Nate Silver believes the "crisis" is pretty much over -- the Boehner and Reid approaches are close enough, he says, to allow some sort of bill to emerge -- and I suspect he's right. Social Security and Medicare will likely remain intact for now. But make no mistake: the bipartisan threat posed to those programs was, and is, real.
The "dean" of progressive economists has written a must-read piece for Al Jazeera English. Excerpts and my two cents below that tasty-looking danish.
If there's one thing everyone in DC agrees on, it's that the government must cut spending, and cut it drastically. Even Nancy Pelosi is arguing that "we must enter an era of austerity." Leaving aside the self-destructive stupidity of cutting spending during a depression, the belief that we have an out-of-control spending problem is a lie, a lie pushed by conservatives and now swallowed hole by most Democrats.
The fact is, the exploding deficit is the direct result of the depression.
At the beginning of 2008 the Congressional Budget Office (CBO), the country's most respected official forecasting agency, projected that the budget deficit in 2009 would be just 1.4 per cent of GDP. The reason that the deficit exploded from 1.4 per cent of GDP to 10.0 per cent had nothing to do with wild new spending programmes or excessive tax cuts. This enormous increase in the size of the deficit was entirely the result of the fallout from the housing bubble.
Ah, yes, the housing bubble! Remember than thing? You wouldn't if all you do is listen to pols. They don't mention it. They don't mention it because mentioning it would:
a) point to the fact that the best way to reduce the deficit is to fix the economy in general and the jobs crisis in particular.
b) indict Wall Street, and neither party wants to indict Wall Street, least of all during the early cash-raising stages of a presidential race.
So pols of both parties push the lie that the deficit is a chronic problem, a chronic problem whose natural solution is major cuts in social programs -- cuts that would not be politically possible absent a "crisis." That is, the GOP and many Democrats are using the prospect of default to pursue cuts (reforms-modifications-modernizations-strengthenings) that have been a longtime goal of conservative ideologues and Wall Street-friendly Democrats.
[T]he crisis over the debt ceiling is the answer to the prayers of many people in the business community. They desperately want to roll back the size of the country's welfare state, but they know that there is almost no political support for this position. The crisis over the debt ceiling gives them an opportunity to impose cutbacks in the welfare state by getting the leadership of both political parties to sign on to the deal, leaving the opponents of cuts with no plausible political options.
It's becoming something of a cliche (how do I type an accent aigu?) to call this an example of the Shock Doctrine in practice, but then there's a good reason for that. Milton Friedman, whose beliefs helped inform Naomi Klein's great book, once said:
"Only a crisis produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. "
The dominant idea "lying around" right now is "austerity." It appears for the time being that the batshittiness of the GOP may prevent cuts to Social Security and Medicare. But Wall Street and its allies in government won't stop selling austerity as a "solution" to our "chronic" spending problem. To preserve what remains of our social safety net, we need to be clear-eyed about what's transpiring. We need to listen to the likes of Dean Baker.
[T]his is about the business community in general, and the finance sector in particular, taking advantage of a crisis that they themselves created to scale back the country's social welfare system. They may well succeed.