10.08.2011

Washington paralysis: a geriatric disorder

Jim Creegan looks at the battle of the budget ceiling and the intransigence of the Tea Partiers

If these reports from the US were fiction instead of fact, the writer might justly be ridiculed as a hack whose stories consist of slight variations on a single plot: Democrats and Republicans argue over policy; Obama and the Democratic leadership initially toss a few rhetorical bones to the liberal-Democratic base and then step in to settle the argument on Republican-friendly, or at least corporate-friendly, terms. Congressional Democrats are prevailed upon to swallow their misgivings and accept a rotten deal in the name of political expediency.

The writer is not, however, responsible for this tediously repetitive storyline. It merely describes the actual course of every major Congressional debate since Obama came into office: around the healthcare bill of 2010 (see Weekly Worker April 15 2010), concerning tax and spending proposals in the same year (Weekly Worker January 13 2011), and now in the battle of the budget ceiling. The only difference in this case were the obstacles that arose on a familiar political path leading to a more or less predictable outcome. The debate had about it the quality of a formulaic cliff-hanger, to which the ending is obvious, and only the particular tribulations of the protagonist along the way provide suspense.

The sparks flew not over the substance, but rather over the particulars, of putting into practice what has become a transatlantic consensus for dealing with the continuing crisis originating in 2007-08: spare the plutocrats and savage the plebs.

At 9.3% of GDP, the $14.5 trillion overall US government deficit (the difference between expenditure and revenue) is indeed high by historical standards. The main cause is a severe shortfall in tax revenues due to the great recession. Compounding the problem are the unrescinded tax cuts enacted under Bush, the bankers’ bailout of three years ago and the cost of the four foreign interventions now in progress. The main driver of projected long-term debt, which some say will swell the deficit to 100% of GDP by 2021, is the mounting price tag of medical care for the elderly and indigent in a system that, due to the administrative expenses of private insurers and high drug prices, costs roughly twice as much as the far more comprehensive healthcare schemes of other advanced countries.

The federal government, however, faced no emergency comparable to Greece or Portugal. Whatever the credit rating of US treasury bills, they constitute the only financial market large enough to absorb the enormous dollar surpluses of China and others. Far more pressing than government debt are the needs of the country’s 25 million jobless and underemployed. The 23% of homeowners behind on their mortgage payments, and facing possible foreclosure, along with the 48 million Americans - about one in six - forced to rely on food stamps, also find themselves in a somewhat tighter corner than the feds. Many state and municipal governments - which, unlike Washington, are not permitted the luxury of deficit spending - have been hit much harder by the fall-off in tax receipts, combined with reduced federal allocations. With coffers near empty, they are often unable to maintain the most essential public services - schools, libraries and fire departments. The disparity in distress between the government and the people has led many liberal economists, with Nobel laureate Paul Krugman leading the chorus, to urge Congress and the administration to spend now on relief and stimulus measures, and worry about budget-trimming later on.

To a government not in thrall to the money power, a wide range of deficit-reduction measures would have been possible. Restoring tax rates for the top income bracket, now at 35%, to their 1960s level of 90%, or even to their 1970s level of roughly 70%, would lop off a huge slice of the deficit at one stroke. Rising medical costs could be contained by negotiating lower drug prices with the big pharmaceutical companies.

But such solutions were ‘off the table’ from the beginning, and hardly ever mentioned in the mainstream media. Both parties are convinced that the answer to hardship is more hardship. The Republicans, emboldened by their capture of the House of Representatives in November, and spurred on by Tea Party fanatics in Congress, are on an all-out budget-slashing rampage. But Obama also made it abundantly clear that he, too, had hitched his star to the austerity bandwagon. He had already announced a freeze on the wages of federal employees and appointed a ‘bipartisan’ deficit commission, headed by a rightwing Republican, Alan Simpson, a rightwing Democrat, Erskine Bowles, and advised by Peter Peterson, an investment banker and anti-social spending crusader of long standing. The president offered no new government stimulus package to replace the inadequate one put in place shortly after he came to office, now largely exhausted. Republicans and leading Democrats were thus divided only over the extent and packaging of the austerity to be imposed - the Republicans favouring deep cuts and strident government-bashing, the Democrats preferring slightly less drastic reductions and a rhetoric of ‘shared sacrifice’ between oligarchs and everybody else.

