuked Vietnam, just like Truman nuked Hiroshima... Had he done that we'd have saved countless American lives in Vietnam. Of course there's the small matter of the Soviets to worry about, but what this really reveals is LBJ's anti-Americanism and lack of conviction in America's ability to beat back the Soviets in all out war. But for his dithering and weakness, the course of history would have forever been changed. Imagine that!
- wkwami
August 6, 2011 at 4:05pm
Deadweight Chait lies again: Entitlement reform is the key according to S&P, see below "In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability. Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a 'AAA' rating and with 'AAA' rated sovereign peers" Not surprising Deadweight ignores that facts that don't support his moonbat narrative. Liberals -- reality works better than paranoid fantasy.
- mr_rationale
August 6, 2011 at 4:24pm
- I don't think the scenario below is much of a secret. But it will be a campaign issue before it plays out and Republicans will talk about the hiking early and nothing else. Strap yourself in.
- michaelg
August 6, 2011 at 4:41pm
mr_rationale "Entitlement reform is the key according to S&P,...." It's not up to S&P to decide how the US government should deal with the deficit. The fact that we need to deal with the deficit in some form is an economic issue. How to deal with it is as much a political as an economic issue. This is the kind of reality that escapes "mr. rationale" our resident fantasist. Right wingers love to call liberals "moonbats," it's what passes for arguments among them.
- arnon
August 6, 2011 at 4:48pm
What makes Chait so confident the Bush cuts will expire on schedule? If Obama loses the election the cuts will not expire, but even if he wins and the Republicans retain either house of Congress, what's to prevent another round of debt ceiling extortion with the demand that the cuts be made permanent? I'll remind people that you can't filibuster the Senate majority's refusal to act.
- AaronW
August 6, 2011 at 5:50pm
- Nusholtz is correct, "The problem was that in order to increase the debt ceiling you needed the house plus 60 (plus the President)." Yeah, a problem verging on the not possible. And that would not have been sufficient to please S&P. They wanted something quick, without rancor and by the way, come up with $4 Trillion at the same time but not attached to this deal because that process would wreck their nerves. And according to Mitt, Bachmann and everyone using the budget, the debt-deficit and the economy as a weapon. Well, this politically impossible task that they ginned up is Mr. Obama's fault because it was on his watch. Slick! We should not be blindly loyal but it's a stretch to see how anyone can pin this on President Obama.
- michaelg
August 6, 2011 at 5:58pm
wkwami, your LBJ nuking Vietnam satire is not even remotely analogous to roi's point. roi is saying that Obama should recognize that he is a partisan politician and that his strategy as such should be to advocate for policies that are sound. And if the opposition blocks such sound policies then at least the lines of responsibility will be clear and voters will be able to make a reasoned choice between distinct parties. What that has to do with LBJ nuking Hanoi heaven only knows. You sure as hell don't.
- AaronW
August 6, 2011 at 6:02pm
- Aaron, the Bush Cuts expire before the session ends. It requires more votes than the GOP has in the Senate to extend them. Lame or not Obama can veto a renewal and that only sets the hurdle higher. The only glitch is Democrats must be willing to put the hurt on everyone and not blink.
- michaelg
August 6, 2011 at 6:09pm
arnon - you miss my point chait totally mis-characterizes the facts behind the S&P downgrade, and no one here notices Moonbat is a useful descriptor as combines the elements of insanity ('effect of full moon') and blindness to countervailing facts ('blind as a bat")
- mr_rationale
August 6, 2011 at 6:20pm
"arnon: K2K, the price for letting the tax cuts expire would have been leaving the jobless people without unemployment insurance. " Not really. Obama had the option of re-allocating still-unspent 2009 Stimulus funds to extend unemployment insurance benefits. Not only did he cave on extending all the irresponsible Bush43 tax cuts, he handed, on a silver platter, the temporary FICA tax 'relief' to the Norquistians who always want to make temporary tax cuts permanent. But he kept his Stimulus funding for high-speed rail. And ACA/Obamacare, which was what got the Tea Party faction going. So now the USA has the same rating from S&P as Japan and South Korea. What I find fascinating is that the UK currently has AAA even after almost going bankrupt at least three times in the past 100 years. (the two WWs and all that Labor-socialism until Thatcher whacked her handbag to stop the deficits (I actually wrote a paper titled "The Handbag hits Housing" on Thatcher's unsuccessful privatization of public council housing.) CNN actually had an informative program today even tho the host Ali Velshi (sp?) blurted out that the past week of economic news was like having to cover eight months worth. Still, if Moody's and Fitch do not follow S&P, then the markets should settle down while all the traders go to the Hamptons. In one way, S&P did the USA a favor. Maybe the Democrats can get Tom Coburn to run. He really has the whole Federal government analyzed like the former industrial engineer he was. Meanwhile, Mike Bloomberg is throwing angry frustration punches in the secret punching bag room he has in all of his houses. The only man in America who could actually fund a third party campaign, and, who despite his nanny-Mike annoyances, actually did build a major company. But is not the leader needed at this moment. Sheila Bair for SecTreas! Too bad she will not do it for Obama - he has to keep Geithner hostage because no one else will take the job unless Bill Clinton volunteers as a service to the country.
