The Very Serious Austerians
by digby
Ari Berman has written another must-read piece, this time on the “austerity class” and its bizarre ascendance at a time when they are most destructive. He describes a symposium at the New America Foundation last month
The hearing began with an alarming video of top policy-makers describing the national debt as “the most serious threat that this country has ever had” (Alan Simpson) and “a threat to the whole idea of self-government” (Mitch Daniels). If the debt continues to rise, predicted former New Mexico Senator Pete Domenici, there would be “strikes, riots, who knows what?” A looming fiscal crisis was portrayed as being just around the corner.
The event spotlighted a central paradox in American politics over the past two years: how, in the midst of a massive unemployment crisis—when it’s painfully obvious that not enough jobs are being created and the public overwhelmingly wants policy-makers to focus on creating them—did the deficit emerge as the most pressing issue in the country? And why, when the global evidence clearly indicates that austerity measures will raise unemployment and hinder, not accelerate, growth, do advocates of austerity retain such distinction today?
An explanation can be found in the prominence of an influential and aggressive austerity class—an allegedly centrist coalition of politicians, wonks and pundits who are considered indisputably wise custodians of US economic policy. These “very serious people,” as New York Times columnist Paul Krugman wryly dubs them, have achieved what University of California, Berkeley, economist Brad DeLong calls “intellectual hegemony over the course of the debate in Washington, from 2009 until today.”
Its members include Wall Street titans like Pete Peterson and Robert Rubin; deficit-hawk groups like the CRFB, the Concord Coalition, the Hamilton Project, the Committee for Economic Development, Third Way and the Bipartisan Policy Center; budget wonks like Peter Orszag, Alice Rivlin, David Walker and Douglas Holtz-Eakin; red state Democrats in Congress like Mark Warner and Kent Conrad, the bipartisan “Gang of Six” and what’s left of the Blue Dog Coalition; influential pundits like Tom Friedman and David Brooks of the New York Times, Niall Ferguson and the Washington Post editorial page; and a parade of blue ribbon commissions, most notably Bowles-Simpson, whose members formed the all-star team of the austerity class.
There is at least one more name to that illustrious group, I’m sorry to say.
Obama and his main economic advisers (Tim Geithner, Orszag, Larry Summers) were devotees of former Clinton Treasury Secretary and Goldman Sachs/Citigroup alum Rubin, who co-founded the pro–Wall Street Hamilton Project think tank at the Brookings Institution in 2006. The Hamiltonians had warned of “the adverse consequences of sustained large budget deficits” during the Bush administration and advocated “painful adjustments,” namely cuts to social insurance programs like Social Security and Medicare in exchange for more liberal policies like tax increases and healthcare reform. Obama entered office with the Hamilton plan in his back pocket.
At the beginning of Obama’s presidency, Richard Nixon’s famous line “We are all Keynesians now” seemed more relevant than ever. But though Obama initially advanced a Keynesian-lite stimulus plan, which economists on the left and right agreed was imperative, the deficit was never far from the president’s mind.
In February 2009, just weeks after the stimulus passed, Obama pivoted to the deficit, holding a Fiscal Responsibility Summit at the White House and assuring Blue Dog Democrats he supported a special deficit-reduction commission. “We feel like we’ve found a partner in the White House,” said Blue Dog co-chair Charlie Melancon. The austerity class swiftly co-opted the new administration. The CRFB, the Peter G. Peterson Foundation and Pew Charitable Trusts launched a special commission in 2009 calling for mandatory spending caps and debt limits to put the United States in an “automatic, fiscal straitjacket.” Its recommendations formed the basis for last year’s Bowles-Simpson commission.
But you knew that.
I hope this piece is widely read among the Villagers, particularly among the journalists. I suspect that the vast majority of them simply think that deficit fever is some sort of received wisdom and haven’t ever thought to put the pieces together before. This piece spells it out for them.
The good news is that Occupy Wall Street has sucked all the oxygen out of this discussion and the herd has finally turned its attention to jobs and the Bigger Picture. This change of agenda could have happened earlier if one of the political parties had wanted to do it, but they were both happy to indulge in onanistic deficit fetishism and so the people finally had to step in and grab the …er, human microphone.
Austerity vs Prosperity is the essence of the fight right now and it’s finally being engaged. No thanks to the political class.
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