Has bogus "austerity movement" won over Obama?

President Barack Obama has nominated Jacob "Jack" Lew as his new director for the Office of Management and Budget. Peter Orszag recently announced plans to step down from that position. Lew served as OMB director during Bill Clinton's administration. Announcing his choice at a July 13 press conference, Obama said,

"Jack's challenge over the next few years is to use his extraordinary skill and experience to cut down that deficit and put our nation back on a fiscally responsible path. And I have the utmost faith in his ability to achieve this goal as a central member of our economic team,'' Obama said.

The president pulled this line straight from Republican talking points:

"At a time when so many families are tightening their belts, he's going to make sure the government continues to tighten its own," Obama said in announcing Lew's selection at the White House.

"He's going to do this while making government more efficient, more responsive to the people it serves," Obama continued.

How will the government become "more efficient"? We know the Pentagon won't be asked to make any sacrifices, since Obama can't bring himself to request even a slight reduction in our defense budget. On the contrary, he keeps going back to Congress for more supplemental war spending.

I hope Obama doesn't believe what he's saying, because aggressive policies to reduce unemployment are much more urgently needed than "belt-tightening" by the government. The Clinton economic boom turned deficits into surpluses not only (or mainly) because of spending cuts, but because unemployment dropped to historically low levels across the country.

If the president was speaking sincerely yesterday, then Lew's appointment likely means less spending on infrastructure, social benefits and other domestic programs. The trouble is, we're not going to significantly reduce the federal deficit if unemployment remains high. More federal spending may be needed to stave off a double-dip recession and ease the strain on state budgets. Bonddad decimated the argument for "austerity" here. Click over to view the numbers he posted, which show that the U.S. has had a structural deficit for the last decade.

Notice this started a long time ago. Yet suddenly everyone is up in arms about the deficit. Please.

Secondly, the complete denial about the important beneficial effects of government spending (especially infrastructure spending and unemployment benefits) is maddening. Regrettably, everyone now talks in sound bites instead of facts. So here's a few inconvenient facts.

1.) The US economy grew at a solid rate in the 1960s. Why? A big reason was the US government building the highway system. Now goods and services could move between cities in a far easier manner. If you think that wasn't a big deal then you obviously don't get out much.

2.) Since 1970, government spending has accounted for about 20% of all US GDP growth.

Bonddad further explained here why austerity hasn't created economic expansion in European countries that have gone down that road.

Instead of echoing Republican messaging, which suggests the deficit should be the government's top concern, Obama should be out there making the case for more spending on job creation and economic relief (such as unemployment benefits, which yield more stimulus "bang for the buck" than most forms of government spending). He should also demand more federal fiscal aid to the states, particularly through the Medicaid program. If Congress cuts off further support now, state budget cuts could cost this country nearly a million jobs, according to Nicholas Johnson of the Center on Budget and Policy Priorities:

The [National Governors Association (NGA) and the National Association of State Budget Officers (NASBO)] report shows that federal Recovery Act [2009 stimulus bill] assistance has greatly helped states deal with their shortfalls in a responsible, balanced way. But that assistance will largely run out by the end of December, halfway through states' fiscal year and long before state budgets are expected to recover.

In the year ahead, state budget-closing actions could cost the economy up to 900,000 public- and private-sector jobs without more federal help. When states cut spending, they lay off teachers and police officers and cancel contracts with vendors. The impact then ripples through the wider economy as laid-off workers spend less at local stores, putting more jobs at risk.

If Obama stakes his presidency on bringing down the budget deficit in the short term, he may be looking for a new job in 2013.

LATE UPDATE: Chris Hayes wrote a good piece for The Nation called "Deficits of Mass Destruction":

Nearly the entire deficit for this year and those projected into the near and medium terms are the result of three things: the ongoing wars in Afghanistan and Iraq, the Bush tax cuts and the recession. The solution to our fiscal situation is: end the wars, allow the tax cuts to expire and restore robust growth. Our long-term structural deficits will require us to control healthcare inflation the way countries with single-payer systems do.

