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Friday, October 21, 2016

Weekend Reader: Debtors’ Prison: The Politics Of Austerity Versus Possibility

Weekend Reader: Debtors’ Prison: The Politics Of Austerity Versus Possibility

This week, Weekend Reader brings you an excerpt from Debtors’ Prison: The Politics Of Austerity Versus Possibility by Robert Kuttner. Kuttner, the co-founder and co-editor of The American Prospect magazine and a Distinguished Senior Fellow at Demos, argues a compelling case against austerity and outlines the implications this policy could have on Americans.

You can purchase the book here.

Austerity for All Seasons

The crusade for fiscal austerity has had three distinct phases. Deficits became a public issue in the mid-1980s after the “supply-side” tax cuts of the first Reagan term failed to deliver the promised revenue increases. The tax breaks, not surprisingly, reduced government income. Deficits, ironically, were disguised by the huge increases in payroll taxes of the 1983 Social Security reform, trillions destined for retirement trust funds—which were then borrowed by the rest of the government, lowering the consolidated government deficit.

Reagan’s budget imbalance was further exacerbated by a military buildup. Deficits averaged about 4 percent of GDP throughout the Reagan and George H. W. Bush presidencies, increasing the debt ratio from under 30 percent before Reagan took office in 1981 to over 50 percent at the time of the 1992 election. There were several attempts to put the budget on an automatic path to deficit reduction, using different versions of a “trigger” formula of automatic budget cuts sponsored by Representative Phil Gramm of Texas and Senators Warren Rudman of New Hampshire, both Republicans, and Senator Ernest Hollings of South Carolina, a fiscally conservative Democrat. Though trigger mechanisms were enacted, these efforts did not reduce deficits much, in part because an economic slowdown in the late 1980s reduced revenues. Bush, having sworn “Read my lips, no new taxes” in his 1988 nomination speech, infuriated supporters by signing a 1990 budget deal that included modest tax increases. But the debt remained on an upward path.

By the time of the 1992 election, more than twenty years ago, the rising debt and the political deadlock over how to address it had already become an emblem of dysfunctional government. Ross Perot, running as a third-party candidate, combined deficit reduction and economic nationalism into a weirdly populist crusade. To Perot and his supporters, failure to deal with the deficit symbolized the bankruptcy of the two major parties. For several weeks in the spring of 1992, polls that showed Perot was running ahead of both Clinton and Bush. In early 1992, Peterson founded the Concord Coalition as a lobby for balanced budget, joining with Rudman and Senator Paul Tsongas, a Democratic deficit hawk from Massachusetts. The coalition was substantially underwritten by Peterson.

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But an economic boom and President Clinton’s politically brave tax increase on the richest 2 percent of Americans nearly put the austerity lobby out of business. In 1993, Clinton struck a famous deal with the chairman of the Federal Reserve to trade smaller deficits for lower interest rates. The two policies had no logical connection, except in Alan Greenspan’s ideology. Projected deficits were in fact having no effect on interest rates, which were the province of the Federal Reserve. Cutting the deficit was thus a political imperative, not an economic one. But after the 1993 budget raised taxes, cut spending, and reduced the deficit, Greenspan delivered on his part of the deal. With lower interest rates, growth rebounded throughout the 1990s.

After the strong economic performance balanced the budget in 1999 and endless surpluses were forecasted, the Concord Coalition took down its clock at Times Square that displayed the escalating national debt. Peterson’s book Facing Up had in 1993 gravely predicted a $300 billion deficit by 2000. That year, the actual budget was in surplus by $236 billion.

Higher growth and reduced unemployment also increased payroll tax receipts and moved the Social Security accounts further into the black. Deficit hawks were fond of pointing to estimates by the Social Security trustees projecting that at some point in the 2030s or early 2040s Social Security would not be able to meet all of its anticipated obligations. The 2012 Trustees’ report put the program’s long-term deficit at about 1 percent of GDP—something easily solved by modest tax increases on high-bracket wage earners, or better yet, by raising wages.

