Obama for America, the campaign apparatus with the very large e-mailing list and great segmentation techniques that exploited Romney's weaknesses to help the President to eke out (yes, I know the electoral vote involved no “eking out,” but the popular vote was something else again) his re-election victory, is now trying to mobilize people who voted for the President to work against their own interests by supporting his deficit/debt cutting activities. So, I couldn't resist the following commentary on their mobilization e-mail.
From the graphic:
Right now, President Obama is working with leaders of both parties in Washington to reduce the deficit in a balanced way so we can lay the foundation for long-term middle-class job growth and prevent your taxes from going up.This is just one sentence. But it has more errors in it than a whole book written by some economists. First, it assumes that we should “reduce the deficit.” But:
-- It's fiscally irresponsible to frame and follow a long – term deficit reduction plan (limited austerity) when, as now, both a trade deficit and an output gap between the economy's potential and its actual results exist. Such a plan is one that must remove more net financial assets, specifically reserves, from the private sector than would otherwise be the case, every year the plan is pursued. Banks can compensate for these reserves by creating new ones when they make loans. But, loans create both assets and liabilities in equal measure and no new net financial assets.
So eventually, if deficit reduction is pursued for long enough, a declining rate of addition to private net financial assets will exacerbate the output gap by lowering aggregate demand and causing both labor and capital to deteriorate. This will eventually dig the US's economic grave by reducing the productive capacity of the economy, and the Government's ability to sustain greater levels of deficit spending, producing outputs of real social value, without triggering inflation. Oh, well, President Obama, Timothy Geithner, Jack Lew, Erskine Bowles, Alan Simpson, Alice Rivlin, Pete Peterson, and the rest of us will be able to find consolation by reminding ourselves that our collective trip to the poorhouse was in the service of the neoliberal notion that fiscal responsibility is all about containing the rise of the debt-to-GDP ratio.
-- REAL fiscal responsibility is a pattern of fiscal policy intended to achieve public purposes (such as full employment, price stability, a first class educational system, Medicare for All, etc.), while also maintaining or increasing fiscal sustainability, viewed as the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve our public purposes.
-- REAL fiscally responsible policy, if it works generally as expected, creates greater real benefits than real costs for people! It has nothing to do with conforming to some standard simple measure like an acceptable debt-to-GDP ratio that has only a questionable theoretical connection to the actual well-being of people. It is political malpractice to give, as the President is now doing with his drive towards a “Grand Bargain,” greater priority to that kind of abstraction, and to the opinions in the bond markets, than to full employment, price stability, a strong social safety net, and Government programs that will help us solve the many outstanding problems of our nation. Who would have predicted that this “pragmatic,” “realistic” president would have such a strong belief in “the confidence fairy”?
The President should put an end to the domination of Washington by that kind of malpractice. We, the members of Obama for America, need to call upon HIM to stop serving the bond markets, and put an end to the current misguided fiscally irresponsible campaign to promote a “Grand Bargain” that is sure to do nothing but destroy more private sector net financial assets and jobs, than would be the case if we either did nothing or increased the deficit, and created and maintained a full employment budget.
Second, what does it mean to reduce the deficit “in a balanced way”? We know what it means. It means that any “grand bargain” should be “fair” in that it takes something out of everyone's hide. “Shared sacrifice,” you know.
So, what's that about? Maybe a few points increase in marginal tax rates for the rich, the impact of which they will be able to substantially get around with tax loopholes and deductions anyway. Some reductions in spending on defense including cuts for defense contractors. And for the middle class and the poor the expiration of the payroll tax cuts, perhaps cuts for the long-term unemployed, certainly cuts for discretionary spending programs that benefit working and middle class people, and probably cuts in Medicare, Medicaid, and Social Security entitlements, since the President has so kindly put these on the table again and again over the past years.
But that doesn't begin to be fair. The 1% have fully recovered from the crash of 2008, largely because of the policies of the Obama Administration and the Federal Reserve in saving the big banks, and the system that allows them to make profits in the derivatives casino, which in turn have also helped the stock exchanges to erase the losses caused by the crash. In addition, the big banks have never been brought to account for their execrable and astonishingly numerous and blatant mortgage frauds that have made a hash of property rights for the middle class in the United States.
However, working people haven't shared in that recovery, as employment, housing, and inequality statistics amply indicate. The rich are getting richer, while everyone else is getting poorer, because of an economy and an associated financial system that has been politically rigged to benefit them and grievously harm everyone else.
So, even if deficit reduction was a REAL problem, which it is NOT, the President's call for balanced reduction is UNBALANCED and UNFAIR, because you can't forget about history and create balance. We've had 40 years of UNBALANCED economics, now fairness and justice demand REDRESS. We need UNBALANCE to create a NEW BALANCE.
Once again, we do not need, and should not have deficit reduction, but if the President must have “balance,” then let us have REAL balance. Let us quit mucking around, and go back to the marginal tax rates of the 1940s and 1950s, when the great American Middle Class was consolidated and full employment was often a result of economic policies that prioritized it higher than avoiding inflation. Let us have a social safety net that is not the least, but the most generous among modern nations.
Let us have no cuts for the middle class and the poor, and let us have policies that require sacrifice from those who have benefited so much from the rigged political system of the past decades. Doing things in “a balanced way” is a fine slogan. But real “balance” isn't a “Grand Bargain” that Wall Street-serving elites in both parties happen to arrive at. Real “balance” is justice and fairness and that kind of balance requires a settlement that gets sacrifice from those who have NEVER sacrificed anything, and gives benefits to those who have received little during the time of neoliberal economic distortion of our lives.
