Obama’s foolish austerity project

As Barack Obama approached the conclusion of his July 15, 2011 press conference regarding the budget negotiations, he clearly threw down the gauntlet before the left:

And I have to say this is tough on the Democratic side, too. Some of the things that I’ve talked about and said I would be willing to see happen, there are some Democrats who think that’s absolutely unacceptable. And so that’s where I’d have a selling job, Chuck, is trying to sell some of our party that if you are a progressive, you should be concerned about debt and deficit just as much as if you’re a conservative. And the reason is because if the only thing we’re talking about over the next year, two years, five years, is debt and deficits, then it’s very hard to start talking about how do we make investments in community colleges so that our kids are trained, how do we actually rebuild $2 trillion worth of crumbling infrastructure.

If you care about making investments in our kids and making investments in our infrastructure and making investments in basic research, then you should want our fiscal house in order, so that every time we propose a new initiative somebody doesn’t just throw up their hands and say, “Ah, more big spending, more government.”

It would be very helpful for us to be able to say to the American people, our fiscal house is in order. And so now the question is what should we be doing to win the future and make ourselves more competitive and create more jobs, and what aspects of what government is doing are a waste and we should eliminate. And that’s the kind of debate that I’d like to have.

Marshall Auerback happily picks up the gauntlet:

You want a debate on this, Mr. President? Consider it done. In a nutshell, your proposed cuts will NOT set the stage for a “progressive agenda” going forward. The austerity measures contemplated by your Administration will suck income and wealth out of the private sector. This will cause private spending to fall, leading to yet more downsizing and unemployment. Tax revenues will decline further as corporate profitability sags, social welfare expenditures will rise as the automatic stabilizers kick in. And before you know it, we’ll be bumping up against that troublesome debt ceiling again, experiencing the same kind of political grandstanding that is characterizing today’s conflict, sort of like a nightmare version of “Groundhog Day”. The government will, in effect, be chasing its own tail. You will not “put the nation’s fiscal house in order”, Mr. President, but tear down its foundations even further.

Auerback continues:

The debate that the President is calling for, then, should not be focused on “affordability” but on what constitutes the national priorities of our government. The political process, not a non-existent gold standard, or a foolishly imposed debt ceiling of questionable constitutionality, should determine our national priorities. Promising jam tomorrow in exchange for “eating our peas” today might make for a good sound bite, but it is predicated on a fundamentally flawed model. The whole basis of our growth over the past quarter century has been based on households borrowing and the continuation of negative saving trends. A good place to start recovery efforts, therefore, would be to change this method of economic growth toward restoring incomes and job growth, rather than propping up zombie banks and embracing “rentier economics” through this misconceived emphasis of public debt reduction. No ostensible progressive can achieve anything close to the objectives ostensibly desired by the President, if we embrace his flawed economic thinking. Concerns about government deficits and the government debt have served as a very useful way of masking the real issue, the unwillingness of conservatives to allow the government to work for the good of the population, something that a democratic government is supposed to do.

Barack Obama, Wall Street’s man in Washington.

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