Their way

The Republicans saw in the Congressional vote required to raise the debt ceiling an irresistible opportunity to do it their way. The crisis was entirely of their making. For nearly a century Congressional approval has been required for the government to borrow more in order to cover expenses already incurred, and thereby avoid default on payments to creditors. The budget both houses of Congress had approved for the fiscal year 2011 contained expenditures totalling $3.82 trillion. Since revenues added up to only $2.17 trillion, there was a $1.48 trillion gap that had to be covered by borrowing in excess of a pre-established $14.3 trillion debt ceiling. A by-your-leave from Congress was therefore needed. In years past, getting such approval was a pro-forma matter. This time, however, Republicans in the House of Representatives used their newly won majority to block approval, insisting that any borrowing above the debt ceiling be matched dollar-for-dollar by future reductions in federal spending without any increase in taxes.

Obama had a number of options had he chosen to fight back. Congressional liberals argued that the 14th amendment to the constitution, which states that US public debt “shall not be questioned”, gives the president the power to override the debt ceiling by executive order. An obscure statute also grants the treasury the authority to mint platinum coins. Obama, it was argued, could have ordered that two such trillion-dollar coins be struck, deposited in the Federal Reserve and used to pay off the debt. Such measures would have been extraordinary, but so too was the Republican attempt to hold the government hostage over a routine procedural vote. Any such countermeasures on Obama’s part would have been feasible politically only if combined with a strong public campaign against obstruction from the ‘Grand Old Party’. The president, however, has lately been disinclined to such barnstorming.

Obama instead saw the impasse not as an affront, but an opportunity. Echoing Republican rhetoric about the need to “live within our means”, he responded by offering Republicans a “grand bargain” for reining in future government spending.

Obama’s offer was tendered in private talks with the Republican speaker of the House, John Boehner, so the details were sketchy. In general, though, Obama proposed to reduce federal outlays by $4 trillion over the next 10 years through a combination of spending cuts - some in the military budget, but most in social programmes - and rises in revenue. The cuts reportedly outnumbered tax increases by three to one. Obama outdid the Republicans by placing on the table reductions in Medicare and social security, the two core government social welfare programmes that even Congressional Republicans shied away from tampering with this time round. They were chastened by the widespread popular disapproval of a plan put forward in April by Tea Party-backed representative Paul Ryan of Wisconsin, to turn Medicare into a private-sector voucher plan.

Among Obama’s proposals were the introduction of means-testing for Medicare, an increase in the Medicare eligibility age from 65 to 67, and the downward revision of the formula used to calculate cost-of-living rises for social security recipients. Yet, for all its rightwing audacity, the president’s proposed compromise was rejected by Boehner in the end because he could not sell it to the newly elected Tea Party caucus in the House, which was influential enough to kill any measure not to its liking.

Fig leaf denied

The ‘grand bargain’ failed because Congressional Tea Partiers were determined to deny Obama even the fig leaf Democrats typically employ to obscure the rightwing content of their actions. The president did not seek this time to rescind the Bush tax cuts for those earning above $250,000 a year, as he had tried to do (unsuccessfully) in last year’s budget fight. He did, however, aim to ‘balance’ the spending cuts contained in his proposal with revenue increases obtained by closing a few of the more outrageous, if less than fiscally important, tax loopholes now enjoyed by the patriciate. He proposed to do away with a deduction corporations and individuals are permitted to take for the depreciation of their private jets; the ‘carried interest’ provision, which permits hedge-fund managers to pay only the 15% long-term capital-gains tax rate on the millions many collect in yearly bonuses, instead of the normal income-tax rate of 35%; and, last, the elimination of some of the enormous subsidies and tax breaks now enjoyed by the top five energy companies, which reported record profits this year. But the House Tea Party caucus would have none of it, insisting that all future savings come from spending cuts alone, and forcing Boehner to suspend negotiations.

