Robert Kuttner

Now, Back to the Economy

While Congress completes action on the deal to raise the debt ceiling in exchange for deep spending cuts, the economy is on the brink of a deeper recession. And by the time phase two of the deal approaches, between Thanksgiving and Christmas (whose great idea was that?), members of both parties could be singing a different song. In phase two, Congress must agree to even deeper cuts recommended by a super-committee, or automatic ten-year cuts will kick in. But as growth keeps slowing, the premise that a ten-year deficit-reduction deal will somehow restore economic confidence and produce recovery, always dubious, will be revealed as ludicrous. Instead of the advertised fight about the mix of tax increases versus deeper spending cuts, we could well have a very different debate about how to stimulate a faltering economy. Democrats will call for more public spending, and Republicans will demand deeper tax cuts -- but at least that debate has the virtue of acknowledging economic reality...

A Disgraceful Deal

The deal negotiated last night is a disaster politically and economically. The liberals who went all out to elect Barack Obama have been reacting with increasing dismay to the president's combination of center-right impulses and inept negotiating habits. The right plays hardball, is rewarded for its intransigence, creating incentives to play more hardball. Its success in this crucial round portends an even harder line when Congress has to take up Part II of the bargain. That construction is heads-I-win-tails-you-lose. As a precondition to the next increase in the debt ceiling, Congress either votes even deeper cuts or a "trigger" causes them to take effect automatically. Liberals are supposed to be cheered because the deal spares Social Security and Medicaid -- for now. But they will be on the chopping block before long. Tax increases are not part of this round, but not ruled out as part of the second stage of the negotiations; of course, there is no way Republicans will go along with...

The Joys of Fanaticism

In a just world, Speaker John Boehner's failure to get the votes for a Republican debt-ceiling plan that is already doomed to certain Senate defeat should put pressure on Republicans to compromise. But that doesn't seem likely. Boehner may yet find the votes for an even more conservative (and doomed) measure, and in any case, the House Republicans are as recalcitrant as ever on holding the economy hostage. Boehner may lose some personal prestige over the affair; he could even lose his job. Yet the broader Republican strategy of playing chicken with the economy seems to be having its intended effect of weakening President Obama. According to the most recent Pew poll, Obama now polls only one point ahead of a generic Republican challenger, down from the 11-point lead he had in May. Pew reports that "this shift is driven by a steep drop-off in support for Obama among independents." Among independents , 31 percent of those polled said they'd vote for Obama, down from 42 percent in May,...

Remember World War I

Like most American spectators watching this slow-motion train wreck of a budget disaster, I have assumed that at the last minute the damsel would be pulled off the track of the oncoming train. Somehow, the Republicans would appreciate the stakes, a compromise (albeit on sickeningly Republican terms) would be reached, and the nation would be spared the catastrophe of default -- a gratuitous deepening of an already dire economic mess. Now I am not so sure. In the last 48 hours, the Republicans have dug in even more, and Democrats are drawing the line at the Reid plan (which is already far too Republican). For those who think that a default won't happen because it is in nobody's interest, think back on World War I. It was in nobody's interest. Yet it destroyed Europe's common civilization and ushered in nearly a century of economic instability and war. World War I occurred because both sides dug in and assumed the other would have to blink first. But that was a miscalculation. Instead of...

Another Capitulation?

Uh-oh. Senate Majority Leader Harry Reid, who has previously functioned pretty well as a firebreak against President Obama's instincts to give away the store, now seems to be tottering toward a Republican deal. If that occurs, yet another leader would be rewarding Republican intransigence. Reportedly, Reid's deal, offered as the Democrats' last hope to ward off a default, would include about $2.7 trillion in spending cuts, roughly the amount of the increase in the debt ceiling, and no revenue increases, details to be spelled out later. But that is basically giving in completely to Republican terms . And there is no way to get cuts that large without serious reductions in Social Security, Medicare, and what's left of other domestic spending. Here's what Senator Chuck Schumer said on MSNBC: "Senator Reid is going to put forth an offer that meets the Democrats' main criteria, going past 2012, and the two Republican criteria -- enough cuts to equal the amount you raise the debt ceiling...

