Catch 22

by digby

“The bill that’s coming through the House, with or without the public option, isn’t good for America,” Adler said matter-of-factly. “We have Congressional Budget Office projections of a trillion-dollar increase in costs that will have to be borne by taxpayers or insurance purchasers; meaning businesses and households. Either way, that’s a cost we can’t afford.”

This is one of the problems with health care reform, as I’ve mentioned before. If the economy is doing well and deficits are going down, everybody’s working and the fiscal scolds insist that reform will rain on the parade and ruin everything. More people working means more people have health insurance and the calls for reform are muted. If the economy is in trouble, then the fiscal scolds insist that the sky is falling because of rising deficits and reform will make everything even worse. Fewer people working makes the need more critical, but many of them see the deficit as a sign that government is dysfunctional and so they reject reform. No matter what, “the deficit” has a stranglehold on the political discourse in ways that makes reform nearly impossible.

Now, Clinton thought that he could change this cycle by fixing the deficit and selling the Democrats as good fiscal stewards. The deficit hawks didn’t exactly thank him for it. Indeed, once surpluses were in the hands of trusted oil men, the Oracle of Galt himself famously reversed himself and said that surpluses were actually a bad thing because the government might gamble with the people’s money by investing it unwisely. (I know …)

Here’s Krugman:

Greenspan argued on the basis of budget projections — which he must have known are notoriously unreliable — that the federal government would pay off all its debt in a few years. If this happened, the government would be forced to invest future surpluses in the financial markets — which, he argued, would be a bad thing. To avoid this outcome, he claimed, surpluses had to be reduced with tax cuts.

It was a peculiar, tortured argument, full of holes. For example, partial privatization of Social Security — which Greenspan supports — would impose ”transition costs” in the trillions of dollars, easily taking care of the supposed problem of excessive budget surpluses. As many warned at the time, Greenspan was also completely wrong about the budget prospect — projections of huge surpluses quickly gave way to projections of huge deficits.

Above all, Greenspan’s fear-of-surpluses argument was at complete odds with what he had said in the past. All through the Clinton years, Greenspan preached the virtues of fiscal restraint, and he did not change his views when the budget deficits of the 80’s and early 90’s vanished. Just six months before his 2001 testimony, Greenspan saw no problem with large projected budget surpluses. ”The Congress and the administration,” he said in July 2000, ”have wisely avoided steps that would materially reduce these budget surpluses. Continued fiscal discipline will contribute to maintaining robust expansion of the American economy in the future.” But then a Republican entered the White House, brandishing a tax-cut proposal — and Greenspan suddenly developed an elaborate theory of why it was necessary to reduce those surpluses, after all.

Any doubts that Greenspan holds George Bush to different standards than he held Bill Clinton were dispelled in the years that followed. He didn’t call for a reconsideration of the 2001 tax cut when the budget surplus evaporated. He didn’t even offer strong objections to a second major round of tax cuts in 2003, when the budget was already deep in deficit.

As Perlstein says, it’s how they roll.

According to Greenspan’s book, Kent Conrad asked Bob Rubin to call Alan before his 2001 testimony to tell him how important it was that they not let go of the “fiscal responsibility” mantle (which endorsing the idea that the surpluses should be spent on tax cuts for Paris Hilton certainly did.) Greenspan pulled the football right out from under them, as anyone would have predicted. And the Charlie Brown Democrats didn’t exactly fight him on it, for obvious reasons — they have a role to play in this little kabuki too.

Greenspan knew that it didn’t matter what excuse he used, the point of any political discussion about deficits and surpluses is simply for one purpose: to keep as much money in the hands of the wealthy as possible. The behavior of the political class over the last 20 years proved it.

When we heard politicians insisting that we had to spend surpluses on tax cuts for the rich we automatically knew who they were serving. But using the deficit as an excuse not to do something for the people means exactly the same thing. Either way, the nation is deprived of necessary reform over and over again until we find ourselves in a situation where reason is no longer operative and the body politic finally breaks.

Grover Norquist didn’t drown government in the bathtub. He waterboarded it.

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