There then ensued a series of elaborate tractations involving the White House and Congressional leaders, the specifics of which I will not bore readers with. But a general pattern was evident throughout. The Republicans presented a number of proposals, and passed measures in the House designed to test the resolve of Obama and the Democrats, who rejected them. One - the so-called Cut, Cap and Balance Act, called for a balanced-budget amendment to the constitution, stating that federal expenditure never be allowed to exceed revenue - a law that would render the federal government inoperable. Another proposal called for a temporary budget fix that would expire before the 2012 elections - obviously a ploy intended to embarrass Obama during his re-election campaign.

But after each Republican provocation, Democrats - whether in the person of Obama, in combination with influential Republican senators (the ‘gang of six’); whether represented by the party leadership, or by their own bills in the House and Senate - came back to the Republicans with a proposal more in keeping with the latter’s demands than the previous one, each time to be turned away because their capitulation was insufficiently abject. Obama at one point publicly stated that he had demonstrated his willingness to compromise by defying the wishes of many of his own party rank and file, and complained that the GOP was so bent on exploiting the situation for narrow party-political advantage that it did not know how to say yes.

This game of grovel-and-be-kicked continued until the very eve of the August 2 default deadline, although few expected that default, with its disastrous consequences for the US and world economies, would actually be allowed to take place. Both parties showed no hesitation about exaggerating the danger in the hope that the public would react with relief rather than anger to the bad news that was to come. The imbroglio was finally resolved at the 11th hour on unmistakably Republican terms: massive future spending reductions with no tax increase of any kind on corporations and the rich. Boehner boasted that he had obtained 98% of what he wanted. Paul Krugman’s New York Times column the next day was aptly headlined “Obama surrenders!”

The plan finally adopted kicks the deficit-reduction can some distance down the road, but under circumstances that make draconian cuts inevitable. It immediately increases the debt ceiling by $400 billion in order to stave off default, and provides for a second $500 billion increase in February. Automatic spending limits that will reduce the deficit by $917 billion over the next 10 years will be put in place on October 1. Most of the cuts will come from ‘discretionary spending’ - on transport, basic research and education. The military budget will also be trimmed by $350 billion, but this reduction is not as great as it seems. John Boehner personally intervened in negotiations to make sure that this amount was reduced by $50 billion from the $400 billion cut initially proposed. By no means all of the sacrifice, moreover, will be borne by the Pentagon; veterans’ benefits, including medical care, will also fall under the axe. An extension of unemployment benefits was not included in the package, as initially demanded by Democrats.

Most significantly, the plan creates a 12-member ‘super-committee’ composed in equal parts of Republicans and Democrats from the House and Senate, appointed by their respective party leaders. The committee will be charged with finding $1.2-$1.5 trillion in additional savings over the next decade, which can come from entitlements - Medicare and Medicaid - as well as discretionary items. Shortfalls can also theoretically be made up through tax increases, though Senate Republican leader Mitch McConnell has already vowed to appoint only members of his party willing to pledge in advance not to vote for revenue hikes. The Democratic names being mentioned as super-committee candidates, Max Bauchus and Kent Conrad, are two ‘blue dog’ Democrats, among the most rightwing in the Senate.

The panel will present its recommendations to Congress for an up or down vote before the end of November. If they are voted down, automatic across-the-board spending reductions will kick in. Half will come from the ‘national security’ budget and some from social security. Medicare and Medicaid will be spared. The automatic-cut mechanism, by including the military budget so dear to Republicans and social security, supposedly important to Democrats, is obviously designed to discourage a ‘no’ vote by Congress. Both Congressional chambers must, in addition, vote on a balanced-budget bill by December 31. If carried, the legislation would, according to constitutionally established procedure, be sent to the states for ratification; two-thirds of state legislatures would have to approve it before it could become law. There is no chance of this happening, and the bill proposing the amendment will be unlikely to get through Congress in the first place. The provision was put in the debt-ceiling plan by Republicans to draw national attention to the balanced-budget idea, which they obviously intend to make a major issue in their 2012 campaigns.

