Call it George W. Bushs revenge. The former president, who wiped out the budget surpluses of the Clinton years in an orgy of open-ended war spending, tax cuts and corporate giveaways, is having the last laugh at the expense of the Democrats. Deficit spending, which Democratic administrations since FDR have employed to stimulate the economy in times of depression and recession, has become the tool that cant be used against the current downturn or, at least, so goes the conventional wisdom.
The Bush administration bequeathed to President Obama a government already in substantial deficit, because of the previous chief executives profligacy, when the Great Recession struck in 2008. Politically, this has made stimulative Keynesianism of the sort instituted in Obamas first year a subsequent nonstarter as the recession drags on with no end in sight. Im speaking here of the continuing Main Street recession of joblessness, housing collapse, and personal bankruptcy, not the Wall Street recession mainstream economists see in abeyance by virtue of surging corporate profits and rebounding stock prices.
The revenge of Bush and his former Republican majority is that the mess they left behind cant be addressed by progressive measures in todays deficit-obsessed policy climate; the conservative enemies of liberal economics have left their successors hands largely tied. Partly, of course, inaction is built into the system. We have a dysfunctional government hostage to minority whim, in which one legislative branch (the Senate) maintains antidemocratic procedures requiring supermajorities to pass anything at all, a situation unlike any other representative democracy in the world. Majority rule simply does not exist in this country at the federal level, and Democrats lack the political will to break the impasse in order to enact further stimulus legislation.
But theres more to it than that. The Democratic Party, whose activist base is liberal or progressive, is saddled with an administration whose policies are cautiously centrist, if not at times outright conservative, on economic issues. The Obama White House has gradually accepted and internalized the essential argument of the Right that debt and deficit are bigger threats than joblessness and recession, Its National Commission on Fiscal Responsibility and Reform, for instance, has been sufficiently packed with center-right appointees to virtually guarantee the majority (14 of 18 members) necessary to force an up-or-down vote in Congress on its anticipated austerity recommendations, which will likely include substantial entitlement cuts. And there are enough centrist Democrats in the House and Senate, in combination with Republicans, to pass those proposals into law.
As for the partys liberal base, the professional left in Obama Press Secretary Robert Gibbs snide characterization, the administration obviously regards it with thinly veiled contempt. Press secretaries dont issue unapproved jeremiads, and the calculated Gibbs rant (progressives critical of the president need to be drug-tested, etc.) clearly came from higher up. Throw in the anonymous White House attack on liberal-leaning labor unions during the Arkansas senatorial primary, and a pattern begins to emerge: whereas establishment Republicans fear and respect their base, establishment Democrats are hostile to theirs. Contrast Obamas uniform endorsement of the more conservative candidate in each of this years contested Democratic Senate primaries (Specter in Pennsylvania, Lincoln in Arkansas, Bennet in Colorado) with FDRs attempted purge of party conservatives in the 1938 off-year election. A latter-day disconnect has obviously developed between the Democratic leadership and the partys most dedicated rank and file.
Tactically, there are at least two things going on here. First, the administration and its centrist congressional allies are preparing to preempt the resurgent Republicans by inching rightward and poaching on their territory, co-opting the GOP message of fiscal conservatism if necessary. They may even be surreptitiously crafting a triangulation strategy in the event Republicans retake Congress; theyll certainly need GOP votes to push through any cuts in Social Security and Medicare, just as the Clinton administration needed Republican help in enacting NAFTA and welfare reform a decade ago.
But this is not all about crass politics. The Obama team has genuinely bought into the desirability of a fiscal-austerity regime. (The departure of economic advisor Christine Romer, a strong stimulus advocate who lost out to the Summers-Geithner duo in White House infighting, indicates the new administration reality.) Despite his call for an additional mini-stimulus, the president has emerged as a budding fiscal conservative who, influenced by elite opinion and the orthodoxy of his Wall Street advisors, is increasingly willing to tolerate 9 or 10 percent unemployment rather than risk swelling the deficit in attempts at further Keynesianism. He may instead be risking a massive, deflationary double-dip recession. Nevertheless, Obamas instinctual reaction is made easier by recent polls suggesting the American public (the majority who still have jobs, that is) feel the same way.
Whats disheartening is that the conventional wisdom concerning deficits currently being trumpeted from the rooftops by the GOP, accepted uncritically by the public, and acquiesced in by the hunkered-down Democrats, is plain wrong. As a percentage of gross domestic product (GDP), the federal debt is far lower now than it was in the 1940s and 1950s, when depression- and war spending (i.e. stimulus) brought it to twice the present level. As for the horrors of deficits, the US has been in deficit all but a dozen of the past 80 years; the nation has not only survived, it has, for the most part, thrived.
Instructively, the economic low point of FDRs presidency, the Roosevelt recession of 1937-38, coincided exactly with a temporary cutback in federal stimulus spending that took place after four consecutive years of recovery, spurred by New Deal pump priming, prematurely persuaded Democrats the Depression was ending. Growth and job creation resumed once more with the massive public investments of the war buildup.
Theres not much doubt that at some point deficit spending becomes counterproductive and national debt problematic. The truth is, however, economists dont know where that point is; it cant be precisely determined. For fiscal conservatives, its always either upon us or just around the corner. Regardless, were not there yet, and hysterical calls for rigid austerity are ideologically driven, not economically based. Obama and the Democrats should not be letting the soiled Bush legacy shape their budgetary determinations and block our painful crawl back from the economic abyss.
Wayne OLeary is a writer in Orono, Maine, specializing in political economy.
From The Progressive Populist, October 15, 2010
News | Current Issue | Back Issues | Essays | Links
About the Progressive Populist | How to Subscribe | How to Contact Us