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  • David Turrentine

    I remember the Reagan tax cuts, because my taxes went up significantly

    • alwaysthink

      Same here during the Reagan years, the cuts were at the top and the very bottom. At the bottom they shifted a lot of welfare from direct payments to a tax credit system for those with dependent children. And now they scream about the poor not paying taxes.

      • ralphkr

        Back when Reagan was governor of California he got California Income Taxes ‘fixed’. My income went up $300 (not because of Reagan since we were not based in California) while my California Income Tax went up $500 while the Republicans claimed that they had lowered taxes. Well, yes, they had for my friend’s boss who was making 40 times what either one of us made.

  • charleo1

    First of all, if this Country would disabuse itself of the Right Wing, economic
    garbage. Just tossed it out, for being the worthless crapola it’s proven, time
    after time to be. That alone, before tax rates, wages, Gov’t spending, or, before
    cutting a dime of anything. Would immediately, make all Americans better off, including the rich. Why? Because in a two party system like we have, Republicans
    are going to gain influence, and control. And once there, they go right back to the same top down, economy clobbering policies, that create the debt, and fiscal crisis.
    Because, every time Republicans are in charge, they enact the same failed policies,
    that of course, produce the same damn results, Economic stagnation, and soaring
    debt. Then, they immediately pivot, and start trying to tear down, any, and all of the
    programs that help the Middle Class, and the poor. Or, otherwise known as the majority. And, it’s not like they fail to understand the rules of supply, and demand,
    investment and profit, or the hazards of an emasculated Middle Class, in an economy where 70% of growth depends on large numbers of people buying great amounts of everything. It’s because their economic blueprints are not based on economic principals. They are based entirely on ideology, and politics. Buttressed by inane bumper sticker sloganeering, and false, apples to oranges, comparisons.
    If I hear, “Your family has had to cut down, and balance it’s budget, and so should
    the Gov’t.” one more time, Really? Is that how it works? Like a family budget?
    Or, “We can’t keep spending money we don’t have.” Again, when did the GOP
    develop this phobia about deficit spending? How about, we can’t keep fighting
    unfunded wars, with money we don’t have? Or, we can’t keep subsidizing the
    oil companies with money they don’t need, with money we don’t have?
    Does the Left carry water for the corporate? Of course they do. After all, Politics
    in this Country is just one big flea market. Did you see the ugly specter of Democrats voting aganist their President, their Party, and 90% of the public, so criminals would
    be spared the heavy boot of a tyrannous Gov’t. demanding they go through a
    background check, they couldn’t possibly pass? Who says Democrats won’t go to
    the mat, for big business? But, they won’t, or at least haven’t so far, sold the
    Plutocrats the entire store. They haven’t called Social Security a ponzi scheme.
    or threatened to turn Medicare into a privatized voucher plan. They still believe
    in investing in America, and believe a poor inner city kid, is just as deserving of
    a good education, as anyone else. They believe in ending the exploitation of
    undocumented workers. And, in the education of their children, who by no fault of
    their own were brought to this Country. And are entitled to stay, and become a
    full fledged citizen, in the only Country they’ve ever known. That’s not only a
    sound economic decision, it’s the right, and moral thing to do. Democrats still
    believe, the Country is better off, when all of it’s people are better off. Not just
    a tiny fraction at the top. They still believe freedom is only truly achieved when
    that freedom also extends to freedom from hunger, and ignorance, and to
    equality, under the law. What we don’t believe is, corporations are people.
    Or that, tax increases, always cost jobs, or that lower taxes, always pay for themselves. Democrats don’t buy into the idea that government always abridges liberty. Or that, a government, even one elected by the People, can never work for the common good. That unfettered free market Capitalism, always offers a
    solution to the endemic societal problems of chronic poverty, and the lack of
    opportunity for upward mobility, that is critical for creating a diverse, dynamic, and durable economy. Where the labor of the worker is respected, along side the
    contributions of investors, as playing an equal part in creating a successful,
    and sustainable American economy.

    • Betta

      “…they enact the same failed policies, that of course, produce the same damn results, Economic stagnation, and soaring debt.”