Keynes interred

Manufactured though the budget crisis was, its outcome punctuates with an exclamation mark a shift that has been going on in American politics for the past 35 years. Until the 1970s, Democrats and Republicans were more or less committed to the use of fiscal and monetary policy to maintain near full employment and a certain level of consumer demand. In the face of the most acute economic distress in the country since the great depression, both parties are telling the people not only that they can no longer look to the government for relief, but that the current recession will be used as a pretext to undermine the safety net even further. In the words of Obama’s former chief of staff and present mayor of Chicago, Rahm Emanuel, “Never let a crisis go to waste”.

This shift is particularly significant for the Democratic Party, which has historically invoked the Keynesian legacy to maintain the allegiance of unions, minorities and the less well-off. Conventional political wisdom has it that, by tacking right, Obama is simply following in the footsteps of Bill Clinton and the Democratic Leadership Council in the 1980s. Then, it is said, the Democrats devised a strategy to seize the political centre from the Republicans by adopting major elements of their politics: tax reduction, gutting the poor allowance (welfare), free trade, business-friendly attitudes. The Democrats thereby aimed to relegate their adversaries to the rightwing fringe. Their trajectory supposedly followed a similar movement in popular sentiment. Recent soundings of public opinion, however, lend little support to the notion that Obama is merely chasing middle-of-the road votes. They reveal that not only the Republicans, but also the president, are several degrees to the right of the American people.

More jobs

The New York Times of August 5 reports that, although most Americans support deficit reduction (an easy thing to be for), they consider the creation of jobs more important by a ratio of two to one. A Pew Research Center survey released in June shows respondents favouring a scale-down of overseas military commitments (65% to 30%), limiting tax deductions for big corporations (62% to 34%), raising taxes on income over $250,000 a year (66% to 31%) ; on the other hand, they disapprove of raising the social security retirement age (59% to 36%), and reducing aid to the poor (54% to 40%). The results suggest that Obama is attempting to win the approval of a group much more restricted than the general public.

Ismael Hossein-Zadeh, an economics professor at Drake University, writes: “The wrangling during the current budget negotiations … is prompted not so much by a clash of differing opinions on the two sides as it is a competition over the same or similar position by both parties - a competition to win the hearts and minds of the Wall Street bigwigs. The Republicans are angry because they feel that the president has broken the traditional rules of the bipartisan game, and has staked out their customary position on the right. And Mr Obama is incensed because the Tea Partiers … are not playing by the conventional rules, and are not providing him with the tax cover he needs in order to justify his ‘bigger than the Republicans’ cuts in social spending” (Counterpunch July 22).

Indeed, Obama was out to prove that he and his party was better able to advance the ruling-class agenda than the GOP. Wasn’t attacking social security, after all, something that George W Bush had tried and failed to do? Obama’s conduct was widely characterised in the media as a Nixon-goes-to China move. Just as only an American Tory like Richard Nixon could make peace with the communist ogres in Beijing, so only a politician with ‘progressive’ credentials can command enough authority among the majority of the people to undo the social legislation that Democrats have historically trumpeted as their crowning achievement.

Grumbling in the Democratic ranks, getting slowly louder since Obama took office, grew during the budget battle into a muffled roar. In the House vote on the bill, Democrats divided evenly, 95 for to 95 against. The majority of the black and progressive caucuses voted ‘no’.

Yet there is less to their opposition than meets the eye. Knowing he had enough votes to secure the bill’s passage, Obama signalled through Democratic House leader Nancy Pelosi that he understood the representatives’ need to oppose the bill for the benefit of their constituents in 2012, when they must all stand for election, and so would not hold their ‘no’ votes against them. None of these disgruntled Democrats, nor any other prominent party politician, has given a hint of going beyond this kind of cost-free opposition or showing the starch of their Tea Party opposite numbers. No-one, for instance, is talking seriously about opposing Obama from the left in the Democratic presidential primaries that will begin in January - a move the president would no doubt look less kindly upon. It appears as if Obama has been able to survive this ordeal with his base intact. If anything will cost him a second term in 2012, it will be the same low voter turnout due to lack of enthusiasm that figured in the Democratic loss of the House of Representatives in November.

