Grand Bargains and Scared Sacrifice After the Election

AS a reminder we are still...

After the election, regardless of who wins, though it will most likely be President Obama, there will be a self induced so called fiscal cliff that involves a sequester which is a number of cuts across the board that go into effect automatically from the debt ceiling deal. This was entirely predictable and self induced once the Bush tax cuts were passed again by a Democratic President. These facts should ring true after the election because they won't change. Because our leaders in both parties are stuck on stupid economically when it comes to national accounting and monetary operation in tandem with fiscal operations they want us to suffer through austerity.

The Republicans and the President both want us to be scared in order to sacrifice the most successful programs of the New Deal and Great Society. They want us to be frightened to death of the self induced crisis(because this president can't negotiate a debt ceiling raise like every other president or he has something else in mind) they created together in this debt ceiling debacle. And it is entirely a self induced crisis.

It was entirely avoidable and entirely predictable if one knows their history, even recent history from the Obama/Bush tax cut deal as well as the 80s. This isn't the 90s. There is a jobs crisis. There is not enough demand in the economy and tax cuts, even employer side payroll tax cuts being proposed (the only arguably effective stimulus in this situation) are not efficient and won’t increase hiring.

The president doesn't understand demand or economics in general. It’s sad to say, but he believes in the pseudo economics of the confidence fairy that will supposedly lure back the bond vigilantes (who haven’t even left yet even during this debt ceiling debate) and his magical Internet gnome David Plouffe perpetuating his Independents deficit disorder. The public does not share the president’s adherence to pseudo economics, so he’s using the crisis he helped create:

"I’ll take John Boehner at his word — that nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse"

The president is using this crisis he helped create in order to make us “eat our peas.”

There is no debt/deficit crisis. As professor James K. Galbraith says:

“When Obama says, even offhand, that the United States is "out of money," he's talking nonsense--dangerous nonsense. One wonders if he believes it.”

If you read that piece you learn that the federal budget is not deficit constrained nor is it like a family's budget because we issue our own currency unlike any EU nation like Greece or Ireland. It's a shame I have to keep repeating this and that the president still is talking nonsense when it comes to fiscal matters. But let's pretend the federal budget is deficit constrained for a second. Let's for a second buy RW and neoliberal framing(like the president is doing) that the debt is an immediate problem and must be handled now or we'll all die!

In doing so I will take you back in history when the deficit/debt did matter to a point because we were still on a version of the gold standard as the dollar was pegged to gold until Nixon took us off of it in 1971. The Bretton Woods system of international financial exchange then ended. There used to be a gold reserve constraint in our banking reserve system and when we ran a trade deficit as we started doing during this time, we had to pay the surplus country we ran the deficit with in gold so it was bound to fall anyway. So this is when in the long run, deficits and debt mattered, but not anymore because we don't have those constraints anymore.

However debt only means something even in this scenario when compared to something else and that is the debt to GDP ratio. If we listen to the John Boehner or Obama buying into his framing but in a lesser way, you would have thought the world ended and our economy collapsed during the height of WWII when our debt to GDP ratio was 120%.



It didn't. In fact, it was the most prosperous period across the globe there had ever been, the Keynesian golden age. The global economy grew at an average of 4.9% and all one has to do to make themselves feel better if they are worried about deficits and debts and spending is to look at that downward slope the national debt took as the economy grew during this period. It's like skiing down the alps and though the debt to GDP ratio is picking up though not expected to be close to 120% of GDP(depends on medical inflation) it's clearly not an immediate crisis even if one thinks we are still deficit constrained in the long run, but we are not.


So don't believe the BS! The President, John Boehner, Harry Reid, and Mitch McConnell, and the gang of six are all coming after our social safety net in this debt ceiling sham of a negotiation. They are all using these proven pseudo economic lies to push Shock Therapy Americans don't want or need. We must fight this grand bargain regardless of the outcome of the 2012 Presidential election. It is unacceptable.