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.

Continue Reading...

Anonymous Hold Placed On Nussle's Nomination to OMB

Well, well, well.  It looks like Senate Democrats are finally starting to play hardball with President Bush.  From Nicole Duran at IowaPolitics.com:

“Senate Democrats aren’t feeling very charitable toward former GOP Rep. Jim Nussle.

Budget Committee Chairman Kent Conrad (D-N.D.) confirmed Tuesday that an anonymous “hold” has been placed on Nussle’s nomination to lead the Office of Management and Budget.

Conrad said he did not know who placed the hold — any senator can prevent a nomination, or legislation, from coming to the floor by objecting, even anonymously, to the Senate majority leader. Holds are traditionally honored, though the majority leader may ignore it if he feels the hold has been placed for too long.”

I’m not sure what prompted Senate Dems to start getting tough on Bush and his nominees, but I’m willing to bet that his threatened veto of any pullout legislation on the Defense Authorization is partially the cause.

Nussle has consistently been a Bush clone and loyal foot soldier doing as commanded with regards to the federal budget.  He helped oversee the creation of the largest debts and deficits in recent American history.  That’s a principled enough reason to oppose his nomination, if you ask me.

Continue Reading...

Will Nussle get grilled by the Senate?

I’ve blogged about it before over at Political Forecast, but I’m not too enthusiastic with the way that Senate Democrats have responded to Jim Nussle’s nomination to be Director of the White House’s Office of Management and Budget (OMB).  Maybe it is all of the work I did during the gubernatorial race talking about Nussle’s failed leadership on the House Budget Committee as it’s chair–leading us into horrible deficits, uncontrollable spending, and ridiculous tax cuts for the richest Americans.

Or maybe it is just that we know he’s a confrontational hack who shouldn’t be charged with leading such a complex and tough office, one that requires someone with some kind of expertise is actual management and appropriate budgeting techniques.  The reality, however, is the that OMB is largely a political office and it made sense for Bush to pick someone who was willing to give up the next two years to fight with Congressional Democratic leadership about the Republican President’s budget.

Still, the least the Democrats could do is raise objections to Nussle’s past experience–deficits and debt–and instead call for someone more inclined to have positive budget experience, yet be known for compromise and hard work, not hackery.

I guess that’s why I’m slightly surprised at today’s Register story where Jane Norman reports that Sen. Kent Conrad (D-ND), the chair of the Senate Budget Committee, is not all that enthusiastic about Nussle’s nomination and has some reservations.  Maybe that’s just political cover for the left flank by telling grumpy activists like me that they’re not planning for anything great coming from, but are going to confirm him anyway.

Or maybe it is some serious action that would make Conrad more inclined to grill him during confirmation hearings.  Conrad is no liberal in the way that people consider Iowa’s Tom Harkin (who has indicated he’ll likely vote to confirm Nussle), but Conrad has a strong populist streak on trade and labor issues.  Nussle’s record on those issues, particularly with the budget, is not good at all.  Kudos to Conrad for stepping up, and I hope he takes it to another level.

Continue Reading...
View More...