Let's Make an EU Deal

The EU's bailout deal for Greece was slightly more generous than expected -- $159 billion of refinancing, of which private bondholders, mainly banks, are expected to eat about 20 percent of the loss. However, rating agencies are arguing that this will be technically considered a default, triggering payments under credit-default swaps; and there is still the ticklish matter of persuading banks to "voluntarily" accept the loss. Still, given the divisions within Europe, the fragmentation of EU institutions, and the residual power of banks and their toxic inventions, it was no mean feat for Europe's leaders to take this first step. There is reason to hope that it will create the necessary firebreak, so that speculators do not continue to drive down the economic recovery hopes of Spain, Portugal, Ireland, and Italy by making bets that they will default. Would that our leaders, facing a totally contrived "debt crisis," do as well.

Snatching Defeat out of the Jaws of Victory

When it comes to setting up Democrats to give away Social Security and Medicare, the Bowles-Simpson Commission is the diabolical gift that keeps on giving. Long officially defunct, the B-S Commission is a zombie that just won't die. The Gang of Six is the commission's spawn -- same kind of proposal, same needless sacrifice of Social Security and Medicare. It's sickening that President Obama says he is heartened and energized by the new Gang of Six plan to cut $4 trillion from the ten-year projected deficits, using both steep cuts in Medicare and Social Security, plus tax cuts, as well as near-term budget cuts that will worsen the recession and neuter the government's capacity for recovery investment. No wonder Obama is heartened. The plan is uncomfortably close to the President's own grand design that House Republicans rejected last week. Once again, what may save the Obama and the economy from this fate is the refusal of House Republicans to entertain any tax increases -- and the...

What Murdoch Teaches Us About Policing Global Corporate Abuse

Rupert Murdoch and News Corp may end up being prosecuted in the US under a 1977 US law known as the Foreign Corrupt Practices Act (FCPA) for their illegal bribes to officials in Britain. The law prohibits American companies from bribing foreign public officials overseas. I had a hand in both drafting the law and conducting the investigative hearings that led to it, in my prior life as chief investigator for the Senate Banking Committee under the superb Sen. William Proxmire. At the time, there was an epidemic of bribery by American corporations overseas. What brought the issue to a head were revelations that Lockheed had paid bribes to several foreign governments to buy its military aircraft, including Japan, Italy, the Netherlands, West Germany and Saudi Arabia. To add insult to injury, Lockheed had been bailed out by the US government in 1971 to the tune of $195 million. Conventional wisdom had it that you could not do business in much of the world without paying bribes. We were...

A Little Courage on the Right to Unionize

I've long argued that the Obama administration, despite Republican obstructionism, could do a lot to help ordinary people in this economy through executive action. On Monday, the National Labor Relations Board began two days of hearings on a proposed rule change that would make it just a little harder for employers to stonewall and harass workers who want to vote in a union. Under the present rules, management can stall almost indefinitely, while they subject employees to captive-audience meetings, threaten to close the facility, and fire pro-union workers. The proposed rule change, though far from the full Employee Free Choice Act that the Obama declined to make a legislative priority while it had a majority in Congress, would reduce the time for management to stall once workers have filed a petition for a unionization election. And if management wants to appeal the validity of the petition, under the new rules the appeal will come after the election, not before. The rule would also...

Down With Shared Sacrifice

Muddled ideology leads to muddled rhetoric, which in turn leads to ineffective politics. This blog will periodically cite unfortunate examples. Today's Exhibit A, sadly, is our president, who repeatedly calls for "shared sacrifice" in resolving the economic crisis and the related fiscal deficit. Though a call for shared sacrifice, in the hands of idiot pollsters, tests well at the level of civic platitude, in these economic times a Democrat should never simply call for shared sacrifice. Why not? Because most Americans have sacrificed in advance--thanks to the recklessness of the financial elite. Regular people have lost income, jobs, trillions of dollars in the value of their homes and retirement savings. Millions of young adults who can't get traction in careers are back living with parents. Millions can't get or have lost health insurance. Isn't that enough shared sacrifice? Oh, and bankers, with massive federal support, are doing better than ever. Where is their sacrifice? You...

