Fiscal policy and the manufacturing of inevitability

One of the worst aspects of the charnel house that was the Iraq War was the sense in 2002 – 2003 that the country was sliding toward a terrible outcome without ever having made a choice. The war was presented as righteous and necessary by the government and the media, regardless of how many of us marched against it or dissected the paper-thin arguments used to justify it. None of that ultimately mattered – the outcome was treated as a foregone conclusion, and led off nearly a decade of  “with us or against us” politics that have only worsened with time.

I mention this because the relentless push toward cutting New Deal programs seems to have assumed the same imperviousness to critique or logic. Only this time, instead of the Republican party and the military industrial complex leading the charge, it is Democrats and the financial sector.

Those who were focused on the election likely missed two interesting stories in the past few days on the alleged need to address the deficit immediately, and to do so in part by cutting the safety net. What was surprising was not the sentiment – as I noted last month, this is now the Serious consensus – but the aggressive timing and consistency of messaging. Taken together, they clarify exactly what the coming months will bring.

The first story appeared on November 5, which is to say before the election, and came from the party that has draped itself in the mantle of the defenders of the New Deal:

WASHINGTON, Nov 5 (Reuters) – If President Barack Obama wins re-election, he’s expected to move quickly, perhaps within a day, to renew his bid for a bipartisan deal to avert a “fiscal cliff” that threatens to push the United States into recession, top Senate Democratic aides said on Monday.

A victorious Obama could reach out to Republicans as early as Wednesday and pledge that, with the election decided, it’s time to find common ground to deal with the year-end expiration of Bush-era tax cuts and the launch of automatic spending cuts that would suck $600 billion out of the economy in 2013.

“He wants to get the process started immediately,” one aide said.

It sounds as though the administration intends to begin the negotiations at the point where they left off. That would be right after Obama preemptively gave away cuts to Medicare and Medicaid that the Republicans hadn’t even asked for:

…The Democratic aides said a deficit reduction deal would likely contain many elements from one that Obama and Boehner, the top U.S. Republican, came close to reaching last year as Congress wrangled over raising the federal debt limit. Both parties have talked about trying to achieve around $4 trillion in deficit reduction over 10 years.

Their elusive “grand bargain,” which ultimately unraveled, would have included Democrats agreeing to cuts in entitlement programs, such as Medicare and Medicaid, in exchange for Republicans signing off on new tax revenues.

The second article appeared the same day on the Financial Times website, followed the next day by an abbreviated version that appeared on the paper’s front page, above the fold. Both articles described a parallel effort by the investment management arm of Wall Street, claiming to speak on behalf of all of their clients. From the online version*:

“America is facing an urgent crisis, barely discussed during the fall’s election campaign,” said the group of investors led by BlackRock and joined by pension systems from Florida, Utah, Texas and Illinois, in full-page advertisements placed in leading US newspapers on Monday….

BlackRock, which organised and paid for the ads, said that the fiscal cliff was the greatest concern of investors polled in October who collectively manage almost $5tn in assets.

The group has used the tactic before, publishing an “open letter to America’s elected leaders” in July 2011 that urged Washington to avert a crisis by raising the debt ceiling. In both letters, the group invoked its responsibility as custodians of savings for firefighters and teachers, nurses, factory workers, and entrepreneurs.

I have to give them credit for being on the side of the angels with the debt ceiling, but the relentless pressure toward fiscal tightening is the  real story here. An interesting point that didn’t make it into the print version – not all of the firefighters, teachers, et al. are on board with this push:

Some large public pension funds that declined to sign the letter expressed surprise at its timing, the day before the election. The Council of Institutional Investors is scheduled to hold a conference call on Thursday to discuss issues arising from the election.

Even more maddening is the sheer gall of companies whose bailouts contributed to the deficit signing their own letter of deep concern:

In October, chief executives of 15 large financial institutions, including Goldman Sachs, Citigroup, State Street and MetLife signed a similar letter warning that “the consequences of inaction . . . would be very grave.”

Lest anyone miss the real demand, the letter closes by exhorting the government to go beyond addressing the fiscal cliff and “enact legislation that truly restores the nation’s long-term fiscal soundness.”

What remains to be seen is whether Democratic voters will fall behind this Democratic policy in the way that Republicans fell behind Bush et al. One thing seems certain – the policy of trashing those who disagree as being loony leftists (which is to say, from the right), will likely remain the status quo.

* Non-subscription version is here

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One Response to Fiscal policy and the manufacturing of inevitability

  1. Pingback: Cognitive filtering and Obama’s grand bargain | aluation

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