But right now we face a joblessness crisis that threatens to pitch us into a long, ugly period of low growth, the kind of lost decade that will cause tremendous misery, degrade the nation's human capital, undermine an entire cohort of young workers for years and blow a hole in the government's bank sheet. The best chance we have to stave off this scenario is more government spending to nurse the economy back to health. The economy may be alive, but that doesn't mean it's healthy. There's a reason you keep taking antibiotics even after you start to feel better.

And yet: the drumbeat of deficit hysterics thumping in self-righteous panic grows louder by the day.

  • If we're not enthused with him

    and reading between the lines, we really aren't, maybe I'm going to begin hoping for a Draft Hillary movement that'd primary him.

    I sat through our last big caucus because I just flat wasn't swayed into a decision to stand with either the HC or BO group. I am beginning to believe I would now prefer to have Mrs Clinton as our nominee next time.

    • The question is

      would the Tea Party movement still be around if HRC was president?  I'm guessing it would be.

      • Honestly...

        If you look at who and what are driving this so-called "movement" it seems to be much more about race than substantive issues overall.

        I'm not saying that there would not be conservative backlash if HRC were the CIC, but???

        If you return to the real roots of the Tea Party it is simply the Ron Paul Libertarian line.  The fact that Palin has become the darling of this "movement" tells me it's all about race.  I really doubt Palin would have gotten as much play if HRC had won.

        Noam Chomsky wrote a tome called "Manufacturing Consent" way back when.  In the era of Glenn Beck, we have media "Manufactured Dissent". 1500 people show up at a FOX sponsored Tea Party event in DC and this somehow represents "the will of the people"?  Please, I'm telling you, this so-called Tea Party Movement is manufactured, no real grass roots development, but it is picking up speed.  

        The "non-existent" peace movement has fielded over 100,000 people multiple times in DC in the past decade, and no media attention at all from FOX. Same with Immigrant Rights protests in DC. At least 200,000 people took to the DC streets last March.  Any mention of numbers by FOX?  

        Wait until August 28th, the anniversary of Dr. Martin Luther King's "I Have a Dream" speech.  See how much airplay FOX gives to the Restoring Honor stunt Glenn Beck is going to pull in DC on that date, featuring Tea Party darling, Sarah Palin.  It's ALL about race, why the hell else would a bunch of disaffected uptight white people gather in DC on the anniversary of the launch of the Civil Rights Movement?

        • I would respectfully disagree

          only because we tend to forget the absurd amount of disdain the right has for HRC.  Obama became a lightning rod, yes, but HRC was always a lightning rod.  

          If HRC had done the same stuff that Obama has, would there be a Tea Party?  Oh yes...in fact, I imagine most members would dislike HRC more than they dislike Obama.  How do I know this?  Because there's no limit to how much dislike you can have for someone...and HRC had a 12 mile headstart over Obama in that department.

          • absolutely

            Hillary would have been just as reviled as Obama, but sexist imagery/language would have replaced the racist imagery/language in wingnuttia.

            Clinton derangement syndrome is legendary.

      • Backlash? Yes. Tea Party? No.

        (I love this kind of alternate history stuff!)

        I agree with Elton. I think if you had a Clinton presidency you would still have a backlash, but you wouldn't have the "tea party" as we recognize it in our timeline.

        The first change is that if HRC were elected, there would be no "birther" movement spring up. Without the birthers to provide that first loosely-tied network of discontents, I'm not sure you have the foundation for the "tea party" as we know it.

        Secondly, let's assume that HRC (having been burned by health care once before) doesn't start the health care reform initiative that Obama did. Instead, she chooses another major initiative--such as financial reform or Iraq/Afghanistan.

        Without the health care initiative, I don't think you get the same ire from the far-right. No town hall fights in Summer '09, no "death panel" fear mongering, so on and so on.

        So, to bring us back to July 2010 in our alternate timeline, I think you do have a smaller Ron Paul/Campaign for Liberty group of far-right wingers who represent some of the same fears and feelings of the "tea party". But it's smaller, less vocal.  

        • Thank you.

          'nuf said.

        • Well...of course.