(There was also a subtler hint concerning the limits to criticism leading Democrats were willing to tolerate. The television network, MSNBC, functions as a left-liberal counterpoise to the notoriously foul and prevaricating Republican propaganda platform, Fox News, owned by Rupert Murdoch. All of its evening news-show hosts - Lawrence O’Donnell, Rachel Maddow and Ed Schultz - throw left jabs at the president from time to time, but all from the standpoint that Obama is a well-meaning progressive deficient in the required gumption and/or negotiating skills.

But one newly hired host, a Turkish-American named Cenk Uygur (also host of an online programme called The Young Turks), was less willing to pull his punches. Uygur, whose nationally televised 6 o’clock hour of interviews and comment enjoyed solid viewer ratings, began to suggest with growing boldness that the occupants of the White House and Democratic Congressional offices are calculating politicians rather than the timid bumblers portrayed by their loyal critics, and that they are just as slavish as Republicans to corporate power. He soon received a summons from MSNBC’s CEO, Phil Griffin, who told Uygur he had just been to Washington, where he had received phone calls from certain unnamed individuals objecting to Uygur’s tone. Griffin continued that, while it was fun to be an outsider, we at MSNBC are ‘establishment’.

Viewers were surprised upon tuning in a few months later to find Uygur’s place taken by the consummately opportunist black politician, Al Sharpton, who had earlier stated on television that he would never “criticise the president”. The station had offered Uygur a much less visible weekend time slot, which he turned down. No-one knows for sure who made the mysterious phone calls, but many conjectured that they were placed by a highly influential Democrat, at a prominent DC address, who obviously regarded calling members of his party inept as one thing, but imputing to them deliberate class motives as quite another, especially on national air.)

Frankenstein’s monster?

The Tea Party caucus in the House of Representatives emerged from the budget negotiations as the only real wild card, and as a new actor on the American political stage. Its conduct sheds some light on a question previously discussed in this paper: is this amorphous, rightwing current primarily an attempt to put a popular face on a ruling class agenda, or is it an expression of untethered middle class rage? No definitive answer is yet possible. The group’s big-money backers are still there. The caucus, headed by 2012 presidential candidate Michele Bachmann, has 60 declared members, and is influential beyond its numbers in the 435-seat lower chamber. Its members are better financed on average than other Congresspersons, and are particularly adored by the oil and gas industry. The ruling class, like other classes, contains right and left clusters of opinion.

Yet the rage is there too. There emerged during the debate an unmistakable tension between Tea Partiers, on the one hand, and the mainstream Republican leadership and Wall Street, on the other. House speaker John Boehner, a corporate hack through and through, appeared personally happy to do a face-saving deal with Obama. Every move of his in that direction, however, was stymied by Tea Party intransigence. They would accept nothing short of what they ultimately got: spending cuts with no tax increases whatsoever for corporations or millionaires. And even the expenditure reductions of the final bill were not draconian enough for the 66 sore winners among House Republicans, including many Tea Partiers, who wound up voting against it.

For its part, Wall Street, which had heavily backed many Tea Partiers in November, grew nervous as default approached. The leading political arms of big business - the National Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable - sent a joint letter to Congress suggesting that the avoidance of financial Armageddon was perhaps worth the price of a few sops to Obama. The Tea Party caucus was still unmoved. In stark contrast to ‘progressive’ Democrats, many of its members seem imbued with a sense of mission that transcends daily polling numbers and contribution cheques. A number have signed a pledge circulated by the anti-tax crusader, Grover Norquist, to oppose any legislation calling for tax rises - and aim to keep it.

What drives these dead-enders? It is certainly understandable how racialism and xenophobia, the distinct undertones of which are often an embarrassment to Tea Party leaders, can exercise a firm grip on frenzied middle class minds. The notion of a balanced budget, however, does not seem to carry a comparable emotional charge. It must be viewed as a component of a larger ideology of unvarnished possessive individualism, not incompatible with racialism, but not merely a camouflage for it either. In the minds of the middle class strivers who find inspiration in the writings of Ayn Rand, the amount of money and possessions one has accumulated is the supreme measure of individual creativity and worth. In their view, tax revenues spent on social programmes take money from themselves and the deserving rich they seek to emulate, only to put it into the pockets of the undeserving poor.