      You’re talking about your boy Obama, right? He’s done all of these things and more, yet you want to blame somebody else? Your “boy” is a classic sociopathic psychopath bent on the destruction of this nation.

      We The People will not tolerate it. In fact, we are fighting back because some people are FINALLY waking up to reality instead of living in fantasy land where bammy put you and wants you to stay.

      • charleo1

        Betta, I could accuse you of doing the same things.
        But, saying it, doesn’t make it so, does it?

        • dtgraham

          Gee, according to Betta, Obama is not just a psychopath and not just a sociopath…he’s a sociopathic psychopath. It’s even worse than I thought.

      • Let’s see,

        Obama got us out of the war in Iraq, and is winding down the war in Afghanistan; He saved the American auto industry and a couple of million jobs that went along with it; His stimulus, though not enough, still managed to at least temporarily, keep another couple of million people working.

        The deficit has been on a downward slope each year of his Presidency. The stock market just hit an all time high. Unemployment has dropped from about 9.1% to 7.5%. Millions of additional people will finally be able to have a degree of health insurance that they didn’t have before, including people with pre-existing conditions. Students can stay on their parent’s health insurance until age 26.

        Small businesses have received 21 tax cuts. The cafe standards have increased so automobiles get better gas mileage. The President signed the Lilly Ledbetter Act bringing a measure of equal pay for equal work. Gays can now serve openly in the armed services and now enjoy the protections of law in many additional areas than before.

        Yep, I guess Obama really destroyed this country. And you’re right, millions of people are beginning to see the things that he has done for this great country. But you’re wrong about where they place the blame. They place the blame squarely on the GOP, where it belongs.

        God Bless America — and God Bless our President!

        • Mary McCurnin

          And not one banker has been jailed.

        • angelsinca

          Wait a minute. When defending the national debt as a Republican-caused problem, the stimilus monies were Bush’s ‘fault’. Now, they are Obama’s pride. Make up your mind.

      • Mary McCurnin

        Obama has out Bushed Bush. He believes he has the right to kill Americans without charges or a trial. He wants to cut Social Security. He did nothing but help BP after the massive, criminal oil spill. He administration is filled with university of chicago economics style Banksters. ACA should have had a public option but he dealt it away for the support of Big Pharma. etc etc etc.

        • charleo1

          You bring up some valid concerns. And there are many
          people now, who are supporters of President Obama.
          That either agree with you entirely, or are uncomfortable
          with any President having the unchecked authority, or
          assumed authority, to be essentially, judge, jury, and
          executioner, of a person, or persons suspected to be
          involved with terrorist activity. Be they American Citizen,
          or other. As far as out Bushing Bush. The Bush Adm.
          engaged in the torturing of prisoners. And created Gitmo.
          Obama has clearly said, he wants to close Gitmo. But,
          Congress has his hands tied in this matter. Which makes
          no sense. But it is, what it is. Basically, a great recruitment
          tool for terrorist organizations. As for the BP oil spill, like
          the behavior of Wall Street. Many wonder why no one has
          went to jail? Criminal negligence, malpractice, Something.
          The short answer is, big corporations don’t break the law.
          They make the law. Then, we have Congressmen like Joe
          Barton. (R.TX) Who apologized profusely, to BP. for the
          “government shakedown,” He thought the taxpayers
          should clean up the mess. Instead of suing for damages.
          Which AG Eric Holder did. The oil giant has paid billions
          at this point. And the lawsuit continues. As does a panel
          looking into criminal charges. But, I gotta say. The Gov’t
          inspectors of these drilling operations, were defanged
          long ago. The word was, the employees on the rig filled
          out the inspection reports, and the Gov’t guy, signed it at
          the bottom. One Party in this Country, don’t believe there
          should be any regulations at all, on private businesses.
          Wanta take a guess which one? I don’t agree on the
          economy. It was handled about as well as it could have
          been. When one Party obstructs, and filibusters every
          attempt to deal with it. Things that should have been done,
          weren’t and others only half done. But, that’s the result of one Party doing it’s level best to stop everything. And so
          it was with healthcare reform. Total Republican obstruction.
          And Democrats, just as beholden to big Farma, and the
          insurance lobby, as any Republican. But, when things get
          bad enough. I know that’s sounds stupid. But when they
          do, people will be demanding that public option. We’re
          just not there yet.

