Why Obama’s Budget Is a Mistake

Jonathan ChaitJonathan Chait wrote an interesting article today about how conservative pundits are now attacking Obama from the left, Conservatives Decide Obama Is Too Conservative. It had a particularly good catch from Matthew Continetti of the Washington Free Beacon who now says that Obama shouldn’t be trying to cut the deficit, but rather be pushing his jobs program. As Chait pointed out, this is a total reversal from what he said when Obama first proposed his jobs program. At that point, Continetti was pushing the same old conservative canard that the government can’t create jobs. It’s fun to read.

But Chait also pointed out something that is important about the mistake which Obama’s budget is: in his column today, Charles Krauthammer wrote that Obama should offer that the tax increases in his budget go half to reducing the deficit and half to reducing marginal tax rates. Jonathan Chait rightly notes that this is (yet another) conservative attack from the left. But here’s the thing: he and the others are only able to make this attack from the left because Obama has moved so far to the right. Just like I (and oh so many others) predicted!

I understand. There is not going to be a budget deal. This isn’t just because the Republicans refuse to do anything. The truth is that the Sequester is just starting to affect the economy. It will keep economic growth slow for the next two years. A Grand Bargain, as much as I am against it, would be good for the economy in the short term. The Republicans do not want that. They are hoping for a replay of 2010 in 2014. And they have a good chance of getting it.

For all of my adult life, I have watched the Democratic Party compromise in the name of being “competitive” with the Republicans. This was always a mistake. Reagan barely won in 1980 and only did win because Paul Volcker created a recession just in time for the election. And then, he lowered interest rates and created a boom, just in time for the 1984 election. Democrats learned the wrong lesson from those losses, just as Republicans learned the wrong lessons from Bush Sr’s loss. But whereas the Republicans obtuseness has only made them more conservative, the Democratic obtuseness has also made them more conservative. And that leaves us with President Obama.

Regardless of what the president thinks, offering compromises like entitlement cuts just moves the political debate further to the right. What he ought to have done is act like cutting Social Security would be as painful for him as sacrificing Natasha and Malia to the gods. But he didn’t do that—because he continues to hold on to the wrong lessons of the 1980s. And in the end, it might be good for his “legacy” (whatever the fuck that is). But it is not good for the liberal cause and it is not good for the Democratic Party.

Just ask Charles Krauthammer.

Afterword

People sometimes complain that I take too much knowledge for granted, so let me clarify my Paul Volcker comment. Paul Volcker was the Federal Reserve chairman appointed by President Carter. Inflation was very high, so Volcker made money less available (by raising interest rates). This threw the economy into recession. After inflation was under control (1982-83), he made money more available (by lowering interest rates). This caused businesses to invest and started an economic boom that we call “morning in America.” That was all Volcker’s doing; it wasn’t Reagan. In case you were wondering.

In gratitude, Reagan replaced Volcker with Alan Greenspan the first chance he got, which was 1987. (Note: the last two Fed chairmen were appointed by Republicans and kept on by Democrats.)

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

0 thoughts on “Why Obama’s Budget Is a Mistake

  1. The way I see it (because the world is turning blue holding its breath dying to know) is that there are three competing Democratic party wings. (In office; obviously among voters there are many more variations.)

    There’s wing #1, the old-school hacks. The people for whom "Democrat" is a label much as Coke or Pepsi is, and they only wear it because that’s what works in their districts/states. They are motivated solely to stay in office, because they enjoy the shit out of it; they like imagining that their backroom deals and power-play games are important. They’re proud of being big fish in the little pond, so to speak.

    Wing #2 are the Obamacrats, the heirs of Clinton’s New Democrats. They enjoy the semblance of power and the game-playing just as wing #1 does, but they also feel themselves to be motivated by high principles of pragmatism. They know that the future involves markets and privatization and new paradigms, oh my, because that’s what their Harvard/Stanford/U of Chicago professors and their corporate-world networking connections have said. They’re on a mission to defeat wing #1, and are disgusted by its resistance to change and its corruption. (Those infuriating wing #1ers occasionally will stubbornly stick up for a random liberal stance if they feel it’s essential to getting votes back home.)

    Then there’s wing #3 — actual Democrats, actual liberals. They looked like an endangered species in the Clinton years, but a handful keep getting elected here and there. These irresponsible bitches/bastards seriously believe they are charged to serve the voters who elected them. Wing #1 regards them with amusement, and wing #2 regards them with pure hatred (how dare any Luddite claim to be nobler of heart than my future-seeing self?)

    Wing #1 (the corrupt assholes) I can live with; put enough pressure on them, and they’ll bend. Wing #3 (the actual public employees) I would like to think represents a growing movement in the Democratic party, but I’m not going to bet my kidneys on that wish coming true just yet.

    Wing #2 — Clinton’s New Democrats, the Obamacrats — are the worst of all possible worlds. They’re carefully groomed by think tanks and prestigious universities to believe what they believe, yet feel as though they act independently, out of sincere conviction. You can’t tell them they’re bought, even though they are, because they never took brown paper bags full of money under the desk. No, they side with the interests of financial mavens because that’s what future-minded people do.

    Incidentally, I’ve given up on Freeland’s "Plutocrats." I try to read works by people who are intelligent and observant and disagree with me, because I can hopefully have my perspective honed by how they see things differently, but the chapter "Responding To Revolution" just gagged me too much. In it, she describes the jerks who cashed in on Russia’s free-for-all public property sell-off as creative outside-the-box thinkers.

    Boy, was Taibbi, a Russian reporter in the same period, so polite and decent not just ripping her a new one during the "Moyers" they appeared on together. He’s the anti-Hitchens; his writing is focused and strictly antagonistic to power, but during in-person debates he’s quite respectful and calm. If I didn’t want to already marry the guy (add him to my harem with Jacoby, they’d get along), realizing how much he must have bit his tongue off listening to Freeland during that Moyers appearance made me love him more while reading "Plutocrats."

    Worse, in the same chapter, Freeland tries to explain how no wise sage of Wall Street could have possibly seen the collapse coming by describing a billionaires-club meeting right at the start of it, where only old semi-retired George Soros (so distanced from current trends he didn’t know what new derivatives meant) feared that the bubble was bursting. Her point actually seems to be that even the best and brightest can’t foresee trends. Yet Soros, probably the only semi-liberal in the bunch, knew this shit was based on pure lies and got back into the game in time to protect his investments.

    What are you saying, Freeland? That you don’t like mega-rich people buying third mansions, although
    you regard as irreplaceable their wizardry when it comes to running the world? Are we doomed if we resist their consensus view of what the future is predestined to become? (Could we be any worse off if we DID resist it?)

    Ah, fuck it, onto my next library book.

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