- K2K
August 6, 2011 at 6:40pm
AaronW: "roi is saying that Obama should recognize that he is a partisan politician and that his strategy as such should be to advocate for policies that are sound. And if the opposition blocks such sound policies then at least the lines of responsibility will be clear and voters will be able to make a reasoned choice between distinct parties." What do you mean by "if" they block his policies? What makes you think Obama doesn't know he's a partisan politician? Do you even realize the obvious absurdity here? What has to happen before you acknowledge that the opposition is going to block Obama's policies? If you're Obama and you KNOW what the opposition is going to do, your response would be to forge ahead with more partisan rigidity in the hope that "the lines of responsibility will be clear and voters will be able to make a reasoned choice between distinct parties"? That isn't a strategy AaronW, it's a political Hail Mary that ensures you will get nothing done, with a more likely scenario of securing a one way ticket out of town. Speaking of reasoned, I thought part of your argument all along has been that voters are susceptible to Republican propaganda and do not necessarily make at reasoned choices?
- wkwami
August 6, 2011 at 6:51pm
Ok, Michael, I buy that. I thought they ended in the new term. I'm still nervous about this admin's ability to withstand any pressure whatsoever, especially if it will have to raise rates on everybody.
- AaronW
August 6, 2011 at 6:54pm
"...unless Bill Clinton volunteers as a service to the country." Wasn't it Bill Clinton that gave us the Gramm–Leach–Bliley Act? Isn't that enough service to the country?
- wkwami
August 6, 2011 at 6:56pm
- It's now clear who is putting their own personal agenda ahead of the only exit out of this. And no, all Republicans were not opposed to a compromise that would have averted this and that distinction needs to be highlighted or the dead-enders will continue ignore resistance in their party. We need not embrace moderates in the Senate but they do stand between Grover and the deep blue sea. Regardless, it's now clear The Big Deal wasn't an Obama bluff and Boehner will have to revise his claim that he got 98% of what he wanted. A hollow victory, eh John?
- michaelg
August 6, 2011 at 7:09pm
- Aaron, actually they could leave and close the session out before the extension expires. However, no action or a failure to override a veto and the Bush bill is toast before a new crew is sworn in.
- michaelg
August 6, 2011 at 7:15pm
wkwami, let's depersonalize this. We're not talking about Obama, Dems or Repubs, just political party A and B. Suppose if you will that party B has ideas about the fiscal management of the country that are anathema to party A. Suppose also that party B's ideas are negative in character so that party B can get what it wants by doing nothing. Suppose as well that party B refuses to modify its position. What are party A's options? It can put forward its own policies, which it believes will be best for the nation in full recognition that party B can block this policy if it chooses but also in the knowledge that it can blame party B for the policy failure, or else party A can arrive at some half-assed "compromise" that is 80% reflective of party B's priorities but that apportions blame equally to parties A and B when the policy achieved produces its predictably bad outcome. Why do you believe that the second option is better?
- AaronW
August 6, 2011 at 7:53pm
AaronW, I'm not sure how to answer your question because the options you describe does not reflect reality. In the real world, there cannot be such clear cut outcomes. There will be degrees of compromise that both parties will find unacceptable, but have to live with if they are to ensure their own viability and survival. Grant it we're experiencing an unusual level of acrimony and intransigence that will probably continue until next year's election, but it will be temporary, as it is my belief that the Tea Party took BOTH parties by surprise in their rejection of the prevailing political social contract that had ensured reasonable bi-partisanship all these decades. It used to be that each party would thump their chest and make a lot of noise to satisfy their base, but ultimately give ground and compromise. Not anymore.
