Who’s at the table
As the political media has increasingly come to focus exclusively and obsessively on the latest twists and turns of the debt ceiling crisis, I find myself more alienated from and disgusted with politics than I’ve been in quite a long while. As Ed at Gin and Tacos put it:
I feel like I should be biting my nails and paying rapt attention to the “negotiations” over the debt ceiling, but I honestly could not care less. This situation is a good example of how Washington politics are starting to feel a lot like Kabuki theater and very little like a functional, representative, multiparty government.
And it’s not the Republicans’ profoundly unserious and extreme refusal to countenance tax increases of any kind that has me feeling this way — their behavior thus far is simple brinksmanship and, what’s more, anyone who paid a scintilla of attention to the government shutdown negotiations of a few months ago can’t reasonably claim to be surprised. Instead, what’s got me feeling alternately bitter and exhausted is how zealously the White House has used Republican intransigence as a cover to avoid taking responsibility for its own policy proscriptions which, charitably put, suck.
This is a road I began to travel somewhat recently, courtesy of Kevin Drum. Drum is generally much more willing to cut Obama slack than I am, maintaining the somewhat boundless faith in the President’s wisdom and foresight that I held in those heady early months of 2009, and began to lose when the Administration began to roll out last year’s hubristic and premature Recovery Summer. So maybe this is just another example of Drum ascribing to Obama political skills of a level that would make Clay Davis green with envy, but he thinks the President wanted it this way:
For what it’s worth, I continue to think that [Obama’s decision not to get a deal on the debt ceiling earlier] probably wasn’t a bungle. More likely, during his first two years in office Obama had gotten enough deficit religion from the likes of Peter Orszag and Tim Geithner that he actually welcomed the opportunity to put in place some long-term spending cuts. He couldn’t very well admit that publicly, of course, since his base would go bananas, so instead he punted on the debt ceiling, knowing that Republicans would then use it to “force” spending concessions out of him. Mission accomplished: long-term spending is reduced, and Republicans get all the blame. Democrats mostly forgive him because everyone knows Republicans are crazy, and as a bonus, Republicans don’t even get much of a boost from their own base out of this since any real-world spending cut won’t come close to the demands of the tea party crowd.
How sure am I of this? Not very. Maybe 60%. But think of it this way: the kind of negotiating position Matt [Yglesias] is talking about isn’t rocket science. It’s not even Negotiation 101. It’s more like the fifth grade version. There’s just no way that Obama and Reid and the rest of the Democratic brain trust were literally so stupid that they didn’t understand this. A far more parsimonious explanation is that this is roughly what Obama wanted. He wanted spending cuts, but he wanted Republicans to be the ones to take the lead. And that’s what happened.
Bottom line: I don’t think we should try to figure out what Obama “really” thinks about stimulus spending vs. deficit reduction. His actions suggest that he wants long-term spending cuts. Like it or not, that’s the real Obama.
None of us are in the room when the President has his secret strategy/therapy sessions with William Ayers, Reverend Wright and, uh, Louis Farrakhan, so not a one of us can say with any real seriousness that we know what’s going on inside the Commander-in-Chief’s cranium. But one can pass on the armchair psychoanalysis and opt instead for the simple beauty of Occam’s razor with the same result: Drum’s hypothesis standing tall. As a bizarro-world Dennis Green might have said, it’s time for us all to recognize that Obama is not who we thought he was, but rather who he said he was.
And the person Obama is, quite simply, a somewhat milquetoast and very orthodox neoliberal. The guy didn’t accidentally choose to stuff his economic policy team with the very people who brought you greatest hits from the Clinton years like the repeal of Glass-Steagall, the passage of NAFTA and the non-regulation of derivatives — he genuinely believes the more neoliberal planks of the Clinton model to be fundamentally sound (which it is, provided we sideline examining the influence the decade’s enormous tech bubble played; and provided we somehow determine that the financial crisis, which resulted in large part from de and non-regulation of the financial industry, was entirely the fault of Reagan and the two Bushes). As Michael Lind wrote (nearly 2 full years ago):
By the time Barack Obama was inaugurated, the neoliberal capture of the presidential branch of the Democratic Party was complete. Instead of presiding over an administration with diverse economic views, Obama froze out progressives, except for Jared Bernstein in the vice-president’s office, and surrounded himself with neoliberal protégés of Robert Rubin like Larry Summers and Tim Geithner. The fact that Robert Rubin’s son James helped select Obama’s economic team may not be irrelevant.
Instead of the updated Rooseveltonomics that America needs, Obama’s team offers warmed-over Rubinomics from the 1990s. Consider the priorities of the Obama administration: the environment, healthcare and education. Why these priorities, as opposed to others, like employment, high wages and manufacturing? The answer is that these three goals co-opt the activist left while fitting neatly into a neoliberal narrative that could as easily have been told in 1999 as in 2009. The story is this: New Dealers and Keynesians are wrong to think that industrial capitalism is permanently and inherently prone to self-destruction, if left to itself. Except in hundred-year disasters, the market economy is basically sound and self-correcting.
Forgiving Lind’s choice to use the charged and vaguely conspiratorial phrase “capture,” there’s not much in the article — if anything at all — that the passage of time has rendered mistaken. If anything, the degree to which Obama subscribes to the neoliberal ideology has been shown to be previously underestimated. Thus an article from the Washington Post in early June, “Geithner finds his footing,” which reports that the former Republican and key architect of the extremely forgiving Wall Street bailout packages of 2008 is now the undisputed lead shaper of the Administration’s economic policy:
Geithner has not only survived but quietly gained influence, which he has used to press President Obama to curb the nation’s soaring debt even at the expense of spending that might more directly spur employment.
