Three public figures associated with the movement to cut government spending – marketed in this country as “deficit reduction” – appeared in the news this week. It was like a modern-day morality play, those church-sponsored medieval performances meant to dramatize the Virtues – and the rewards one could earn by following them.
All three characters – the Senator, the Lobbyist, and the Economist — have encouraged steep cuts in government spending. But only one of them is going to heaven. Which one?
The final public remarks of retiring Sen. Kent Conrad (Corporate Democrat – North Dakota) resonated with the self-righteous sanctimony that has come to characterize elected officials who put self-interest before the public interest, but who prefer to be perceived as selfless servants of the people. (See Bayh, Evan.)
Conrad expressed dismay over the Senate’s failure to enact a comprehensive deficit reduction agreement. “I told my colleagues I hate this agreement,” he said of last week’s bill. ”I hate it with every fiber of my being because this is not the grand bargain I hoped for or worked for or believed is so necessary to the future of our country.”
Conrad spoke of an “unsustainable circumstance” in which ““The United States is borrowing 31 cents of every dollar that it spends.” And yet, by all published reports, Conrad played a pivotal role in increasing the nation’s deficits. And he continued to press for more deficit-exploding measures until his final day in the Senate.
Public Option, Private Gain
Conrad, more than any other Senator, is blamed for killing the so-called “public option” in health reform. Even a highly restricted version of that measure was projected to save $110 billion over ten years, despite being available to only about one American in twenty. Unfortunately for the nation, even that modest proposal threatened the profit margins of the healh care interests – interests which gave Conrad more than $2 million in campaign contributions.
That’s a lot of campaign money anywhere. But in tiny North Dakota, it’s a fortune – a potentially election-changing fortune.
Conrad has been a tireless laborer for the corporate and billionaire agenda of lowering taxes (for themselves) and cutting vital social programs in the name of “deficit reduction.” From his roles in the Senate “Super Committee” and “Gang of Six” to his promotion of the Simpson Bowles austerity package, Conrad’s economic legacy is his unambiguous support for the economy-crushing proposals of the rich and powerful.
Conrad’s swan song in the Senate was his support for raising the Medicare elibility age, which would have had the recessionary effect of forcing more people to devote their discretionary income to health care. Since health care will drive the Federal deficit in the coming decades, Conrad may have played a vital role in increasing those deficits for generations to come.
That’s not to say Conrad’s record is without its bright spots. He was a stalwart supporter of civil liberties and an opponent of unnecessary wars. But when it comes to economics, sanctimony was his brand until the last. Now he’ll undoubtedly go the place all good “centrist” Senators go if they’ve been very, very good: The Land of Hedge Funders and Lobbyists.
Retired Sen. Alan Simpson once again appeared on Meet the Press this weekend with his partner, former Clinton Chief of Staff Erskine Bowles. A discerning news consumer might be inclined to wonder why so much news exposure is always being given to an undistinguished ex-politician from Wyoming and a former White House functionary whose political career quickly fizzled after he left Washington.
The answer’s simple: Money. Bowles and Simpson are backed by the money of billionaire anti-government conservative Pete Peterson, whose influence with the Democrats won them an appointment as co-chairs of President Obama’s “Deficit Commission” – which was the wrong project at the wrong time with the wrong people.
They’re being proclaimed as “budget experts,” but Simpson’s a career politician and Bowles is a Wall Street millionaire. Both of them earned their power and wealth the old-fashioned way: they were born into it. Bowles and Simpson failed to get a report out of that commission, primarily because they insisted on including extreme anti-government measures in the bill – and insisted on targeting Social Security for cuts, although it’s forbidden by law from contributing to the deficit.
Why target Social Security? Because benefit cuts will reduce political pressure that could lead to higher payroll tax contributions for millionaires and billionaires.
Nevertheless, their dutiful parroting of the corporate and billionaire agenda that funds them (cuts to Social Security and Medicare, lower taxes for their wealthy and powerful sponsors) is absurdly treated as a) unbiased and b) deficit-reducing, even though it is demonstrably neither.
Mr. Big Stuff
Today was no exception. Simpson, the well-to-do son of a former Governor and Senator, brought his patented faux-folksy patter – ane his usual corporate sales pitch – to this Sunday’s Meet the Press.
“What the hell?” Simpson said of last week’s budget deal. Who’s kidding who?”
Like Fix the Debt’s Maya MacGuineas and other fellow anti-government lobbyists, Simpson and Bowles expressed regret that last week’s phony “fiscal cliff” crisis didn’t lead to deeper spending cuts. They were particularly sorry that those cuts didn’t include “entitlement programs” – Social Security and Medicare – even though they’ve refused to endorse genuinely cost-cutting health care measures.
When it comes to cost-cutting, Simpson complained bitterly, this agreement didn’t cut “the big stuff.” European countries like Greece, however, have cut “the big stuff.”
How’s that working out for them?
That brings us to the third character in our morality play: The Economist. This week Olivier Blanchard, chief economist for the International Monetary Fund (IMF), released a paper which reviewed the assumptions it used in order to push for those “big stuff” spending cuts – and concluded that they were wrong.
That’s not exactly news – at least not to anyone who’s been paying attention. Those cuts plunged Europe into another full-scale recession and caused unemployment to skyrocket. They caused deficit spending and government debt to increase, rather than decrease. As the IMF noted in a paper last October, austerity cuts like those pushed by Simpson, Bowles and Conrad increased government debt in Greece, Spain, Portugal, and Ireland.
What makes this paper newsworthy, then, is not its admission that the IMF’s assumptions were wrong. What makes it newsworthy is that a deficit-driven economist admitted that he and his team were wrong.
The paper’s technical argument centers on something called “fiscal multipliers,” which is the technical term for the amount of growth that government spending can generate in the overall economy. Blanchard now acknowledges that they underestimated the enormous economic return a country receives for each dollar it spends on government services, especially in economic times like these. And they underestimated the influence that current personal income and business profits have on spending and investment.
Where the Power Players Dine in Luxury
They were wrong, and they admitted it. People like Simpson, Bowles, Conrad and MacGuineas haven’t – and they’re not likely to, facts or no facts. Clearly, then, deficit reduction isn’t their primary concern.
But then, we already knew that, since their “debt reduction plans” include tax cuts for millionaires, billionaires, and corporations. No rational deficit plan would do that.
If this were a medieval morality play, we would know that Olivier Blanchard is headed for Paradise – and that our other players were headed for a warmer climate. We’ll make a prediction, however, based on the long-standing ways and means of Washington lobbyists: Olivier Blanchard may get into heaven. But if someone needs a last-minute table at Tosca or Minibar next fall, my money’s on Kent Conrad.
And that, not economic reality, is why we’re discussing spending cuts in January of 2013.