- wkwami
August 6, 2011 at 9:09pm
Reality: Republican desires: maintenance of low tax rates, especially on the wealthy & no effective stimulus spending. Democratic desires: higher tax rates, especially on wealthy, & effective stimulus spending. Debt ceiling compromise: maintenance of low tax rates, especially on the wealthy & no effective stimulus spending. Likely consequences debt ceiling compromise: continued high unemployment Parties who will be held responsible: Republicans AND Democrats
- AaronW
August 6, 2011 at 9:45pm
You can't pretend we never got a lot of what we wanted in the first two years. And if Roi's alternate strategy is correct, then the resulting high unemployment would impact the voters enough to shift opinion back to the Democrats. Isn't that one of the outcomes you're hoping for?
- wkwami
August 6, 2011 at 9:52pm
To rationale's Heritage creator: If reality works better than paranoid fantasy, why don't you try it some time?
- liberalref
August 6, 2011 at 10:04pm
Of course, wkwami, I don't expect you to acknowledge these facts. Your first principle is that Barrack Obama is beyond criticism. If reality does not comport with this axiom, then reality must be adjusted.
- AaronW
August 6, 2011 at 10:06pm
" And if Roi's alternate strategy is correct, then the resulting high unemployment would impact the voters enough to shift opinion back to the Democrats. Isn't that one of the outcomes you're hoping for?" Huh? Are you being dense on purpose? Roi's point is that until Republicans either abandon their core beliefs (not likely) or are defeated at the polls we are doomed to have contractionary fiscal policy and high unemployment. As long as the president pays rhetorical homage to Republican-style small-government nonsense and makes "compromises" that result in contractionary budgets and blames a generic Congress, Democrats along with Republicans, for all our troubles voters won't know who to blame when the expected high unemployment results. What is so hard to understand,
- AaronW
August 6, 2011 at 10:26pm
It's a sign of the times that Exxon has a higher credit rating than the US government.
- RHSerlin
August 6, 2011 at 10:38pm
I'd like to know why Obama reacted to the news by calling S&P misguided in its decision instead of blaming the modern GOP for the political dysfunction that caused it.
- sighthnd
August 7, 2011 at 6:48am
sighthnd "...why Obama reacted to the news by calling S&P misguided in its decision instead of blaming the modern GOP for the political dysfunction that caused it." my guess is 1) to stop Moody's and Fitch from following S&P, 2) even Obama/Axelrod/Plouffe know that they missed their moment in December, 2010 to raise the debt ceiling in a clean vote, and 3) Obama has to keep Geithner hostage as SecTreas until after the 2012 election. Unless anyone here can name a credible, confidence-inspiring replacement who will a) take the job for 15 months, and b) not turn the confirmation hearing into another circus. Yes, Bill Clinton had his role in deregulation leading to the meltdown. However, he is the only person with credibility on fiscal responsibility, and the ability to frame the issues clearly, who might accept the lame-duckness and I doubt the Senate would be able to turn his confirmation hearing into a circus. Could be quite educational. Apparently Obama was trying to recruit Corzine, but the blowback was too intense. Of course, Anthony Weiner still needs a job :)
- K2K
August 7, 2011 at 8:31am
Hey Rat, if you wanna talk about moonbats, how about the Republicans with their stance that the budget can be balanced with spending cuts alone. Presumably you agree with that? If so, how about telling us what cuts you would propose that (1) would eliminate an annual deficit of $1.5 trillion and (2) would be even halfway palatable to the American people.
- DAVIDDREIER@EARTHLINK.NET-old
August 7, 2011 at 8:46am
wkwami, have you read this? http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html?pagewanted=1&_r=1&ref=opinion What say ye?
- AaronW
August 7, 2011 at 9:11am
- Aaron, I've exhibited a high degree of loyalty to Obama and your perception of wk could be leveled at me. But people here won't see me criticizing President Obama unless I believe he's liable or the guilty party. There is an overlap between both parties where the principle is to assign blame because it occurred on his watch. Simply put, I assert he's doing his best to mitigate in the face of those who are constantly the aggravating party. One can speculate whether he's chosen the most effective course but that requires reliance on the conterfactual, "what if?". That allows any cynic to be a critic because they include a world where "it didn't happen" and give the pretend outcomes equal standing with evidence. While I'm not out to prove anyone guilty, anyone who evaluates his opposition cannot conclude President Obama is the wrongdoer.
