Obama's conservative economic priorities, the Grand Bargain and the future of the Democratic Party

Since the "fiscal cliff" was a contrived crisis, I'm not inclined to spend much time comma-dancing over whether "going over the cliff" happened at midnight December 31 or would have happened at some point after that. The latter seems to have become the dominant description, so there is a discussion of whether Obama could have gotten more in the deal by "going over the cliff," i.e., holding out longer.

I think my comments on the January deal so far show that I'm disappointed by how Obama handled the negotiations. I'm relieved that the result wasn't worse because my expectations for Obama's performance during the lame-duck were so low. I just think it's worth noting that it wasn't until the Bush tax rates had actually expired - which was the only hard-and-fast deadline about the "cliff" - that the Republicans agreed to any kind of deal. The lesson I take from that is that the Republicans were unlikely to agree on anything until the Bush tax rates had actually expired, and that it was a point of major leverage for the Democrats. I'm convinced that the Democrats could have gotten a better deal if Obama hadn't been so eager to get a deal done this week.

And it also means that unless the Republicans see that Obama is willing to call their bluff on the deficit ceiling by using the 14th Amendment option or the platinum coinage option, the Republicans will walk all over him again in Debt Ceiling Crisis II.

It's a basic problem that Obama not only doesn't see his goal as building a national consensus behind Democratic ideas, he actually appears to see that as an undesirable goal. His goal from everything we seen so far is to build a postpartisan, end-of-ideology consensus around corporate-friendly neoliberal policies of deregulation and privatization. And specifically a consensus that unites the Republican Party in policy goals with the corporate wing of Democratic Party in hopes of permanently marginalizing the labor movement and progressive economic policies. And he sees the Grand Bargain to cut benefits on Social Security, Medicare and Medicaid as central to that goal.

I don't see how else to read the plain statement that Obama made just before the election last year (Obama, In Morning Joe Interview, Predicts War Inside Republican Party If He Is Reelected Huffington Post 10/29/2012):

President Barack Obama said in an interview Monday that the Republican party would have to overcome an internal war if he were reelected, but expressed hope that the partisan gridlock in Washington could come to an end.

"There are a whole range of issues I think where we can actually bring the country together with a non-ideological agenda," Obama said in a pre-taped interview on MSNBC's "Morning Joe." ...

Asked by host Joe Scarborough what would be different if, in a second term, Obama was once again dealing with a Republican majority in the House, the president expressed more optimism that Democrats and Republicans would come together to tackle the debt and deficit.

"I truly believe that if we can get the deficit and debt issues solved, which I believe we can get done in the lame-duck or in the immediate aftermath of the lame-duck, then that clears away a lot of the ideological underbrush," he said. "And then now we can start looking at a whole bunch of other issues that, as I said, historically have not been that ideological." [my emphasis]

This is a "centrist" fantasy that could not work out well for the majority of the people. In another interview shortly before the election, Obama had this to say (TRANSCRIPT: Obama Campaign Releases Transcript of President’s Interview With Des Moines Register After Insisting That It Be Kept Off the Record FOX News Insider 10/24/2012):

I want to reduce our deficit. It's got to be done in a balanced way. I've already cut a trillion dollars' worth of spending. I'm willing to do more. I'm willing to cut more, and I'm willing to work with Democrats and Republicans when it comes to making some adjustments that bring down the cost of our health care programs, which obviously are the biggest drivers of our deficit.

But nobody who looks at the numbers thinks it's realistic for us to actually reduce our deficit in a serious way without also having some revenue. And we've identified tax rates going up to the Clinton rates for income above $250,000; making some adjustments in terms of the corporate tax side that could actually bring down the corporate tax overall, but broaden the base and close some loopholes. That would be good for our economy, and it would be good for reducing our deficit. [my emphasis]

Here we see the emphasis on deficit reduction during a depression.

In this extended quote, he lays out his idea of how to eliminate major ideological conflict over economic issues, assuming a reasonable and responsible Republican Party, which he seems to see in the real existing Republican Party. Note that the phrase "grand bargain" is the Administration's phrase for cutting benefits on Social Security, Medicare and Medicaid:

In the short term, the good news is that there’s going to be a forcing mechanism to deal with what is the central ideological argument in Washington right now, and that is: How much government do we have and how do we pay for it?

So when you combine the Bush tax cuts expiring, the sequester in place, the commitment of both myself and my opponent — at least Governor Romney claims that he wants to reduce the deficit — but we're going to be in a position where I believe in the first six months we are going to solve that big piece of business.

It will probably be messy. It won't be pleasant. But I am absolutely confident that we can get what is the equivalent of the grand bargain that essentially I've been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs.

And we can easily meet — "easily" is the wrong word — we can credibly meet the target that the Bowles-Simpson Commission established of $4 trillion in deficit reduction, and even more in the out-years, and we can stabilize our deficit-to-GDP ratio in a way that is really going to be a good foundation for long-term growth. Now, once we get that done, that takes a huge piece of business off the table.

