I don’t know why Yves Smith is so discombobulated over President Obama’s reported willingness to reduce entitlement spending in exchange for tax increases:
There is no more pretense possible. As we’ve warned for some time, Obama is eager to put a notch on his belt by being the President that rolled back the New Deal programs that helped create broad-based middle-class prosperity and dignity. He’s cast himself as an adult inflicting discipline on profligate Americans. But in reality, the profligacy was most concentrated among elite financiers who used leverage on leverage vehicles to stoke liquidity that led to worldwide underpricing of risk. They paid themselves record bonuses in the years immediately preceding the crisis, and then in a grotesque display of ingratitude, did so again in 2009, able to do so only thanks to massive taxpayer support, alphabet-soup special borrowing programs, and the tax on savers known as ZIRP. And the direct result of their looting exercise that produced the crisis was the explosion in government deficits, due to a collapse in tax revenues and a rise in payments under countercyclical programs such as unemployment insurance and food stamps.
But are the real perps the object of Obama’s disciplinary impulses? No. He seems spectacularly unwilling to take on anyone even remotely approaching his size (as if a President should be cowed by senior banker bullies like Jamie Dimon). The President’s failure to reprimand the financial CEOs who dissed him by refusing to attend his address on the first year anniversary of Lehman was a tacit acknowledgement that they were really in the driver’s seat.
Keep in mind what is happening here. We are not in the realm of Obama kayfabe, where he pretends that those big bad Republicans forced him to do what he wanted to do all along. This is Obama’s budget offer, not the result of pretend hard fought battles over positions that are at most 10 degrees apart.
Let’s recap. The president is willing to offer things he’s confident won’t happen and that he probably can’t deliver in exchange for things he’s confident will happen and political gain. How do we know that the entitlement cuts won’t happen? Because they include tying SSRI increments to CPI and the chestnut “cutting Medicare payments to doctors and hospitals”. Congressional Democrats in both the House and the Senate have already rejected the first one more than once (it’s one of the reasons that the president’s blue ribbon deficit-cutting panel never delivered a consensus report) and, if Democrats wanted to cut Medicare spending, that could be effected simply by never bringing the annual “doc fix” to the floor in the Senate, something at the discretion of committee chairman. In fairness, there’s equal opportunity sophistry here: the Republicans could have done the same thing when they held the Senate majority.
The president has a confidence, born of experience, that he can get tax increases enacted, especially if a few Republicans go along with the gag. What’s the worst case reasonably anticipated scenario? That no deficit reduction will be enacted while the president gets credit for being the adult in the room? Quelle horreur!
I think that Rick Moran has it right:
All the president needs is to peel off 5 Republicans in the Senate to get an up or down vote on the budget. And that’s dependent on more liberal Senators sticking with the president despite the entitlement cuts. I don’t see it happening – nor will the GOP House even bother to take it up if it gets that far.
But in the PR fight over the budget, it might be a political version of “shock and awe.” Obama is going to anger his base – they will go ballistic – and win no friends on the right. But most Democrats will probably stay with him and indpendents will wonder why the GOP won’t accept most of what they’ve been advocating for months.
As a serious effort at deficit reduction, it falls considerably short. But as a political document, it will probably give the president at least a temporary advantage and make life difficult for Republicans running in 2014.
There is nothing beyond the mid-term elections. With every passing day, I think it becomes clearer that the White House strategy is to hold the Senate and capture the House. I don’t think it’s going to happen but I do think it’s the strategy.
Love the pro ‘rasslin’/carnie reference!
And then there’s this:
He seems spectacularly unwilling to take on anyone even remotely approaching his size (as if a President should be cowed by senior banker bullies like Jamie Dimon). The President’s failure to reprimand the financial CEOs who dissed him by refusing to attend his address on the first year anniversary of Lehman was a tacit acknowledgement that they were really in the driver’s seat.
No shit, this guy just realized that the Democratic Party and the President are lefties for plutocrats? What a maroon.
“Yves Smith” is a woman. It’s a play on words.
The United States was, has been, and is a plutocracy. Sometimes, like now, it’s more obvious than at other times.
This is an idea I’ve been working on for a later post but I think that the deadly embrace between the federal government and Big Banks is the modern equivalent of the patronage system. Nowadays the objective of getting elected is not to accomplish anything other than making your availability for a job with Goldman Sachs known.
I am willing to bet that you are underestimating the problem. The revolving door of going from finance to govt to finance is bad, but it misses a lot. How many jobs go to the families and friends of people in government? The finance sector is always at or near the top when it comes to lobbying money spent and political donations. There is a reason for that.
Back on topic, I think that Obama is willing to cut some entitlement spending. The ACA cut a lot of Medicare spending. O f course that cost the Dems the 2010 election, so it will be harder to convince them to go along again, but it has to be done and I think they would rather do it their way than the GOP way.
Steve
You’re assuming that the cuts were ever actually going to take place. The Balanced Budget Act of 1997 cut a lot of Medicare spending. Nothing that ever happened, of course.
I think the key political fact is that there are seven Democratic seats up for re-election in red states in 2014, plus four seats in purple states like Iowa as well. This requires a massive strategy of prevent defense.
The Democrats’ problem won’t be getting votes in the Senate. It will be getting them quick enough to be forgotten by 2014. It will be getting bills that have no dangers to vulnerable incumbents.
What would a WH strategy be to keep the Senate? Here is where control of the Senate will be won or lost:
West Virginia
Arkansas
South Dakota
Louisiana
Alaska
Montana
Do any of these states look like places that would reward immigration amnesty, increased federal gun control and cuts to SS benefits? I pretty much disagree with everything Yves just wrote, but she’s probably much closer to the correct political approach than the White House.
I think the White House is hoping to benefit from circumstances to generate support for laws it could sign. There is no strategy here, other than fund-raising.
We are already seeing some of the cuts. So far, some of the Medicare Advantage cuts have been decreased, but not totally eradicated.
Steve
Ah, the impatience of youth! Give them time. It took the Congress a couple of years before they started eradicating the cuts enacted in the Balanced Budget Act of ’97.