- michaelg
August 7, 2011 at 10:05am
michaelg, it's not a question of "wrongdoing" on the part of Obama that is the issue, but the way he went or rather didn't go about making his case to the American people. He might have made it clear that he held the Republicans responsible for the current economic mess we are in. He might have set up his own red lines that he would not cross when it came to negotiating with them. He might have made it clearer that we needed to raise more revenue through higher taxes. He might have.... That he didn't do so doesn't make him guilty in the legal sense, but it does show a failure of nerve and in politics that can be fatal.
- arnon
August 7, 2011 at 10:45am
Here is what the NY Times editorial says on the matter: "The Truth About Taxes "A week later and we are still amazed at how the Republicans in Congress pulled it off. They held the economy hostage, won some cheap political points, and all of us will spend the next decade paying the ransom as government programs — $900 billion over 10 years in the first round — are slashed and the recovery is put at risk. The only glimmer of hope is that the battle is not completely over — if President Obama is finally willing to fight." http://www.nytimes.com/2011/08/07/opinion/sunday/the-truth-about-taxes.html?_r=1&ref=opinion&pagewanted=print But is he willing to fight?
- arnon
August 7, 2011 at 10:51am
"One can speculate whether he's chosen the most effective course but that requires reliance on the conterfactual, 'what if'?" Not you too, michaelg... ANY criticism of ANY course of action by ANY person "requires reliance on the counterfactual, 'what if?'" Let me shout it to the rooftops, if the simple fact that in offering a critique of past deeds we speculate on how things might have turned out differently had things been done differently invalidates the critique then all criticism of past deeds and those persons who commit them is invalid all the time. In this thread I offered a schematic outline of one of the kinds of political problems Obama has faced and is still facing even now. Anyone here was free to criticize my conclusion, but no did. Instead wkwami claimed that my schematic didn't reflect the complex reality. When I provided a description of reality that showed, quite clearly I believe, how closely it mapped to my schematic, wkwami changed the subject. I will now ask you, wkwami and anyone else who cares to take a crack at it to answer the following questions: 1. Do you believe that the lack of effective stimulus spending in 2010 or 2011 will adversely effect the employment picture in the coming year? 2. Assuming the answer to question one is "yes", do you believe that in 2012 voters will be motivated to punish those whom they hold responsible for lack of action on unemployment? 3. Assuming the answer to question two is "yes", do you believe that voters can/will draw a distinction between Republicans, who would get behind stimulus spending if and only if the nation was standing on their necks, and Democrats, who mumble that there is no point in talking about stimulus spending because the Republicans wouldn't let it pass anyway? 4. Assuming the answer to question three is "yes", how is such a distinction to be made? By the voters, I mean? Are they just supposed to sense Obama's goodness? Are they supposed to intuit that Obama wants to fix the unemployment mess and that he has all these great ideas to do just that which he'd be reading to put through if only the nasty Republicans weren't standing in his way? Even when he mentions none of these plans and ideas? Even when he spouts the same we-must-learn-to-live-with-in-our-means rubbish as the Republicans?
- AaronW
August 7, 2011 at 11:00am
I had planned to link the front page piece from today's NYT Week in Review. But Aaron has already done so. I was stunned to read such an eloquent and thorough explication of political communication, policy, and the real connections between them. It is everything I have struggled to say for months. What indeed does wkwami say in response to a detailed explanation of Obama's failure making my points and then some far more cogently than I can? Re Brown/Coakley, does it really need to be said that a couple of speeches at the end are not a communications strategy? To the contrary, this is among Obama's consistent mistakes, imagining that he can remain above the fray for the entire battle then swoop in and direct the outcome with one or two speeches. That's ridiculous. A communications strategy requires many coordinated voices and acts 24 hours a day every day. By the end, it is far too late. Libref pats himself on the back, and gives wkwami an attaboy, for being the only two here who understand that mental maps don't necessarily conform to reality. But that is indeed the reason why skillful political communications can in fact produce completely perverse outcomes in which voters vote for people whose policies, such as co reactionary fiscal policy, are profoundly inimical to their interests. My whole point in a nutshell is that the mental maps of voters are everything in politics. And those are shaped by communication and various forms of symbolic behavior. Policy matters largely for it's symbolic value. Of course policy is all that matters for outcomes. The economy cannot be talked into behaving like supply-side economics is more than a childish fantasy. But, as we see with the Bush disasters and the still far better than nothing Obama stimulus, even policy outcomes can be quite overwhelmed by perverse perception created by intense and consistent messaging. The heart of the knock on Obama's political inertness is that he refuses to take responsibility for this essential political task. Without taking up the burden of politics and succeeding at it, even his policy successes will soon be crushed, as the benefit of his stimulus is now being crushed. ACA will go down the drain too with time. The victory was not at all won with enactment. That was the high-water mark as things turn out. Politics comes before policy. Only political victors who can sustain public support get to make enduring policy for good or ill.