Senator Warren?

The White House this morning announced that President Obama will appoint Richard Cordray, former Ohio Attorney General, to head the Consumer Financial Protection Bureau. The appointment drew the strong support of Elizabeth Warren, who said today, “Rich has always had my strong support because he is tough and he is smart-and that's exactly the combination this new agency needs. He was one of the first senior leaders I recruited for the agency, and his work and commitment have made it clear that he will make a stellar director." What are we to make of this? First of all, Cordray’s views are the same as Warren’s, though he is not the kind of persuasive progressive super-hero as Warren. He will not be as effective in going over the heads of financial elites to move public opinion. Even so, Republicans have made clear that they will not confirm any kind of progressive and that they want nothing less than to kill the agency as an effective institution. So if Obama is serious about getting...

I Love It When You Get Angry

So far in his handling of the budget/debt issue, President Obama gets an A for splitting the Republicans and a D for offering far more substantive concessions than necessary. His bigger mistake was accepting the premise that what America needs is a ten-year budget deal, a premise that played to the Republican strategy of privatizing Social Security and Medicare. But the best moment in recent days occurred when Obama warned Rep. Eric Cantor "not to call my bluff," ended the meeting and strode out of the room. We need such more flashes of presidential anger. With a press conference set for 11 a.m. today (Friday), this would be a very good moment for Obama to say something like the following: It's clear that Republicans and Democrats are poles apart on the issue of how to reduce the deficit and what mix of taxes and spending is good public policy. The issue of raising the debt ceiling never should have been linked to the 2012 budget, much less to a ten year budget. Sen. Mitch McConnell...

Obama on the Dismal Jobs Situation

Here is President Obama Friday morning remarking on the dismal June unemployment numbers and its bogus connection to the budget and debt-ceiling talks: The sooner we get this done, the sooner that the markets know that the debt limit ceiling will have been raised and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need in order to make additional investments to grow and hire and will provide more confidence to the rest of the world as well, so that they are committed to investing in America. Say what? To believe this, you would have to believe that America’s entrepreneurs are holding back investing in new projects and jobs, as they await progress on the ten-year budget. There is no economic theory that can justify such a belief.

Obama's Austerity Altar

The right has succeeded in dominating the framing of the entire budget issue, and tragically they have the perfect accomplice in Barack Obama. President Obama's willingness to throw crown jewels like Social Security onto the austerity altar grows more flagrant by the day. The press--even some of the progressive press--is treating the main issue as whether we include significant tax increases as part of the package of $4 trillion in budget cuts over ten years. But even that issue is a sideshow. Fallacy number one is that we need anything like $4 trillion in budget cuts, and fallacy two is that it's reasonable to devise a ten-year budget path. Both of these premises are traps. Even if by some miracle Democrats in Congress hang tough and insist that half of the total deficit reduction comes from tax hikes, $2 trillion in program cuts would be immense. A further trap is the Republicans' success in connecting the budget talks to the debt ceiling extension. Throughout the Reagan and Bush...

The Budget Fight: Over Before It Began

The stars are now in alignment for Democrats to capitulate to a draconian ten-year budget deal as the Republicans’ price for agreeing to raise the debt ceiling. Senate Budget Committee Chairman Kent Conrad’s fiscally conservative budget for 2012, set to be released today, will add pressure for a cave-in. Conrad is one of the most hawkish of the Democratic austerity mongers. President Barack Obama created the Bowles-Simpson Commission partly to appease him. He appointed Conrad to the panel, whose majority proposed a ten-year deal not unlike the one that Republicans are pushing, with deep cuts in Social Security and Medicare as well as a mandatory cap on spending. (The main difference is that the report recommended raising taxes.) The Conrad 2012 budget is well to the right of where most Congressional Democrats stand on these issues. But the biggest source of pressure for accepting a deal on Republican terms is the now familiar picture of President Obama responding to GOP stonewalling...

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