So far the super committee charged with stepping up to the plate and dealing with America’s deficit does not have a deal. But if they make one, they won’t be what you see on the screen. They will be super heroes and they could change sentiment around the world and save America from a debt crisis like Europe’s.
- Erin Burnett, CNN host, November 8, 2011
So we reach the end of yet another lengthy deficit reduction negotiation, and all signs at this writing point to failure.
This is actually very good news, although to hear the pundits tell it, the Four Horsemen of the Apocalypse will be trampling down the doors of the New York Stock Exchange and everyone in the US will soon be force-fed poisoned baklava at gunpoint. Indeed, if you followed the financial and political press over the past couple of weeks, you would have thought the world would literally come to an end if this arbitrary deadline to cut an arbitrary percentage of the deficit isn’t met.
And yet, no deal means “sequestration” (also known as “the triggers”) will kick in, which will mean brutal cuts to discretionary spending and defence starting in 2013. If the goal is to cut $1.2tn in order to set the country’s fiscal house in order, why should all these deficit hawks care how the government gets there? Well, it turns out that this isn’t really about deficit reduction at all. The entire exercise is about gutting the social safety net, thus giving the markets “confidence” in the United States’ ability to govern itself.
Ironically, this was considered to be so important that our democratic government had to convene a secretive committee to meet behind closed doors and enact policies that go against the explicit desires of a vast majority of American citizens. In fact, among the chattering classes, defying the citizens has become the defining act of political courage. Nearly all of them have demanded that the Democrats brutally slash their signature social safety net programmes to prove their seriousness while assuming that Republicans could never agree to substantial tax increases.
And sadly, Democrats were more than willing to go along with this lopsided demand, labouring under the bizarre illusion that they would be rewarded by the people for doing exactly what the people didn’t want them to do. The only thing standing in their way was the Republicans’ unreasonable refusal to consider raising any taxes at all on highly profitable corporations and the greedy 1 per cent. In the end, even that small concession to allow the Democrats to save a tiny bit of face was too much and the negotiations fell apart.
The GOP intransigence is somewhat mystifying, since Republicans know very well that cutting taxes is always popular and they would have the opportunity to restore the lower rates as soon as they come back into power. It’s true that a right-wing ideologue named Grover Norquist has made nearly every Republican sign a pledge to never raise taxes under any circumstances, but that hardly constitutes a commandment handed down from Mt Sinai. And having the Democrats beg them to agree to slash the social safety net doesn’t come along every day. Still, they cannot bring themselves to take yes for an answer. And thank goodness for that.
The Beltway conventional wisdom will be unsparing towards the Democrats, however, regardless of their willingness to throw their own legacy over the cliff. It is an article of faith that despite their clear willingness to slash spending, the fact that they wouldn’t agree to only cut spending makes them just as guilty as the Republicans who refuse to raise any taxes, ever, under any circumstances. The Democrats will be given no credit for their fetish for a “balanced” plan and demanding “shared sacrifice”. In fact, the Republicans will now go into the election honestly claiming that the Democrats have proposed to cut Social Security and Medicare as well as raise taxes.
The polls have been clear and solid over time: The public cares far more about jobs than deficits and a majority of Americans are opposed to cuts in Social Security, Medicare and Medicaid. Even a majority of Republicans believe that the wealthy should pay more and that the “entitlements” should be left alone. Considering that the world is in the midst of an epic economic slowdown, this should not be surprising. At a time when average working families are feeling intensely vulnerable, the last thing they want is for the government to kick out another leg of the wobbly stool of their financial security. One can only wonder what would happen if the powers that be cared as much about the confidence of the citizen consumers as they do about the confidence of the markets.
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