- roidubouloi
August 7, 2011 at 11:36am
"contractionary fiscal policy" not "reactionary fiscal policy" (although it is reactionary too). Too much help from my i-pad.
- roidubouloi
August 7, 2011 at 11:43am
- [Not proofed, but I rarely do...] First arnon. It is fair to prefer President Obama polarize a position, assigning blame to the GOP. But you won't see that in his character and he worked with opponents early on or wouldn't have run Harvard Law Review. I believe he did draw lines, in private, when negotiating. But even on that topic the left can divide. Some believe he has been wrong to take a position before the GOP was on the record, others believe he needs to begin from a position further than his opponent as he will have to retreat from that and some declare a policy isn't negotiable. Those include style, substance as well as tactics and strategy. And it's up to him to defend and explain how he arrives at those choices. I do not believe he's done so poorly or failed to preform in a way that would require he move aside or understand how a challenge would benefit the left in '12. OK Aaron, you ask: "1. Do you believe that the lack of effective stimulus spending in 2010 or 2011 will adversely effect the employment picture in the coming year?" Who from the WH debates that? From Goolsbie to Roemer to Summers they all belatedly knew the crash demanded more but they 1.) Lacked the data that indicated the severity until after Congress had begun work on a plan. 2.) They didn't have cloture proof numbers for more $'s than in the bill that passed. Remember that Franken was seated late and Byrd, Kennedy and Lieberman we're problematic from day to day. Read Ezra Klein's breaking down the myth that 60 votes from one party allow them to ignore the minority. And ponder this: I suspect it was known by people with more accurate numbers around March or April that it was bad, bad, really bad & they could use more than the Senate would support. The only way to move the opposition and weak Democrats was to revise the threat. "You don't want to heat this but we just found out...". We know he'd be accused of using "WMD scare tactics" (and show us your papers while you're at it). But there was a more serious 'what if' because he was only certain he could halt a stampede and if and only if he could squeak out what would be passed in the Senate. No, I do not know if upping the danger level would have moved votes for more money. But even if he did, the consequence of raising the alarm would only impact the public negatively so each dose of worse news to gain legislative support would send the drivers of the economy into a tighter clinch. Where does that lead and where does it end? We rarely credit leaders when they have chosen to not incite the public and they could argue it had the potential to serve a narrow end. Getting more money in early '09 wasn't impossible but in order to persuade the public, everyone would be required to absorb worse news and not send the economy downward.
- michaelg
August 7, 2011 at 4:16pm
"wkwami, have you read this? http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas... What say ye?" LOL, like roid I was going to link to this superb article about Obama's lack of political narrative--or incorrect narrative, if you feel his "both sides are to blame and I can rise above the usual way of doing business in DC to bring them together" message rises to that level of analysis. But thanks Aaron, you beat me to it. I differ from the author, Drew Westen, a bit in that with the wisdom of hindsight it's clearer that Obama couldn't square the circle of both seeking compromise and pushing a progressive, economically effective agenda. He surely screwed up badly in picking Geithner, et al; not making the case for a massive, ongoing stimulus; and failing to reign in Wall St. But hey, following in Bush's footsteps he had manifold messes to clean up as soon as he entered office. In other ways, he handled his first 100 days well. But in sticking to his ineffective narrative, he's made historically bad choices in terms of both policy and politics. He's basically agreed with the Republican analysis of what ails the country's economy, so his promised pivot to a supposedly "pro-jobs" plank undercuts his own credibility and leaves him with only tepid policy options. In pretending that he's above the fray, he's agreed to fight on the other side's turf, losing half the battle from the start. And he's naive if he thinks that he's gotten the deficit debate out of the way...it will just rear it's ugly head again and again, detracting from what should be our focus on jobs, demand and truly reviving the economy.
- Thunderroad
August 7, 2011 at 5:53pm
michael, did I say anyone from the White House answers "no" to my first question? Question one was a freebee, a statement of the obvious just to make sure that we agree on the terms of the debate. Questions 2, 3 and 4 are where the money is. Really questions 3 and 4. Care to take a crack at any of those?
