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March 1, 2013 |
We have been strangling the economic recovery through economic
incompetence -- and worse is in store because President Obama continues
to embrace (1) the self-inflicted wound of austerity, (2) austerity
primarily through cuts in vital social programs that are already
under-funded, and (3) attacking the safety net by reducing Social
Security and Medicare benefits. The latest insanity is the sequester --
the fourth act of austerity in the last 20 months. The August 2011
budget deal caused large cuts to social spending. The January 2013
"fiscal cliff" deal increased taxes on the wealthy and ended the
moratorium on collecting the full payroll tax. The sequester will be the
fourth assault on our already weak economic recovery. We have a jobs
crisis in America -- not a government spending crisis and the cumulative
effect of these four acts of austerity has caused a certainty of weak
growth and a serious risk that we will throw our economy back into
recession. The Eurozone's recession -- caused by austerity -- greatly
adds to the risk to our economy because Europe remains our leading
trading partner.
President Obama and a host of administration
spokespersons have condemned the sequestration, explaining how it will
cause catastrophic damage to hundreds of vital government services.
Those of us who teach economics, however, always stress "revealed
preferences" -- it's not what you say that matters, it's what you do
that matters. Obama has revealed his preference by refusing to sponsor,
or even support, a clean bill that would kill the sequestration threat
to our nation. Instead, he has nominated Jacob Lew, the author of the
sequestration provision, as his principal economic advisor. Lew is one
of the strongest proponents of austerity and what he and Obama call the
"Grand Bargain" -- which would inflict large cuts in social programs and
the safety net and some increases in revenues. Obama has made clear
that he hopes this Grand Betrayal (my phrase) will be his legacy. Obama
and Lew do not want to remove the sequester because they view it as
creating the leverage -- over progressives -- essential to induce them
to vote for the Grand Betrayal.
Further evidence of Obama's
continuing support for the sequester was revealed in an odd fashion
today. Bob Woodward is in a controversy because of his column about
sequestration. His column made two primary points. First, the
administration authored the sequester. Second, Woodward claimed that
Obama was "moving the goal posts" by asking for revenue increases.
Woodward was criticized by many Democrats for this column and created a
further controversy by saying that the administration threatened him. It
turned out that the purported threat was based on a statement by Gene
Sperling, Obama's economics advisor. David Weigel's
column summarizes the dispute.
Weigel
comes out where I do on each of the three issues. Yes, the
administration created the sequester and has fought to keep it alive
when Republicans tried to kill it. (The Republicans "started it" by
their obscene extortion in 2011 in which they threatened to force a
default.) No, Obama has not moved the goal posts. No, Sperling did not
"threaten" Woodward. I raise this background simply to provide a context
for
Sperling's comments about the reasons that the administration created and continues to support the sequester.
The
idea that the sequester was to force both sides to go back to try at a
big or grand bar[g]ain with a mix of entitlements and revenues (even if
there were serious disagreements on composition) was part of the DNA of
the thing from the start. It was an accepted part of the understanding
-- from the start. Really.... There may have been big disagreements over
rates and ratios -- but that it was supposed to be replaced by
entitlements and revenues of some form is not controversial. (Indeed,
the discretionary savings amount from the Boehner-Obama negotiations
were locked in in BCA [Budget Control Act of 2011]: the sequester was
just designed to force all back to table on entitlements and revenues.)
Obama
continues to want to "force" a "grand bargain" in which he proposes to
make large cuts to social programs, some tax increases, and reductions
in the safety net. Again, Obama can easily break with this strategy of
choking our economic recovery by supporting a clean bill that would kill
the sequester instead of our economy.
The good news is that Representative John Conyers has made the Obama's task simple by
sponsoring
exactly that clean bill in the one sentence form many of us have been
urging: "Section 251A of the Balanced Budget and Emergency Deficit
Control Act of 1985 is repealed." Amen.
I propose that we launch
an effort, open to all, to support Conyers' bill and demand that our
representatives in the House and the Senate promptly enact it.
Bill Black is the author of
'The Best Way to Rob a Bank is to Own One' and an associate professor of
economics and law at the University of Missouri-Kansas City. He spent
years working on regulatory policy and fraud prevention as Executive
Director of the Institute for Fraud Prevention, Litigation Director of
the Federal Home Loan Bank Board and Deputy Director of the National
Commission on Financial Institution Reform, Recovery and Enforcement,
among other positions.
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