How worried should we be about the "fiscal cliff" negotiations? Bill Moyers talks to Bruce Bartlett and Yves Smith
"Is the fiscal cliff just a metaphor or is it for real?" After Bill Moyers introduces us to the picturesque way he visualizes a "fiscal cliff," this is the question he poses to segment guests Bruce Bartlett and Yves Smith.
We keep hearing reports about the ongoing negotiations between the president and House Speaker "Sunny John" Boehner to arrive at a "compromise" on the so-called "fiscal cliff." Sometimes they're making progress, and sometimes they aren't, but it's tricky to separate the parts of these accounts that are theatrical display and the parts that are seriously worrying.
About the theatrics of it, maybe you have to have lived through some of the Age of Big Unions, when contract negotiations in critical situations regularly came down to the last minute -- and beyond. (Remember the old practice of "stopping the clock"?) Sometimes there was a last-second settlement, and sometimes there wasn't, but from the outside you really couldn't tell which way the negotiations were heading.
And eventually you figured out that there was no other way that really high-stakes labor-management negotiations could go. Because the negotiators for each side were performing for their constituencies. On both sides, any indication that they had settled for anything less than they might have gotten could be presumed to result in a loss of face -- or, more importantly, loss of future employment and high-price compensation.
On this week's edition of Moyers and Company, Bruce Bartlett, onetime economic adivser to Presidents Reagan and G.W.H. Bush, made the point splendidly as applied to the "fiscal cliff" negotiations, especially on the Republican side:
I think the important thing to remember is that there's no possible way of a deal before the last possible minute, and one reason for this is that John Boehner, the speaker of the House, is in a very precarious position regarding his own membership. It's an article of faith among Republicans that any deal that is arrived at too soon is to their disadvantage, because they could have always gotten a better deal if they'd simply held out and hung tough longer. And so Boehner is in a position where even if he knew exactly what the deal would be today, he cannot deliver on it until, you know, 11:59 on December 31, or else his own members will attack him for having given away the store.Before proceeding, we have to marvel once again at how wonderfully different Bill Moyers's sense of "balance" is from the standard media model. Instead of the usual far-right wing demagogue squaring off against some milquetoast centrist Village stooge, we got Bruce Bartlett and Yves Smith, whom I think we can describe as an authentic conservative and an authentic liberal, but both in close touch with reality, and as a result, in talking about the current economic and political situation they agreed way more than they disagreed -- a reminder, I think, that there aren't always two sides to every issue. Or at least not two sane and responsible sides.
Here's how Bill introduced them:
Bruce Bartlett was an economic adviser to the supply-side icon Jack Kemp, and to two presidents, Ronald Reagan and the first George Bush. He got into hot water with his conservative cohorts when he wrote a widely quoted book critical of the second President Bush. His most recent work is The Benefit and the Burden: Tax Reform -- Why We Need It and What It Will Take.After asking both guests about the "fiscal cliff" metaphor (not terribly useful, they agreed) and covering some other ground, Bill wonders:
Yves Smith is the founder and editor of the popular blog Naked Capitalism. After 25 years in the financial-services industry, she now heads the management consulting firm Aurora Advisers. She's the author of this book, ECONned: How unenlightened self-interest undermined democracy and corrupted capitalism,
[W]hy are we talking about reducing the deficit instead of creating jobs? Because when people have jobs, they spend money. When they spend money, businesses have customers. When they have customers, the money keeps circulating. And yet Washington isn't talking about jobs.Bruce jumps in, proposing two reasons. First, and this is certainly surprising coming from a conservative, he cites the decline of labor unions:
[W]hen the union movement was much bigger and more powerful, and especially when private sector workers dominated the union movement, the AFL-CIO sort of looked out for the working class. They looked out for all workers, not just union workers. They understood that a healthy working class having lots of jobs was ultimately to the benefit of their members.The other reason, he suggests,
is that fundamentally Barack Obama's pretty conservative. He really is. He's an Eisenhower conservative. He's not a liberal. I mean, he's-- and I think that's one of the problems with the Democratic Party is they're looking for leadership to a guy on an issue like why aren't we creating jobs? Why isn't there more aggregate demand in the economy? And it's because their guy doesn't really want it.Yves agrees "100 percent," saying she's "always shocked when people call Obama a socialist," and "I think you might be doing a disservice to Eisenhower." She points out that "even, you know, Nixon is to the left of Obama on many, on most social issues. I mean, Nixon proposed a negative income tax, which everybody forgets about."