The second thing I'm confident we’ll get done next year is immigration reform. And since this is off the record, I will just be very blunt. Should I win a second term, a big reason I will win a second term is because the Republican nominee and the Republican Party have so alienated the fastest-growing demographic group in the country, the Latino community. And this is a relatively new phenomenon. George Bush and Karl Rove were smart enough to understand the changing nature of America. And so I am fairly confident that they're going to have a deep interest in getting that done. And I want to get it done because it’s the right thing to do and I’ve cared about this ever since I ran back in 2008.

So assume that you get those two things done in the first year, and we’re implementing Wall Street reform, Obamacare turns out not to have been the scary monster that the other side has painted. Now we’re in a position where we can start on some things that really historically have not been ideological. We can start looking at a serious corporate tax reform agenda that’s revenue-neutral but lowers rates and broadens the base — something that both Republicans and Democrats have expressed an interest in.

I've expressed a deep desire and taken executive action to weed out regulations that aren't contributing to the health and public safety of our people. And we've made a commitment to look back and see if there are regulations out there that aren't working, then let’s get rid of them and see if we can clear out some of the underbrush on that. Again, that’s something that should be non-ideological.

My hope is, is that there’s a recognition that now is a great time to make infrastructure improvements all across the country. And we can pull up some of the money that we know we’re going to be spending over the next decade to put people back to work right now at a time when contractors are dying for work and interest rates are really low.

And, again, that’s something that even John Boehner — John Boehner and Mitch McConnell, they’ve got a bridge linking Cincinnati and Kentucky, and the bridge is so broken down that folks are having to drive an hour and a half of extra commuting just to get across the Ohio River. There's no reason why we can’t work on things like that and put people back to work. [my emphasis]

It's a really bad sign when Obama is pointing to George W. Bush and Karl Rove as examples of rationality and moderation. Here the emphasis on immigration highlights the "social liberalism" Obama wants to project. How seriously he takes immigration reform remains to be seen. But as his references to Bush and Rove in that context suggests, there is no inherent link between immigration reform and progressive policies on wages and business regulation. And his record on immigration so far suggests that Obama would be able to settle for much less than comprehensive and just immigration reform.

The issues that Obama specifies as those "that really historically have not been ideological" are lowering corporate tax rates, deregulating business even more and the favorite neoliberal bromide "infrastructure." All of those have huge implications for inequality, workers' rights and employment. They are only non-ideological if no one has any problems with whatever the Koch Brothers and their like-minded allies want to do in those areas.

In his softball interview with David Gregory on Meet the Press December 30, Obama bragged about how he was proposing a cut in Social Security benefits via the "chained CPI" scam and about how his own base voters and the AARP were upset with him about that:

Well, I-- I have to tell you, David, if-- if you look at my track record over the last two years, I cut spending by over a trillion dollars in 2011. I campaigned on the promise of being willing to reduce the deficit in a serious way, in a balanced approach of spending cuts and tax increases on the wealthy while keeping middle class taxes low.

I put forward a very specific proposal to do that. I negotiated with Speaker Boehner in good faith and moved more than halfway in order to achieve a grand bargain. I offered over a trillion dollars in additional spending cuts so that we would have two dollars of spending cuts for every one dollar of increased revenue. I think anybody objectively who's looked at this would say that, you know, we have put forward not only a sensible deal but one that has the support of the majority of the American people, including close to half of Republicans. ...

David, you-- you follow this stuff pretty carefully. The offers that I’ve made to them have been so fair that a lot of Democrats get mad at me. I mean I offered to make some significant changes to our entitlement programs in order to reduce the deficit.

I offered not only a trillion dollars in-- over a trillion dollars in spending cuts over the next 10 years, but these changes would result in even more savings in the next 10 years. And would solve our deficit problem for a decade. They say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected. That seems to be their only overriding, unifying theme. ...

David, as you know, one of the proposals we made was something called Chain [sic] CPI, which sounds real technical but basically makes an adjustment in terms of how inflation is calculated on Social Security. Highly unpopular among Democrats. Not something supported by AARP. But in pursuit of strengthening Social Security for the long-term I'm willing to make those decisions. [my emphasis]

So, we're looking at a six-month push by the Administration to get a Grand Bargain enacted to cut benefits on Social Security, Medicare and Medicaid along with other austerity policies that will damage the economy.

I put particular emphasis on the cuts to benefits on Social Security, Medicare and Medicaid not only because its really bad policy but because having a Democratic President lead the push for such cuts would represents a political watershed. It would mean that Wall Street and their bought-and-paid-for politicians would see that as the start of open season on those programs.

Democrats like Obama seem to assume that as long as the Democratic Party is seen as marginally more liberal or worker-friendly than the Republicans, that there will be no cost to the Democrats electorally. But a Democratic President leading the charge for a Grand Bargain that cuts benefits on Social Security, Medicare and Medicaid is likely to upset that calculation, not least because the Republicans will demagogue those cuts against the Democrats. Combined with Citizens United-era corporate money at all levels of politics, escalating inequality, weakening of unions and segregationist voter suppression, the One Percent won't need to settle for a Democratic Party that's in hock to Big Business but insists on the occasional legal restraint on plutocratic rule. They can have a Republican Party that wins election against a Democratic Party whose current base doesn't trust its leaders even to the limited extent they do now.

Tags: austerity economics, barack obama, debt ceiling, grand bargain, medicaid, medicare, social security