06 August 2011

The Debt Ceiling Deal and Progressives

The debt ceiling deal has rightfully been criticized by progressive commentators.  One problem with the deal is its content: its deep cuts in spending on health care and other valuable domestic programs; its lack of additional revenues through progressive taxation; and finally, its movement away from providing a Keynesian stimulus, even as the Great Recession (or "Lesser Depression") continues.  A second major problem with the deal is that it so greatly rewards, and thereby encourages, the "extortion politics" of Republican leaders who, throughout the negotiations, based their positions on delusional--even idiotic--claims (tax cuts always increase tax revenues, to cite just one example).

Yet, while progressive commentators did a good job pointing out these serious failings in the deal Obama accepted, it concerns me that, in many cases, they encouraged Obama and the Democrats to resuscitate a model, or policy bundle, that is itself a deeply scary one--albeit scary in a different way.  

This "Democratic status quo," let us call it, does include higher spending on health care and education and other public goods; and it does provide more revenues through progressive taxation.  This much is good.  However, it also includes fantastically high expenditures on the U.S. military. 

Yet, while progressive commentators (Paul Krugman, for example) attacked Obama for conceding to the Republicans on tax revenues and domestic spending, they generally did not criticize Obama for accepting the status quo on military spending.  It is as if, since McGovern's defeat in 1972 (the last time a Democratic nominee had the political courage to propose serious cuts in U.S. military spending), even many progressives (and certainly, "mainstream progressives") have come to accept that the U.S. military needs to be as fantastically large as it is--even though this both precludes greater investment in public goods and, again and again, undermines global social justice and peace.

What is striking, in this regard, is that this linkage of (a) higher tax revenues and higher spending on domestic programs with (b) U.S. militarism is present in the very way Obama structured the debt ceiling deal.  As the final deal is structured, in the second (and much larger) phase of deficit reduction, unless the Republicans compromise (is this an oxymoron?) and accept an overall debt reduction package that has Democratic support, there will be quite large automatic cuts in the budgets for both domestic programs and the U.S. military.  The Obama strategy is, quite simply, to force Republicans to compromise and accept increases in tax revenues (and thereby provide some increase in resources for domestic spending) by means of this threat to the military budget.  

If this strategy works, then the Democrats are again accepting an oversized U.S. military as the political price that must be paid to get Republicans to raise revenues and not cut domestic programs so very, very much.  This is, of course, exactly the implicit deal, or policy bundle, that has been in place since the beginning of the Cold War (specifically, from the Korean War forward)--and which the Republicans have, since Reagan, been working to replace, by drastic reductions in resources for domestic spending.  But again, while the Republican alternative is awful, so too, in its own way, is the "Democratic status quo."

Given this, if there is any opportunity or potential for a progressive future embedded in the debt ceiling deal, as negotiated by Obama, it lies in the fact that this deal makes visible and public the received linkage between (a) excessive military spending and (b) progressive taxation and domestic programs.  And moving forward, progressives should be advocating as much for the deep cuts in military spending that have been placed on the table, as for  higher spending on domestic programs and increased revenues through progressive taxation.


[In a second post on the debt ceiling deal--coming in a few days; this is, after all, a slow blog--I'll turn to a different blindspot in progressive critiques of the deal, one that concerns the uncritical and unnuanced embracing of "economic growth" as what we should be aiming for, as an antidote to the Great Recession.]


  1. Three points:

    How much money will we save from cutting defense? Quantifying it should help clarify the issue.

    I believe the reason Democrats haven't gone after Defense as aggressively as you wish is because there isn't as much money as you assume.


    How is "movement away from providing a Keynesian stimulus" a problem if "economic growth" isn't progressives's goal?


    Why will Keynesian stimulus benefit the economy when the central bank is targeting inflation?

    Why not criticize Obama for leaving 2 of the 7 Fed positions open?


  2. Hi Will,

    Well, some things do not change. You always did ask great questions.

    To your point 1: just today Rep. Frank argued for 200-300 billion in military cuts as the first step in future deficit reduction. He's on the right track. U.S. military expenses are something over 5% of GDP I believe; Canada is at something over 1%. To wage peace, we need to reduce the military budget big time--and there is real money there for deficit reduction. Note, for instance, that the automatic cuts in phase two of deficit reduction, that would occur if the bipartisan committee does not reach an agreement, also involve significant dollar savings in military cuts. On this, see http://thinkprogress.org/security/2011/08/08/291030/obama-panetta-medicare-cuts/

    On your point 2: that's what my future post about uncritical embracing of "economic growth" by progressives will be about. So don't change the channel -- as they used to say (back in the day when people watched broadcast television).

    On point 3: sure, criticize Obama for not filling 2 of 7 positions on the fed. And criticize Republicans for blocking so many other presidential appointments.

    Cheers, Dan

  3. If you don't want growth as an objective, that's certainly one thing. But why keep pushing Keynesian stimulus anyway?

    Re--the Fed:

    It's that attitude that is so problematic in the first place! I sure do blame Richard Shelby for his stance against Diamond, a stance that can be only charitably called "unprincipled."

    But Obama can't control the Republicans. He can only control himself. Obama could have found a way to recess appointment people to the Fed back when Democrats controlled both Houses. Or he could have tried to publicize the issue. He didn't even nominate ANYONE for the second Fed position. And both sat empty for months!

    But he didn't. He didn't because progressives, for whatever reason, don't engage on monetary policy. It's the best, most effective way to combat the recession.

    The issue is especially important now. Treasury yields shooting down, inflation expectations decreasing, risk aversion increasing again. The tell-tale signs of a coming drop in Nominal GDP. A foreboding sign of another recession. The only tools available are in the Fed's toolkit.

    This should be required reading for any economic analysis: http://www.themoneyillusion.com/.