Obama's Bad Bargain

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William Greider, The Nation

The most distressing outcome of the deficit hysteria gripping Washington may be what Barack Obama has revealed about himself. It was disconcerting to watch the president slip-slide so easily into voicing the fallacious economic arguments of the right. It was shocking when he betrayed core principles of the Democratic Party, portraying himself as high-minded and brave because he defied his loyal constituents. Supporters may hope this rightward shift was only a matter of political tactics, but I think Obama has at last revealed his sincere convictions. If he wins a second term, he will be free to strike a truly rotten “grand bargain” with Republicans—“pragmatic” compromises that will destroy the crown jewels of democratic reform.

The president has done grievous damage to the most vulnerable by trying to fight the GOP on its ground—accepting the premise that deficits and debt should be a national priority. He made the choice more than a year ago to push aside the real problem—the vast loss and suffering generated by a failing economy.

As a conservative reformer, Obama embraced a bizarre notion of “balance.” The budget cuts he first proposed would have punished the middle class and vulnerable three times with a big stick, shrinking Social Security, Medicare and Medicaid benefits while hitting the wealthy only once with a modest tax increase. When Democrats complained that this wasn’t fair, Obama adjusted the “shared sacrifice” to a dollar-for-dollar ratio. Take a dollar from working stiffs who need these programs, take a dollar from the superrich who don’t need a tax break. How fair is that?

Obama’s facile arithmetic essentially scrapped the Democratic Party’s longstanding commitment to progressive taxation and universal social protections. The claim that cutting Social Security benefits will “strengthen” the system is erroneous. In fact, Obama has already undermined the soundness of Social Security by partially suspending the FICA payroll tax for workers—depriving the system of revenue it needs for long-term solvency.

The mendacity has a more fundamental dimension. Obama helped conservatives concoct the debt crisis on false premises, promoting a claim that Social Security and other entitlement programs were somehow to blame while gliding over the real causes and culprits. Social Security has never contributed a dime to the federal deficits (actually, the government borrows the trust fund’s huge surpluses to offset its red ink).

This mean-spirited political twist amounts to blaming the victims. There should be no mystery about what caused the $14 trillion debt: large deficits began in 1981, with Ronald Reagan’s fanciful “supply side” tax-cutting. Federal debt was then around $1 trillion. By 2007 it had reached $9 trillion, thanks to George W. Bush’s tax cuts for the wealthy and his two wars in Iraq and Afghanistan, plus the massive subsidy for Big Pharma in Medicare drug benefits. The 2008 financial collapse and deep recession generated most of the remainder, as tax revenues fell drastically. Obama’s pump-priming stimulus added to the debt too, but a relatively small portion.

Whatever supposed solutions Congress eventually enacts, the misleading quality of the debt crisis should become widely understood once the action is completed. The debt and deficits will probably keep expanding, because the economy will remain stagnant or worse, with near 10 percent unemployment and falling incomes, and that is fundamentally what drives deficits higher. It should become obvious that deficit reduction did nothing to revive economic growth or to create jobs. In fact, cutting federal spending may make things worse, because it withdraws demand from the economy at the very moment when demand for goods and services is woefully inadequate.

At some point, then, the president will have to change his tune. Instead of mimicking the penny pinchers, Obama will have to say something about the nation’s real problem—the sick economy and the terrible consequences facing millions of families. But it’s not clear he will have much to say beyond small-bore suggestions and the usual pep talks. If he does a sudden about-face and proposes big ideas for job creation, will anyone believe him?

The White House evidently thinks it’s good politics for 2012 to dismiss the left and court wobbly independents. Obama no doubt assumes faithful Democrats have nowhere else to go. It’s true that very few will wish to oppose him next year, given the fearful possibility of right-wing crazies running the country. On the other hand, people who adhere to the core Democratic values Obama has abandoned need a strategy for stronger resistance. That would not mean running away from Obama but running at him—challenging his leadership of the party, mobilizing dissident voices and voters, pushing Congressional Democrats to embrace a progressive agenda in competition with Obama’s.

To be blunt, progressives have to pick a fight with their own party. They have to launch the hard work of reconnecting with ordinary citizens, listening and learning, defining new politics from the ground up. People in a rebellious mood should also prepare for the possibility that it may already be too late, that the Democratic Party’s gradual move uptown is too advanced to reverse. In that event, people will have to locate a new home—a new force in politics that speaks for them.

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