          If HRC didn't do anything to anger the right...yeah, there would be no tea party.

          But, there are two problems.

          1) We all know that she would do things to anger the right


          2) That's not the question at hand.

          The real and original intent of the question is, would there be a tea party if HRC was President and she did everything that Obama did.  The answer is simple: absolutely.  Would they dislike her more than Obama?  Absolutely!  Would there be HRC signs that depict her with a Hitler mustache?  Of course!  The birther issue aside, in the midst of the primary, the right hated HRC about 3 times more than Obama.

          If HRC was president now, the tea party would exist...and there would be even more disdain for the person living in the White House.

        • Having said that

          I agree with you partially.  If Clinton was president, she might be less liberal than Obama, she might have not done Health Care, and focused on Iraq and Afghanistan exclusively, and not angered the right.

          Indeed...there would be no tea party.

        • she would have done something on health care

          There is no way she could have left that hanging.

          There would have been town hall fights on something, no matter what HRC did or didn't do. The Clinton-loathing was easily as ridiculous as the birther movement. They would have found some other way to undermine her legitimacy.

          • And it might have actually looked like health care reform

            This has been a fun thread.  Now, on to the austerity part.  If the proposals on the block regarding Social Security go forward, I won't get my first check until I'm 70.  Lovely.

            Missed the proposed cut-off by six months.  Would figure.  My grandfather was a "notch baby" who paid in for decades, but only received about $2500 a year in benefits.

            • Your grandfather got screwed

              and so will we, the ones who are under age 35.  I've already begun long-term financial planning with the idea that I will be receiving peanuts from SS, compared to cost of living and inflation.

            • notch babies!

              There's a blast from the past. I remember that phrase showing up from time to time during campaigns of the 1980s.  

  • Indeed

    Obama should be out there making the case for more spending on job creation and economic relief (such as unemployment benefits, which yield more stimulus "bang for the buck" than most forms of government spending).

    Then the Senate should have taken up Senator John Thune's amendment to transfer remaining stimulus funds into unemployment benefits.

    Everyone wins...we get the biggest bang for the buck, and deficit hawks are happy, as are the unemployed.  Alas.

  • I understand the argument that Krugman makes

    I understand the argument that Krugman and many other economists make and I sympathize with them, but their politics don't really match up with the electorate in my view.

    People are worried about the deficit and you have to remember that during the primary Obama ran as an all things to all people candidate when he was actually asked a tough question.

    At the same time I will say that if I was going to vote for someone who was going to be Keynesian one hundred percent of the time I would voted for Nader or McKinney.  I didn't and overall I have been quite happy with Barack Obama, some of his supporters were too Ron Paulist esque in their expectations.  

    • the polls don't bear that out

      Job creation always ranks ahead of deficits in every poll that I've seen. One recent example from a Selzer poll conducted for Bloomberg this month:

      "The U.S. currently has a huge budget deficit and a high unemployment rate. Which should take priority: reducing the budget deficit or reducing the unemployment rate?"

      70 percent said unemployment, 28 percent said the deficit.

      Obama just doesn't want to make this argument for whatever reason.

    • the other problem

      is that you simply can't bring down the deficit if the national unemployment rate stays around 9-10 percent for a long time. We are looking at years before we even get back to 8 percent unemployment.

      • You're right on your second point dmd

        I think those polls you cite are somewhat inaccurate.  I listen to telephone town halls that Dave Loebsack has every couple of weeks and he constantly gets asked about the deficit just as much as he does job creation

        What can he realistically do to create jobs if the GOP won't properly fund the DOT so we can put construction people back to work? There are other things that he can do and has done, but most of your business climate is outlined on the state level.    Reasonable people like George Voinovich in the Senate say that he would like to fund more DOT projects, but he's got looney tunes on his side like DeMint and Ensign who don't want to fund the DOT.  

        Voinovich also said in a speech on the Senate floor that Dems were too focused on Kerry-Lieberman instead of funding these projects,  Voinovich may still be a somewhat partisan Republican, but the man doesn't appear to be a liar so there seems to be plenty of blame to go around.  

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