The Grand Sell Out
FILED TO: Economics
The looming fight over the ‘fiscal cliff’ promises to be another gigantic sellout of the middle classes and poor. President Obama has talked about a ‘Grand Bargain’ he intends to make with the Republicans in order to stop a set of $1.2 trillion spending cuts and tax hikes that are scheduled to take place on Jan. 1st should Congress not agree on a plan to reduce the deficit. According to most economists, the automatic cuts and tax hikes are very likely to cause a recession, reversing progress made over the past year and a half that has seen economic growth and steady job creation.
As Cenk Uygur writes, Obama has essentially sold out the Democratic base before negotiations have begun:
President Obama has proposed that the Grand Bargain include $4 trillion in savings. He has said over and over again that the ratio would be $3 in spending cuts to $1 in tax increases. This is before his legendarily disastrous negotiating begins. So, let’s do some quick math. According to the president’s own plan that would be $3 trillion in spending cuts, which is significantly higher than the current plan of $1.2 trillion in spending cuts.
Let me add one other fact, if all you do is let the Bush tax cuts expire for people making over $250,000, you would already have $1 trillion in tax increases. And we were told because of this election that was already non-negotiable. That’s what we fought to make sure would happen and the president has guaranteed it. So, what exactly do progressives gain out of this Grand Bargain?
The reality is that this is cost shifting. They are going to move the spending cuts away from defense and on to the middle class and poor by hacking away at Medicare and Medicaid. This is defined as courageous in Washington. What a load of crap. What would be courageous is taking on the rich and the powerful and the large political donors, which is the exact opposite of what’s going to happen.
Uygur hits the nail on the head here – the reality of the ‘Grand Bargain’ is that Republicans get to hold the country to ransom, much like they did with the debt ceiling, and force through savage cuts that will hit the poor and elderly. Obama has yet again started negotiating from the right by outlining cuts to the welfare state and a minor tax hikes for the rich that would be considered conservative in any other era or country.
Glenn Greenwald (painfully accurately) outlines what the negotiations will most likely look like:
STEP ONE: Liberals will declare that cutting social security and Medicare benefits – including raising the eligibility age or introducing “means-testing” – are absolutely unacceptable, that they will never support any bill that does so no matter what other provisions it contains, that they will wage war on Democrats if they try.
STEP TWO: As the deal gets negotiated and takes shape, progressive pundits in Washington, with Obama officials persuasively whispering in their ear, will begin to argue that the proposed cuts are really not that bad, that they are modest and acceptable, that they are even necessary to save the programs from greater cuts or even dismantlement.
STEP THREE: Many progressives – ones who are not persuaded that these cuts are less than draconian or defensible on the merits – will nonetheless begin to view them with resignation and acquiescence on pragmatic grounds. Obama has no real choice, they will insist, because he must reach a deal with the crazy, evil GOP to save the economy from crippling harm, and the only way he can do so is by agreeing to entitlement cuts. It is a pragmatic necessity, they will insist, and anyone who refuses to support it is being a purist, unreasonably blind to political realities, recklessly willing to blow up Obama’s second term before it even begins.
STEP FOUR: The few liberal holdouts, who continue to vehemently oppose any bill that cuts social security and Medicare, will be isolated and marginalized, excluded from the key meetings where these matters are being negotiated, confined to a few MSNBC appearances where they explain their inconsequential opposition.
STEP FIVE: Once a deal is announced, and everyone from Obama to Harry Reid and the DNC are behind it, any progressives still vocally angry about it and insisting on its defeat will be castigated as ideologues and purists, compared to the Tea Party for their refusal to compromise, and scorned (by compliant progressives) as fringe Far Left malcontents.
STEP SIX: Once the deal is enacted with bipartisan support and Obama signs it in a ceremony, standing in front of his new Treasury Secretary, the supreme corporatist Erskine Bowles, where he touts the virtues of bipartisanship and making “tough choices”, any progressives still complaining will be told that it is time to move on. Any who do not will be constantly reminded that there is an Extremely Important Election coming – the 2014 midterm – where it will be Absolutely Vital that Democrats hold onto the Senate and that they take over the House. Any progressive, still infuriated by cuts to social security and Medicare, who still refuses to get meekly in line behind the Party will be told that they are jeopardizing the Party’s chances for winning that Vital Election and – as a result of their opposition – are helping Mitch McConnell take over control of the Senate and John Boehner retain control of the House.
There’s always hope that Obama will stand his ground, and given his recent hammering of Mitt Romney, he has some political capital to play with. Paul Krugman has written a plea to the President to take a firm stance with the Republicans, and go over the so called fiscal cliff if necessary in order to preserve the President’s standing with his base and save the economy from more unnecessary damage:
President Obama has to make a decision, almost immediately, about how to deal with continuing Republican obstruction. How far should he go in accommodating the G.O.P.’s demands?
My answer is, not far at all. Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a “grand bargain” on the budget that snatches defeat from the jaws of victory……
This time, nothing very bad will happen to the economy if agreement isn’t reached until a few weeks or even a few months into 2013. So there’s time to bargain.
More important, however, is the point that a stalemate would hurt Republican backers, corporate donors in particular, every bit as much as it hurt the rest of the country. As the risk of severe economic damage grew, Republicans would face intense pressure to cut a deal after all.
Meanwhile, the president is in a far stronger position than in previous confrontations. I don’t place much stock in talk of “mandates,” but Mr. Obama did win re-election with a populist campaign, so he can plausibly claim that Republicans are defying the will of the American people.
I’m not holding out a huge amount of hope for this – while I think Obama has been incredibly crafty at handling the Republicans in certain regards, when it comes to negotiating on the economy, he has consistently fallen short and allowed big business and the Republicans to define the terms of the debate. The tax system in America is already dangerously skewed to reward the rich and punish the poor, making debt reduction and economic growth almost impossible. An exacerbation of the status quo could be horrific. Tax cuts for the rich do not create economic growth or new jobs, and slashing spending on medicare/medicaid and social security does nothing other than make the lives of millions of Americans unbearably difficult. Austerity is a recipe for disaster during a recession (see much of Europe as an example of this), and Obama may well be on the verge of undoing the progress he made during his first term.
The Left has to intelligently hold the President to account here and tell him that he must not yield to Republican demands. There’s no need to self sabotage (as Glenn Greenwald/Jane Hamsher etc are likely to do), but Obama should be forcefully reminded about who put him back into office, and what he needs to do to retain their loyalty.
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