Neither guest puts much stock in the Republican side of the debate. Here's Bruce:
There was a poll just the other day that you probably saw. Something like half of all Republicans believe that the 2012 election was stolen for Obama by a group called ACORN, which was -- which went out of business several years ago. It doesn't even exist. I mean, they just believe these conspiracy theories. And they circulate without barrier, because nobody will say anything to disagree with it. And if you hear the same propaganda over and over and over again, eventually you're going to start to believe it.But to return to the Democratic side, Yves notes later that cutting entitlements "is where Obama wants to go. . . . He just needs the Republicans to make noise so he can go where he wants to go." She recalls the dinner with prominent conservatives before he was inaugurated where "he made it very clear" --
that as soon as the economy was stabilized that he wanted to cut Social Security -- well, "reform." But that's just code for "cut" Social Security and Medicare. Obama really believes that this will be a signature accomplishment of his, that he will go down in history positively for.Bruce points out that in 2011 Obama put "vast, vast cuts in entitlement programs on the table," and "the Republicans walked away from it, which only goes to prove that they don't have the courage of their own convictions." However, he says,
Yves's point is exactly correct. Obama really is maybe to the right of Dwight Eisenhower fiscally, and it's really at the root of so many of our economy's problems, because he didn't ask for a big enough stimulus. He's let the housing sector, basically, fester for four years without doing anything about it. He's really, you know, focused more on cutting the deficit than people imagine.When Bill points out that people on the Democratic side, like columnist Jonathan Chait, have argued that the president should go along with raising the Medicare eligibility age, which Yves describes as "one of these sort of penny-wise and pound-foolish measures," which "results in more old people getting sick" and "winding up with more costly care." Bruce is just as skeptical, pointing out that the total projected saving, "maybe $100 billion over ten years,"
is really a drop in the bucket, if you're really trying to reduce deficits. So it's the fact that Obama's willing to talk about this, I think, would give me a lot of concerns if I was someone on the left.There's a great deal more of interest in the three-way conversation, but at the end Bill asks both guests where they would compromise if they were "called upon to break this deadlock."
YVES: I'm not sure that compromise is worthwhile. If we go over the fiscal cliff or into the fiscal slope, we're going to have the tax increases kick in. If Obama were interested in negotiating for a better deal for the ordinary person, he should actually go into January. But the whole fact that he wants a deal now says that, says that he is as conservative as Bruce says he is.Whereupon Bruce jumps in:
BILL: You You mean we should go over?
YVES: We should go over.
BILL: And see what happens?
YVES: We should go over, just because then we've already had tax increases put in. Republicans don't have the leverage of, you know, "Oh, these -- ," you know, of doing a deal without the tax increases already having taken place. You're in a very different negotiating position. Going past January 1 would actually be a very good outcome for ordinary Americans.
I'd go even further. I'd say let the fiscal cliff take effect permanently. Now everybody's afraid to do that. They think the economy's too fragile. But if you look at what the Congressional Budget Office has estimated, they say, "Yes, we'd lose some growth for about half a year, but the medium- and long-term growth would actually be higher, because it would actually do exactly what everybody says they want to do, which is cut a lot out of the long-term deficits. And it would do so fairly by raising revenues a lot and cutting spending." How else are we going to cut the defense budget if we don't allow the sequester to take effect? Both parties are pretty much into that. So I say let's just let the whole thing happen. If I was a member of the Senate, I'd filibuster anything to get rid of it.Setting aside the theatrics of the Obama-Boehner "negotiations," there's already plenty to be concerned about in what we're hearing the president -- the new, supposedly tough-negotiating incarnation -- is already prepared to concede, like an increase the Medicare eligibility age and the now widely-reported agreement to use "chained CPI" as the basis for determining cost-of-living Social Security benefits increases. I want to talk about this a little tomorrow, but for now, even without going into the specifics of the various ways of computing the cost-price index, I'll just quote the end of a post by economist Dean Baker (to which I expect to return tomorrow):
The current effort has the spirit of using statistics for political ends, for example by refusing to have BLS produce a full elderly CPI so we would actually know the inflation rate experienced by the elderly. There also has been some discussion of leaving some programs, such as Supplemental Security Income, tied to the current CPI so as not to hurt a seriously disadvantaged population.
Congress can decide the benefit formula for these programs as it chooses. The honest way to cut benefits is for Congress to explicitly vote to cut benefits, not to try to hide a cut behind a statistical manipulation. This is the sort of behavior that encourages public contempt for politicians and the political process.
BY THE WAY, LATER IN THE SHOW, BILL TAKES
A SNARKY LOOK AT THE D.C. REVOLVING DOOR
There's a riveting segment, at 25:00, on the government-industry revolving door, focusing on health-industry plant Elizabeth Fowler, who was credited by Senate Finance Committee Chairman Max Baucus as the architect of the health-care "reform" legislation, and who went on to fill key roles in the Executive Branch overseeing the execution of the ACA law, and is now returning to industry to cash in. And this is only the first of Bill's "aha moments" in the segment.