Now that the pseudo-crisis of the debt limit is over, the real crisis begins. The stock market continues to stumble, faster since the so-called resolution was passed on Monday. It was hardly a resolution. it was a joke. And the stock market is proving what we all knew to be true -- it can't take a joke.
The joke is that the conservatives did what they promised. The one promise they did hold to was not to raise taxes, but the big promise they made, to reduce the debt, they left lying in the road like a dying dog. Only a tiny percentage of the spending cuts they passed will take place this year. Most of them are backloaded after the year 2014. In other words, the game of chicken they played that pushed the economy to the brink changed almost nothing this year, or next year.
Which is funny when you think about it. Conservatives swear up and down that the U.S. economy is failing because the government is in a debt crisis. Not because our schools are terrible. Not because we spend one-eighth of our GDP on health care, by far the highest rate in the world. Not because we have a tax code that favors accumulation of wealth for the rich -- excuse me, the job creators -- and not job creation. Not because we spend more money imprisoning people for drugs than any other developed nation instead of fashioning a meaningful drug policy. Not because we, an immigrant nation, insist on treating illegal immigrants as if they are radioactive, instead of what they are -- us, a few generations removed. No, it's all about the debt. Can't be anything else.
The Republican mantra is that taxes kill jobs and tax cuts create them. The corollary seems to be that debt kills jobs and balanced budgets create them. From my knowledge of economics, the two statements are not equivalent. I borrowed money to build a house and I could have sworn it created jobs. The government borrowed money to build interstate highways and the outcome seems the same. This is not to say all borrowing creates jobs, or that borrowing is preferable to paying out of pocket, but still. It is clear that the debt-budget balance equation is a touch more complicated that we are being told.
Yet, let's take the Republicans at their word. They believe every borrowed dollar devastates the economy just as surely as every drop of blood a person bleeds makes him weaker. Thus, paying down the debt will lead to certain prosperity. So why didn't they author a bill that did that? Why didn't they make massive budget cuts now, since that is what will turn the economy around?
They would say it is because the Democrats wouldn't let them. Which is absolutely true, except to the extent that it is largely false. The GOP was ready to let the U.S. default on its debt obligations because many on the far right thought default was better than borrowing a single dollar. Somebody who thinks that wouldn't sign on to a bill that didn't make any more than symbolic cuts in year one.
The real cuts in the compromise will take so long to take effect that there is plenty of time for both Democrats and Republicans to take them back before they ever take effect. No doubt that will happen. There aren't many hard and fast rules in American politics, but the one that says that, given a choice between a hard decision and an easy one, a politician will chose the easy one, seems as ironclad as any rule can be. Forget the hue and cry. The deal just made was an easy one for both sides. Easy for the Democrats because no cuts come now, and they know they can always play the you'll-kill-grandma card later when it comes time for real budget cuts down the road. Easy for the Republicans because they can claim trillions in cuts on the campaign stump knowing the pain of the cuts can always be pushed further into the future.
So once again, how does a political party that insists that debt spending is disastrous for our economy sign on to a bill that doesn't reduce debt? Maybe if they don't truly believe in their hearts what they are saying in public.
It's not a stretch to believe a politician would lie to the public. I don't also think it is very hard to believe that a politician, in difficult economic times, would hesitate at the thought out laying tens off thousands, if not hundreds of thousands, of public workers. It is one thing to believe in theory that deficit spending is bad for the economy. But to tell thousands of your own constituents that you are going to fire them for the good of the country is quite another. It would take someone with supreme confidence that budget cuts will improve the economy, and fast. Next year, after all, is an election year.
The better course is to pretend to cut spending while securing the jobs of your constituents. That way you can claim to have exercised supply side economics while you in truth hedged your bets with continued government spending. And, surprise, that is exactly what happened.
The superficial interpretation of the stock market crash is that investors feel the budget deal will not improve the long term public debt problem. Baloney. The stock market has never cared about public debt before. The debt "crisis" has something like a 10 year time horizon, and Wall Street has trouble looking past next August, much less 10 years down the road. Conservatives love to talk about the debt being balanced on the backs of our children and grandchildren. The very idea that Wall Street investors give a hoot about what our grandchildren will have to pay is hilarious.
No, Wall Street is upset first because there are serious problems in Europe, and second (also secondarily) because the recent debt ceiling debate proves the U.S. government, and especially the party that is in their corner, has no clue whatsoever how it is going to get this country back on its feet. At this stage I think even a leftist plan that involved aggressive government spending to stimulate demand would make the financial markets feel better. Just as long as it is a clear plan that has the goal of growing the private sector. The means don't matter, the important part is that there is a meaningful plan.
This is why it is the Republicans who have failed us. They who insist they have the answer to long term economic growth but are afraid to really put their ideas into action when they have a chance to do so -- they, the Republicans, the cocksure, wouldn't do what they swear up and down is the only way to save America from financial ruin.
How can anyone have confidence in a party that won't do what it professes to be gospel?
And no, I don't think the same can be said about the Democrats. (Obama is a special case. My opinion of him is summarized below.) The Democrats were willing to compromise from the beginning. None of them were against all cuts. They simply wanted cuts offset with revenue increases. Democrats don't profess that tax increases are the definitive answer, or that stimulus spending is the only way out of trouble. That absolutist language is solely Republican. Democrats have always been willing to attack the problem from both sides. The key is, they acknowledge that there are two sides to the problem in the first place.
Somehow, even though the Tea party is only a subsection of a party that only controls one house in Congress, it drove the entire conversation and set all the limits of debate. And despite winning every battle, it accomplished exactly nothing.
With a Congress like that, I'm afraid myself. If this is the best Congress can do, what happens when they have to tackle a real problem? Here in Jackson MS we are on pace to set the record for 100 days in a summer, with most of August to go. Climate change is the true crisis of our age, and no one dares to even speak of it.
As for Obama. There are two schools of thought about him. One says he lacked the courage to stand up to the Tea Party. The other says he is secretly a moderate, maybe even right of center, and that he wanted spending cuts and the extension of the Bush tax cuts all along.
The Obama-as-moderate argument is alluring because it gives him credit for intelligence and for having a plan after all -- just not the plan we thought he had. I can't buy it, however. No matter where Obama stands on the political spectrum, whether he is left of Eugene V. Debs or to the right of Ayn Rand, what the Tea Party did by holding the U.S. credit rating hostage to political negotiations is immoral. Blackmail is immoral no matter where you stand politically. The Republcans did the blackmailing, but the President allowed himself -- and us -- to be blackmailed.
This suggests the President is ethically challenged. My view of Obama is that in allowing debt negotations to get to that point, he was signaling that he doesn't feel strongly enough about the obligations of the U.S. government towards its debt to take a stand. He could have threatened to use the 14th Amendment to raise the debt ceiling. The GOP was breaking the rules by refusing to raise it, so why was it unthinkable that the President would counter their queen by deploying his own queen?
Obama is supposed to be very intelligent. Any good chess player knows you can't win a match if you keep your queen parked in the corner. His refusal, not just now but repeatedly, to use all the powers he has to defend what is right suggests that he does not have a strong sense of right and wrong, at least not in this matter. Or in health care. Or in climate change. Or with torture.
I don't think I can vote for him next year.