Say, Dean Baker, what do we really need to know about the fiscal-cliff deal?
When CNN asked economist Dean Baker to sum up in one pithy piece what folks needed to know about the then-merely-proposed (but soon to be enacted) "fiscal-cliff compromise deal," they probably weren't expecting what they got, which would have been more along the line of some swift crunching of numbers (extra credit if the numbers are mostly imaginary) showing that as a result of the "deal" most people will be (a) better off, (b) worse off, or (c) the same.
Something along the lines of, say, the jackassery puked up by WaPo's Robert "No Relation to Paul" Samuelson, better known as the Village Idiot of Economics Reporting, who summed up the deal as "Obama's leadership failure." Hmm, you say, that could be interesting? Come on, be serious. We're talking about "No Relation to Paul" Samuelson, the Dumbest Slug on the Finance Beat. The presidential failure, you see, was his refusal to persuade the country to understand that what's bringing the country to its knees is extravagant Social Security and Medicare payments!
But no, Dean didn't get sucked down that blind alley. Instead he suggested ("Look beyond the fiscal cliff") that the one possibly truly useful thing about the fiscal-cliff deal is that just possibly it may put "the distractions created by the debate over the fiscal cliff behind us." That debate, he says, "has been part of a larger distraction -- the concern over budget deficits at a time when by far the country's most important problem remains the economic downturn caused by the collapse of the housing bubble."
The obsession with budget deficits is especially absurd because the enormous deficits of recent years are entirely the result of the economic downturn. In spite of this, the leadership of both parties has elevated the budget deficit to be the top and virtually only issue in national economic policy. This means ignoring the downturn that continues to cause enormous amount of unnecessary suffering for tens of millions of people."Fears of big deficits," Dean says, "are preventing us from giving the same sort of boost to the economy that got us out of the Great Depression." And why is this?
The explanation is simple: profits have returned to prerecession levels. . . . [F]rom the standpoint of the people who own and run American businesses, everything is pretty much fine. Moreover, they see the deficits created by the downturn as providing an opportunity to go after Social Security and Medicare.Enter the Campaign to Fix the Debt, which DWT readers have heard quite a lot about. It's basically the cocktail-party chatter of high-powered CEOs translated into a "nonpartisan" crusade, bankrolled by those same "Wall Street types and other wealthy interests . . . to push their agenda."
The Campaign to Fix the Debt involves the CEOs themselves directly stepping up to the plate and pushing the case for cutting Social Security and Medicare as well as lowering the corporate income tax rate.Dean has one thing in common with "No Relation to Paul" Samuelson: He sees in the present economic crisis an opportunity for the president "to show real leadership." Not surprisingly, though, Dean has a very different idea of what form that leadership would take.
It's clear what's going on here. We don't need any conspiracy theories.
CEOs from both political parties have openly come together to demand cuts in Social Security and Medicare, two programs that enjoy massive political support across the political spectrum. The wealthy are joining hands without regard to political affiliation to cut benefits that enjoy broad bipartisan support among everyone who is not rich.
He should explain to the public the basic facts that all budget experts know: We do not have a chronic deficit problem. The big deficits are the result of collapsed economy. The priority of the president and Congress must be to put people back to work and bring the economy back up to speed."Tell the truth," for cripes' sake? Is it any wonder that Dean Baker is regarded as an uncouth ruffian in the polite Village circles, not to mention the drawing rooms of the 1% -- in other words, the very people who make it possible for a pathetic whore like Robert "No Relation to Paul" Samuelson to draw a paycheck for systematically obfuscating and unclarifying fiscal realities for the benefit of readers who say they want the truth but in truth can't handle it.
When the housing bubble burst, annual spending on residential construction fell back by more than 4% of GDP, which is $600 billion in today's economy. Similarly, consumption plunged as people drastically curtailed their spending in response to the loss of $8 trillion in housing bubble generated equity.
There is no easy way for the private sector to replace this demand. Businesses don't invest unless they see demand for their products, regardless of how much love we might shower on the "job creators." In fact, if anything, investment is surprisingly strong give the large amount of excess capacity in the economy. Measured as a share of GDP, investment in equipment and software is almost back to its prerecession level. It is hard to envision investment getting much higher, absent a major boost in demand from some other sector.
This is why it is necessary for the government to run large deficits. Ideally, the money would be spent in areas that will make us richer in the future: Education, infrastructure, research and development in clean energy, etc. There is just no way around a large role for the government given the economy's current weakness.
Obama needs to explain this simple story to the country. The rich of both parties will hate him for going down this route. They will use their powers to denounce him. But the American people support Social Security and Medicare, and they support an economy that creates jobs for ordinary workers.
Obama needs the courage to tell the truth.