It is tempting to regard such ideas as a transparent rationale for the selfishness of comfortably situated white people anxious to hang on to what they have. But material interests, as we know from Marx, harden over time into ideologies that can become a power in their own right. Such, it seems, is the case with some Congressional Tea Partiers. The unbridled individualism they espouse may seem to many Europeans, as it does to many Americans, a remnant of 18th and 19th century bourgeois consciousness. It still resonates, however, in the dollar republic, and has a certain purchase within the ruling class itself, which in any case finds it useful.

Only when the true believers take their ideology seriously enough to stand in the way of bank bailouts, or court financial collapse, do they threaten to step out of their assigned role as Igor, Dr Frankenstein’s deformed but dutiful laboratory assistant, and become a Frankenstein’s monster. Because the stubbornness of the Tea Party caucus contributed ultimately to an outcome not objectionable in ruling class circles, there has yet been no deep split amongst Republicans, but that could change.

The budget ceiling crisis was a debacle way out of proportion to the differences involved. Never in recent decades was there so much sound and fury over a temporary fix between two parties that are in basic agreement. The fight was driven by an appetite for narrow political advantage unrelated to major policy differences and untempered by the larger sense of purpose, like the struggle against communism, that once inclined the rival bourgeois parties to compose their differences more amicably.

Obama’s (perhaps fatal) flaw as a politician is that he seeks to restore the old bipartisan spirit at any price when the foundation for it no longer exists, and major private-sector players contemplate little else but the bottom line. Only the danger of total meltdown forced an uneasy compromise. The Tea Party, with its ‘individual über alles’ mentality, in a sense embodies the spirit of the time.

Default

Although default was avoided, no long-term problem was solved and no-one can really be said to have come out on top politically. The affair was an alarming symptom of distress at the imperial hegemon’s heart - not of cardiac arrest, certainly, but at least of arrhythmia.

The malaise can only deepen. From an economic standpoint the final bill will slow down the accumulation of government debt, but hardly eliminate it. And despite its pro-austerity tilt, the ‘super-committee’ set up to preside over future budget cuts could well find itself gridlocked just as Congress was, if the Tea Partiers on it remain as adamant as the have been so far.

It is also difficult to remember a time when such an intense furore inside the Capital Beltway has been so remote from the concerns of the country outside it. Ordinary Americans do not yet clearly perceive the class attack behind what they see as an arcane and unseemly row among politicians, but they know that little of benefit to them will emerge from the squabbling. Few any longer give credence to the ritually repeated Republican mantra that slashing spending and lowering taxes will unleash business confidence to ‘create jobs’. The country has just passed through a period in which the oligarchs have used billions in tax windfalls and bailout money to hire workers in low-wage countries, buy back their own stocks, award themselves bigger bonuses, invent new swindles and do just about everything but hire more workers at home.

Congress, and especially its Republican wing, has hit the bottom in public esteem, with disapproval ratings in the 70s and 80s. The Tea Party has also fallen into greater disrepute. With higher negative poll numbers than at any time since it started, it is broadly perceived as the main culprit in the affair. Obama has emerged perhaps less damaged than the other players, but doing a deal on Republican terms has made him appear weak in the eyes of core constituents.

It is difficult to predict what hopeful portents - or what rough beasts - will spring from the pervasive feeling that existing political forces in the country have reached the point of exhaustion. But big investors, casting a cold eye on a country with mounting debt, next to no economic growth and a government estranged from its people and divided against itself over trifles, are voting with their portfolios. Last week, one of the three top rating agencies, Standard and Poor’s, downgraded the US government bond rating from triple A to double A-plus for the first time in history, and the Dow Jones industrial average, after falling by 500 points last week, plunged more than 600 points on the day of this writing.