President Obama on Monday night appealed to the American people over the heads of Congress to help resolve the legislative impasse over the national debt. His call for “shared sacrifice” and reinstatement of the notion of the greater good clearly resonated with many voters, since the phone lines and email servers for the Capitol were jammed the next day as viewers followed Obama’s advice to contact their congressional representatives.
As E.J. Dionne wrote in the Washington Post, “Obama’s speech spoke more to middle-of-the-road Americans than Boehner’s did because Obama was clearly talking to them. Boehner has to prove over and over that he’s faithful to the folks at the right end of his caucus, and it’s starting to take a toll.”
However, the speech was too late to have any effect on what Congress will eventually pass. The rival plans of Republicans and Democrats each cut trillions of dollars from government spending with no increase in tax revenue. Obama supports the Senate Reid plan, but it consists entirely of cuts and asks for no sacrifices from the rich. There is so little difference between the plans now that the whole debt limit issue is clearly an excuse for a political catfight.
The debate is taking place in a Washington bubble while the rest of the country worries about jobs. To put it more in context, the mentality in Congress today is the opposite of what prevailed at the time of the bank bailouts. Then, spending $13 trillion to rescue large financial institutions was no problem. Now the political class are saying that there’s nothing left in the Treasury, so the middle class and working poor will have to pay for the economic mess the banksters created. With no more stimulus and less government spending the economy will inevitably contract in a double-dip recession. Unemployment would then soar up from its present level.
Josh Marshall comments: “It is not partisan or spin to say that the Democrats have repeatedly offered compromises. The real driver of the debate is that the fact that Republican majority in the House can’t agree to win.” The GOP coalition has in fact splintered into open warfare over whether to pass any kind of increase at all on the debt limit. As TPM explains, “More traditional Republicans and big business types are desperate to avoid a recovery-crushing default. But their Tea Party colleagues are leading a rebellion of epic – perhaps even galactic – proportions.”
The New York Times reports further that “The U.S. Chamber of Commerce, which spent millions of dollars last year helping elect Republicans to Congressional seats, is struggling to convince the House it helped to build that the debt ceiling must be increased. … But as the government runs out of money, those efforts have not produced the desired result. The freshman class of House Republicans, along with longer-serving members, is balking at Mr. Boehner’s plan, let alone anything that Senate Democrats and the White House might be willing to accept. The tension highlights the distance between the pro-business stalwarts of the traditional Republican Party and the populism of its newer representatives, many of whom seem to view Wall Street and Washington with equal suspicion.”
While Cantor now supports Boehner’s plan, so far he has been unable to marshal these populist legislators behind it. His influence with the Tea Party caucus depended on a coincidence of their ideological positions with the interests of the banking securities and investment sector, which contributed $1.85 million to Cantor’s election campaign in 2010. For the past four years, he has been fighting against changes in the tax code affecting hedge fund managers, who pay only 15 per cent on commissions from their investors’ profits, instead of the 35 per cent for ordinary income. “[Hedge fund] lobbyists said in interviews that it has been highly beneficial to have Cantor as a lead negotiator. And it didn’t hurt that Cantor’s opposition to the specific proposals had blended into the Tea Party’s overall anti-tax stance, said one lobbyist, speaking on the condition of anonymity.”
The problem is that Obama and the Democrats have not challenged the Republicans’ frame for the debate. As Dionne points out in WaPo, “Because the president and many Democrats have been complicit in making the deficit the centerpiece of theWashington conversation, they have left unanswered the Republican claim that cutting spending would help create jobs. That’s a view rejected even by economists who favor long-term deficit reduction. Yet Republicans and conservatives have clearly moved [public] opinion toward the idea that spending cuts equal more jobs.”
Economist James Crotty of UMass Amherst explains in a RealNews TV interview how Obama’s acceptance of the need for austerity policies brings him into line with the EEU’s ratcheting down of the economies of Greece and Ireland. The push for austerity internationally is coming from the major investment banks who want the value of the loans they make to governments safeguarded even if it cripples the economy. Having accepted trillions in bailout money and walked away with huge payouts, the banks now say they will only lend money to governments so long as the governments follow the policies they dictate.
Moreover, the devastating crisis created by financial institutions has empowered neoconservatives and really hardcore rightwingers like the Koch brothers who want to roll back the gains people have made since the Second World War. “This is an opportunity for them to defeat the forces that created the social welfare system,” said Crotty.
However, what has not been visible in the media so far is the resistance of ordinary Americans to these plans. There is no reason to suppose they will be more docile than Greek workers if Social Security and Medicare is cut to pieces. The reaction of voters to Obama’s speech is one indication of their suppressed anger; another is the extent of support in Wisconsin for the recall of Republican legislators who voted for the ending of collective bargaining rights for state workers.
Greg Sargent of WaPo reports that the “[conservative group] Club for Growth Wisconsin has dumped at least $1.5 million into the recall races, according to the progressive group One Wisconsin Now, which tells me it got the information from its ad tracker. Even more tellingly, the Club has poured a surprising $400,000 into the battle to recall state senator Alberta Darling, who was once viewed as safe … If labor and Dems can knock off Darling, it would be a major coup: She is the co-chair of the legislative committee that passed Scott Walker’s union-busting proposals.”