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When, oh when will Democrats realize that once they move away from job creation to deficit reduction, they are playing right into the right wing agenda? On Meet The Press, President Obama told Dancing Dave Gregory this when asked about going over the proverbial fiscal cliff:
Obama: What I said was is that we should keep taxes where they are for 98 percent of Americans, 97 percent of small businesses. But if we're serious about deficit reduction we should make sure that the wealthier are paying a little bit more and combine that with spending cuts to reduce our deficit and put our economy on a long-term trajectory of growth.
I understand the president is in the process of getting Republicans to vote for raising taxes (which has become something of a crisis for them ever since President Clinton came out of his eight years with a budget surplus), but if he's going to be strong on deficit reduction, the solution should be job creation and not draconian spending cuts, including entitlements. Remember this: When it comes to the federal budget---Republicans are great at one thing, which is smashing sh*t on the floor.
Remember the context: Mankiw loved the Bush-era fiscal policies to create long-run structural budget deficits, and worked hard to implement them--the unfunded war and unfunded tax cut and unfunded entitlement policies that did so much to create our structural deficit. Mankiw did his best to join in the process of taking the work that we in the Clinton administration had done in the 1990s to restore America's fiscal balance--work that was very well done, very important, and work that we were and are very proud of--and casually smashing it on the floor.
But Republicans will inevitably see a balanced budget as an opportunity to give money to rich people (tax cuts and crony capitalism). The reward to liberals for this well done very important work? Tax cuts for rich people and unpaid, disastrous wars.
Liberals should spend their time in office figuring out how to implement a sticky liberal agenda, one which is hard to dislodge, not figuring out how to create a pot of money for Republicans to steal when it is their turn.
As soon as Clinton left, Bush couldn't wait to hand out wingnut welfare to his rich cronies. He literally paid them off with our tax dollars for voting him in office. He did know that doing this would help create a fiscal nightmare for future generations. Bruce Bartlett writes this about George Bush and 'starving the beast' politics:
Once in office, George W. Bush justified his proposal for a big tax cut in 2001 partly on the grounds that budget surpluses led to bigger government (OMB 2001, 172).Therefore, the prudent, fiscally conservative thing to do was to get rid of the surplus by reducing taxes (Schick 2002, 48). As he said at an August 2001 press conference, the tax cut would put Congress into a “fiscal straitjacket.”
And as we've seen, what that does is create the illusion of a budgetary nightmare for which Republicans will require 98% of Americans to have their Social Security, Medicare and Medicaid cut --for the privilege of lining their pockets (and their cronies) with gold. What a scam. I doubt George Bush planned it, but one of the repercussions of his tax cuts has been for the beltway Villagers to scream for shared sacrifice from the masses when working class Americans did nothing wrong.
The Villagers are stimulated by the prospect of human sacrifice
The [current CPI] fails to account for what economists call upper-level substitution bias, and what my mother would call plain common sense: If the price rises for a certain commodity in the basket of goods used to measure inflation, consumers will choose a cheaper alternative. In my house, when the price of beef soars, we substitute chicken --- Washington Post columnist Ruth Marcus
Yes, I'm quite sure the price of beef is always a huge concern for an elite columnist at one of the world's most influential newspapers. In that column, the allegedly liberal Ruth Marcus went on to heartily endorse the change, saying that the White House had assured her that the most elderly poor will be taken care of so it's all good. And then I'm sure she rushed into the kitchen to figure out how to stretch her meager weekly ground beef allotment for another few days. Oatmeal added to the meatloaf can be quite nourishing, don't you know?
So, the whole deficit panic is fundamentally misplaced. And it’s especially galling if you look at what many of the same people now opining about the evils of deficits said back when we had a surplus. Remember, George W. Bush campaigned on the basis that the surplus of the late Clinton years meant that we needed to cut taxes — and Alan Greenspan provided crucial support, telling Congress that the biggest danger we faced was that we might pay off our debt too fast. Now Greenspan is helping groups like Fix the Debt.
And as Duncan Black points out, the Bush experience tells us something important about fiscal policy: Namely, that when Democrats get obsessed with deficit reduction, all they do is provide a pot of money that Republicans will squander on more tax breaks for the wealthy as soon as they get a chance. Suppose Romney had won. Do you have even a bit of doubt that all the supposed deficit hawks of the GOP would suddenly have discovered that unfunded tax cuts and military spending are perfectly fine?
The point is, the whole focus of budget discussion is based on a combination of bad economics and bad (and fundamentally dishonest) politics. We’re looking not so much at a Grand Bargain as a Great Scam.