My morning routine involves driving down to the mailbox (1/4 mile down a steep hill) at o’dark thirty to get the newspaper and also give my golden retriever a ride in the truck, which she pouts about if I don’t exactly follow this routine. So my satellite radio was on and I was tuned to MSNBC and I listen to Chris Jansing interview some Progressive Congressman about going over the cliff, which he felt would provide Democrats with better leverage in the negotiations. Jansing countered rather vigorously with the question, “What makes you think the Republicans will negotiate then (after going over the cliff) rather than now.” Implicit in this questions was be afraid, be afraid, the Republican talking point.
No, I did not hear the answer because I was so frustrated with the question, I turned her off. But here is what my answer would have been: “Gee Chris, so implicit in your question is the assumption that we should just cave to what the Republicans want like we did last time? What you are really saying in your question is that taking the nation hostage with terrorist demands should be tolerated? And in answer to the question, when we go over the cliff, it will be obvious who caused it and we will take it to the American people. They have already weighed in on tax cuts for the wealthy in the election. Republicans are already irrelevant, and this will be political suicide for 2014.”
There are really two things to consider when looking at compromise that everybody who is a talking head or a pundit seems to want. The first is to consider how extreme the Republican Party is. They have moved the country far to the right during the Clinton and Bush years, and George Bush brought us Republican Valhalla, minimal enforcement of regulations and rock bottom tax rates, and the deficit bloomed, the economy sputtered and then blew up. Now what the Republicans are fighting for is an extreme position backed by failed policies and compromise just moves us further to the right. They move the ball 10 yards down the field to Right Lunacy, and we compromise with a 5 yard gift? Why would we want to do that?
Second, the two views of the economy are diametrically opposed. The Republicans’ view is to pay off the debt so that the wealthy will have “confidence” and create jobs while maintaining their “job creator” status. The problem with this is an unblemished record of failure in this economic philosophy (See Europe and their austerity or job creation during the Bush years). As the wealthy get more concentrated wealth, the economy falters (See Why Nations Fail or Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else). They are fighting to maintain this unequal distribution of income and if you believe history, continue to weaken our economy and our economic future.
Meanwhile Progressives understand that we must raise up the middle class as the only way to get our economy going again versus the flow down that has failed under the Republicans. They understand that the deficit is not the problem, but a symptom of a lackluster economy that is not growing. The problem is jobs. If you gut Medicare and Medicaid, and only increase tax rates marginally on the wealthy, you simply leave the problem in place while forcing those who have already suffered under these policies to pay price. So why compromise if the end result does not solve the problem. Like last time when the Democrats compromised on the Stimulus and the Debt ceiling, nothing got better and simply gave the Republicans a reason to say once again, “See, the Democrats ideas don’t work” when the Republicans made them ineffective with their compromised positions.
So no, don’t compromise. If we go over the curb, we have just taken care of the tax cuts to the wealthy and there will be tons of pressure on Republicans to restore middle class tax cuts. The other spending cuts need to be addressed one -on-one. Defense certainly needs to be cut. And note, if you follow my yesterday’s recomendations, that money will be reinvested into the economy in more productive ways, so there is no net loss in spending and we create jobs.
One last shot over the bow. I listened to ex-Senator Alan Simpson of the Bowles-Simpson plan discuss how we need to raise the rates on the rich because he understands that without revenue, you can’t solve this problem. But then he went off on the debt causing growing interest rates and inflation. This is basically the argument that the CEO’s have launched to get a deal before we go over that speed bump. It is the confidence fairy argument again where the problem is the deficit, not a lack of jobs and a growing GDP. It is a failed argument as Paul Krugman has documented for the last four years (Incredible Incrediblity). It is solving the wrong problem and nothing will get better.
First Republicans, CEOs, and VSPs (Very Smart People) have been saying our borrowing will drive up the interest rates and yet it is at record lows as predicted by Keynesian Economics in a severe recession. It is not going to go up no matter how much we borrow until our economy takes off, because there is no strong demand for borrowing in a depressed economy. When the economy takes off, you can then throttle back spending, controlling the interest rate, but first it has to take off and that means jobs.
The inflation argument is the other one that has been repeated over and over again since 2008 once it was obvious that we are printing money to pay our debts. The trouble is two-fold. First is a little inflation would be a very good thing. Holding on to money during a period of inflation just makes it decrease in buying power, and there would be an incentive to invest and grow our economy. Second, once again, Keynesian Economics tells us that there won’t be any or very little inflation until the economy starts to grow, and as Paul Krugman pointed out after WWI, France took the print money approach to solving their problems and weakening their currency while England took the responsible austerity approach, and guess whose economy did better and recovered earlier (Twenty Tales)?
My point is simple. The people who are holding sway in this debate and pushing compromise and debt reduction have it all wrong. Not just wrong in my opinion, but demonstrably wrong by all the data out there. So why are we listening to them? Because we are stuck in our home budget analogy and just can’t grasp the lessons of the world around us. The only way to solve our problems is to grow our middle class, redistribute the spoils of our economy, and create jobs. The debt will take care of itself if we follow Keynesian Economics and throttle back spending when the economy blossoms (see what happened after WWII with our massive debt, we just simply grew out of it). So listening to this false BS on the TV makes me want to drive the car off a cliff. Will we ever learn?