- AaronW
August 7, 2011 at 9:20pm
"Credibility, Chutzpah And Debt" By PAUL KRUGMAN "The real question facing America, even in purely fiscal terms, isn’t whether we’ll trim a trillion here or a trillion there from deficits. It is whether the extremists now blocking any kind of responsible policy can be defeated and marginalized." http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt.html?_r=1&hp=&pagewanted=print As I have been saying, we are facing more of a political than an economic problem.
- arnon
August 7, 2011 at 11:57pm
Cross-posted from Keynes is Dead: Either I'm channeling Paul Krugman or he's channeling me. I wrote above that our two bona fide fiscal problems are under-taxation and health care costs. Just saw Krugman's Op-Ed for tomorrow online. He says our two real fiscal problems are under-taxation and health care costs. Believe it. We have one way out of what by all accounts is threatening to become a double-dip recession much worse than the first recession: huge government spending, preferably on infra-structure, and printing money to get inflation going and depreciate the debt, thereby increasing consumer spending capacity. We do those things and we will pop up like a cork. Meanwhile, the Times laments that the government is out of tools because it cannot keep running big deficits. Even assuming that were the case, the answer is simply large high-end tax increases to accompany the government injection of demand. The money it prints together with the money it taxes can prevent deficits from increasing any further while the spending gets the economy moving. The inflation will depreciate our existing debt so that, together with real growth, it is a much smaller percentage of GDP. If we hang on to the tax increases, we can have our fiscal house in order in a pretty short time. The Chinese will weep about the value of their Treasuries. Perhaps they will then stop manipulating trade to run surpluses with us. Is there any chance that we will actually do these things? Sadly, given Republican and Tea party and supply-side nuttery and terrorism -- the affirmative act of damaging the economy in order to damage Obama -- the answer appears to be no, at least not before things become desperate. The whole thing is tragic because, fundamentally, we are wealthy and have the productive capacity we need for now and the tools and means to wrench ourselves out of recession. If we could increase output by 50% in a very short time to gear up for World War II, ending the Great Depression in the process, we could save ourselves right now, within months. But we are cursed, truly, by being saddled with a radical, reactionary right-wing, including its libertarian variant in evidence in these pages, that is determined to destroy us. I suppose they expect that they will be saved by prayer.
- roidubouloi
August 8, 2011 at 12:54am
Consumer spending will not revive (to anything resembling robust) until people regain steady confidence in buying homes in all the markets that were NOT over-built. Memo to Dems: "Tea Party Downgrade" has a short shelf life, and when Obama finally speaks, he should not echo his surrogates with this slogan. Might be true, but most Americans are in a 'pox on both party extremes' mood. Obama should also reconsider his bus tour, focus on governance and the economy, and not be in campaign mode. Plenty of time for campaign mode once the GOP has a candidate. I might start praying for an alien invasion - nothing focuses the mind better than post-apocalypse economies based on looting and scrounging with zero media and an enemy that truly unites the surviving humans, which will not include Grover Norquist.
- K2K
August 8, 2011 at 9:34am
- Aaron, I objected to the assertion in the first question. Yes, Democrats fair poorly because your premise "the lack of effective stimulus spending" contains the distinction the GOP ignores. That is, they claim the stimulus did not work and only added to the deficit. I believe we allow voters to reject the policy or its effectiveness when we don't remind them dose and duration is part of their prescription routine because they understand "how much and for how long" is as important as matching the medicine to the ailment. Voters can understand if we explain we were sicker than anyone could know and needed to take a stronger dose of government help for longer. The Republican cure for a patient who is flat on their back? We can't do anything for you, get back to work.
- michaelg
August 8, 2011 at 10:15am
- [Second try, the it was chopped by the intertubes] Aaron, I objected to the assertion in the first question. Yes, Democrats fair poorly because your premise "the lack of effective stimulus spending" contains the distinction the GOP ignores. That is, they claim the stimulus did not work and only added to the deficit. I believe we allow voters to reject the policy or its effectiveness when we don't remind them dose and duration is part of their prescription routine because they understand "how much and for how long" is as important as matching the medicine to the ailment. Voters can understand if we explain we were sicker than anyone could know and needed to take a stronger dose of government help for longer. The Republican cure for a patient who is flat on their back? We can't do anything for you, get back to work.
- michaelg
August 8, 2011 at 10:19am