His success at driving the agenda signals his status as the president’s closest economic counselor. With the departure this summer of Austan Goolsbee as chairman of the Council of Economic Advisers, Geithner will be the last remaining member of the president’s original economic team and, with Federal Reserve Chairman Ben S. Bernanke, one of the two remaining architects of the great banking bailout that began in 2008, even before Obama’s election.
Geithner, who was once a registered Republican and then an independent, has a faith in the marketplace that puts him at odds with many of Obama’s traditional Democratic allies, whose skepticism about markets seemed vindicated by the financial crisis. His debut on Obama’s team was also shaky. He faced questions about whether he had properly paid all his taxes, and his initial public defense of the administration’s plan for rescuing the financial industry was uninspired, prompting anxiety in the markets.
But over the past year, he has fared better, especially at pushing his viewpoint in internal White House debates. While forces outside the White House — in particular, Republican lawmakers — have helped turn Washington’s attention to the nation’s debt, Geithner’s efforts inside the White House have shaped how Obama confronts this defining moment.
Mike Konczal wrote a post not long after the article’s initial running which highlighted what I, too, thought was its most important revelation. Here’s the bit in question, detailing internal debates between members of Obama’s economic team (most of whom are now departed, though none have resurfaced in quite as plush circumstances as Orszag) :
By early last year, Geithner was beginning to gain the upper hand in a rancorous debate over whether to propose a second economic stimulus program to Congress, beyond the $787 billion package lawmakers had approved in 2009.
Lawrence Summers, then the director of the National Economic Council, and Christina Romer, then the chairwoman of the Council of Economic Advisers, argued that Obama should focus on bringing down the stubbornly high unemployment rate. This was not the time to concentrate on deficits, they said.
Peter Orszag, Obama’s budget director, wanted the president to start proposing ways to bring spending in line with tax revenue.
Although Geithner was not as outspoken, he agreed with Orszag on the need to begin reining in the debt, according to current and former administration officials […]
Even before the president had been inaugurated, Geithner had been urging him to set a target for the budget deficit that would require shrinking its size to 3 percent of the U.S. economy. At that level, the national debt would eventually become manageable.
“From the earliest moments of the administration and even before, he clearly had a big focus on long-term deficit reduction and making clear, not just to the markets but for the entire economy, that the government is living within its means,” Goolsbee said in an interview.
The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.
Wrong, Romer snapped back. Stimulus is an “antibiotic” for a sick economy, she told Geithner. “It’s not giving a child a lollipop.”
In the end, Obama signed into law only a relatively modest $13 billion jobs program, much less than what was favored by Romer and many other economists in the administration.
“There was this move to exit fiscal stimulus a lot sooner than we should have, and we’ve been playing catch-up ever since,” Romer said in an interview.
Konczal was about as dumbfounded as I was upon first reading this, and rightly notes that with the rise of Geithner has come an accompanying shift in focus on the Administration’s part, from long-term deficit reduction as a means to ensure short-term, job-saving and making stimulus, to deficit reduction intended to inspire “confidence,” which, in an environment where interest rates are effectively 0, means little more than “long-term deficit reduction [as] its own goal”:
Notice the change in what the concept of “confidence” is doing in each. The idea of the first “two deficits” approach is predicated on not upsetting the bond markets while the administration tries to get to full employment, because upsetting the bond market could put us right back at square one. If confidence drops while increasing aggregate demand the stimulative effort will be compromised. We need to keep confidence in check.
This new idea is that making the bond market happy in-and-of-itself will produce prosperity and full employment through increasing confidence. The major drag on the economy isn’t low aggregate demand but confidence. Now the assumption isn’t that we have to keep the bond markets as happy as they were but instead make them much happier, which will then increase investments and spending through this increase in confidence. Hence long-term spending cuts, lots of gimmies to incumbents in supply-side investments and other things powerful interests love but don’t necessarily make demand-based economic sense.
Konczal, who is much, much better informed than I when it comes to the dismal science, writes, “I simply don’t see any evidence of why, or even how, this would work.” I’d say the past two quarters of anemic growth imply that he doesn’t see the evidence because of its stubbornly persistent refusal to exist. At the least, most Americans remain similarly searching:
Thirty-nine percent of those surveyed for a New York Times/CBS News poll released late Wednesday say they see the economy headed on a downward path – significantly worse than when the question was last asked in October and 28 percent of Americans said the economy was in permanent decline.
At the same time, fewer Americans see the economy as having the potential to eventually recover, with 57 percent of those surveyed saying they think things will, in time, be better. That’s down from 68 percent in October.
To return to from whence this (too) long post began, it’s long past time for everyone to recognize that this is who Obama is and that the current farcical game of chicken over the debt-ceiling is, like the government shutdown before it, following a path that he in all likelihood finds perfectly acceptable. How else to explain his attempts to cast the proposed Grand Bargain’s truly minimal 5:1 cut-to-tax ratio as the reasonable center-left proposal? This is what he seems to want. (And in a funny but not “ha ha” funny twist, it appears that when it comes to living Democratic Presidents not named Jimmy Carter, Obama is alone on this score.)
So I’d ask liberals to stop asking the question as to why the President, supposedly “our” guy at the table, seems to be so confoundingly unfamiliar with Kevin Drum earlier called “the fifth grade version” of negotiation. Instead, it’s time we recognize that, when it comes to matters of economic policy, we have no guy at the table. What we’ve got instead is some rather silly theater; and I hope you’ll excuse me if I say that, for the time being, I’ve had more than enough.