Third, the kind of bargain that will get sacrifices in the safety net and discretionary programs for Wall Street is not the kind that will create a foundation for long-term job growth. Only increased aggregate demand manifested in increased sales can do that, and only another credit bubble for the middle class, or INCREASED deficits from the Federal Government can supply that demand. Since the last thing most of us want is another credit bubble, the most preferable alternative is for the Government to use fiscal policy to end the human sacrifice of the middle class and the poor to the Gods of neoliberalism, and bring prosperity back to all Americans rather than only the economic elites.
And fourth, It is just WRONG to imply that if we don't have “balanced deficit reduction,” then we must have higher taxes. That is a false choice. We need neither deficit reduction nor higher taxes to ensure continued solvency. What we need is public deficits high enough to compensate for our capability to import more than we export, and our desire to save 6-7% of GDP per year. We are not getting deficits high enough for that now, and that is what Obama for America should be mobilizing people to support.
From the e-mail:
Your voice and action helped re-elect President Obama, and hundreds of thousands of you have already responded to our survey, which will help shape our next steps. Thanks to your feedback, we’re taking immediate action on one of your suggestions: keeping you informed about how the President is fighting for you so you can continue to talk to your friends, family, and neighbors. So here’s the deal:President Obama, do the results of your survey show that a majority of OFA members 1) want long-term deficit reduction and are willing to cut the social safety net and discretionary Federal spending to get it, or 2) do they want you to leave these areas alone and just raise taxes on the wealthy, raise or eliminate the salary cap on FICA payments, and cut defense spending? I think you know the answer to this question as well as I.
OFA members favor deficit reduction, because they don't know that the deficit/debt isn't a problem for America. But they don't favor “balanced deficit reduction.” They favor 2) above instead. So, if you're really listening to their feedback, then why don't you stop “spinning” it, and just listen.
No “Grand Bargain.” No cuts to the safety net. No cuts to discretionary spending. If the Republicans don't like it, then just “go over the fiscal cliff!” And keep pushing in January to restore the middle class tax cuts and fixing other parts of the sequestration that damage the middle class and the poor. If the Republicans won't act reasonably in the new Congress, then they'll pay the price in 2014!
From the graphic:
Reducing the deficit in a balanced way. The President’s plan extends tax cuts for 98 percent of Americans Eliminates tax cuts for the wealthiest Americans Cuts spending by more than $3 trillion The ResultsPresident Obama, you're asking OFA members to support $3 Trillion in spending cuts and only $1 Trillion in tax increases, or an average of $400 B in deficit spending cuts over the next 10 years. That $400 B is about the same size as the annual deficit spending on the American Re-investment and Recovery Act (the stimulus bill). But this annual anti-stimulus lasts for 10 years, whereas the stimulus lasted for about 2 years.
More than $4 Trillion in balanced deficit reduction that keeps your taxes low and preserves investments we need to grow the economy like Education and Infrastructure.
Now please explain to me why you think the stimulus bill was necessary and good for the economy and saved 3 million jobs, yet at the same time you think an anti-stimulus of the same order of magnitude lasting 5 times as long and made up mainly of high multiplier spending cuts will provide a foundation for long-term job growth, rather than simply cost the economy 15 million jobs? Do you think OFA members are dumb or something?
Why do you think OFA members will buy a pig in a poke? You haven't given any details about the spending cuts you are willing to accept, and which ones are off the table, yet you ask for our support? You say trust me, after you've put entitlement cuts on the table repeatedly in deficit negotiations and after you were the person primarily responsible for the creation of the notorious Catfood Commission; who has repeatedly made favorable comments about the Bowles-Simpson (B-S) report authored by these Captains of Catfood, when they were unable to get the approval of the Catfood Commission you created?
Sorry, Mr. President, but I doubt that OFA members are that gullible. If you really want their support and the support of OFA members generally, try telling people that deficit reduction isn't necessary but jobs programs are, and that you plan to go over the fiscal cliff and then fight hard for the Republican House to restore the tax cuts for the 98%, unemployment insurance for the long-term unemployed and a Federal Job Guarantee program that will create full employment at a living wage? That'll get all OFA members behind you quicker than you can say Green New Deal!
From the e-mail:
That’s the President’s plan, but he’s not wedded to every detail. He is determined to work with Congress to find compromise and common ground. His guiding principle throughout this debate will be what’s best for the middle class. He’ll be fighting for you.Well, the President's $4 Trillion deficit reduction plan is bad enough, guaranteeing a stagnant economy for a decade. But, in addition, to be told that he's willing to make it even worse, to maybe agree to even greater cutbacks in spending that people need, and to even less in tax cuts for the rich that they don't need? No, OFA, I don't think members are going to support that kind of flexibility for a guy who seems determined to give away the crown jewels of the New Deal, in return for minor concessions from the knuckle-draggers.
There’s a lot at stake. With your help we’ll continue to move this country forward.You bet I'll spread the word, I'll tell the world that support for this deficit reduction trope ('er so sorry, “plan”) is something we shouldn't give, and that, instead, we should shout very loudly for the President to begin acting like a Democrat, start trying to get full employment and extend the social safety net, and quit trying to play footsie with the Republicans and blue dogs.
Please forward this email and spread the word on Facebook and Twitter:
There are plenty of things the President can do unilaterally to improve the economic situation. We voted for him to get started – not to cave to the Republicans and blue dogs again!
(Cross-posted from New Economic Perspectives.)