          • angelsinca

            “When one Party obstructs, and filibusters every
            attempt to deal with it.”

            Last count was ONE fillibuster. Wimpy Harry succumbed to the threat of fillibuster so wouldn’t even bring items to floor for vote. If you truly want to correct legislative faults, take an honest look your own pork-barrelling party. Or, keep pretending the GOP is the source of all our ills and get nowhere. Like now.

          • charleo1

            I think both Parties have an obligation to work towards
            addressing the Nation’s challenges. Regardless of which
            Party has majority. “Pork barreling,” is a general term,
            usually reserved for the goodies someone else received.
            And, I do not count lowering corporate taxes for shipping
            jobs overseas, while refusing to extend unemployment
            benefits, unless food programs for the poor, and aged are
            cut to offset overall cost, being helpful in financial crisis.
            And, in good conscience, I can’t pretend it was both Parties.
            It was the damn GOP.

          • angelsinca

            Sounds like you have the script memorized. That was then. What are the Dems doing about the now? Blaming the past, and accepting no fault. Slippery.

          • charleo1

            What it sounds like is, I gave a fairly accurate answer
            to your assertion I ought to take my Party to task, and
            quit blaming the Republicans. But, I can’t go back, and
            change history. The GOP did what they did. And, they
            did so, for purely political reasons. I didn’t, however
            blame the GOP for the mess. Although there is ample
            evidence to do so. I only commented on their behavior
            post election. Starting in Jan’09. I think it was reprehensible.
            I think when your Country is in trouble, as it was that Jan.
            It’s time to put aside partisan politicking, and worrying
            about who will get the credit if the Country is lead to a
            better place, and the crisis is averted. But, that is not
            what happened. They made the political decision to do
            nothing, to endorse nothing, and as best they could,
            prevent anyone else from doing anything. All the while,
            jawboning Obama, and the Democrats. And saying it’s
            your economy now! We didn’t believe his measures
            would work, and they didn’t. So, throw him out, and
            put us back in charge. Their problems with this strategy
            became evident as the economy began to improve,
            without, their help. So, I continue to believe, when
            your Country calls, because it is in trouble. And you
            decide there are more important things at stake. Like
            advancing one’s Party. I don’t think you get do-overs,
            for that. You don’t come back, when the crisis is averted,
            and want your share of the credit. At least as far as I’m
            concerned. Were the Democrats always right? No.
            Did they make some mistakes? Sure. But when they made
            them, they did so in their efforts to mitigate the recession.
            They were giving as best they had in the interest of the
            Country. And, as a citizen, voter, tax payer, and an American,
            that loves this Country. That’s good enough for me.

          • angelsinca

            Thanks for the reply Charles. The last 3/4 of your engaging comment easily describes how the Senate has behaved throughout all this posturing. My present concern is how we’ve been brought to bear the pain of the president’s political loss on The Sequester gamble. As an unwilling constituent in these politcal ploys, it’s annoying. It’s insulting. It’s Obama ‘engaging’ the people with backroom politics that are better left in the back room.

          • charleo1

            You’re entirely welcome. As it’s always a pleasure to
            talk to a fellow citizen who is just as concerned about
            the Country, and it’s dysfunctional politics as I am.
            We may not see the problem in the same way. But,
            that’s okay. The civil exchange of ideas, and opinions
            is how we become better informed citizens. It is, after
            all, the person with which we don’t entirely agree, we
            learn the most.

          • One Fillibuster! are you delusional or have you been out of the country for the last three years?

      • Beebster

        Seriously Dude, loosen that tin foil hat!

      • Wow are you a racist or just tone deaf? The President of the US is nobody’s “Boy” and I resent the use of the word in relationship to a dully elected President of my country. You also need a dictionary because you can not be both a sociopath and a psychopath – it is one or the other.
        I realize that it is easy to blame everything on the current President, however the President does not pass the budget nor he is responsible for the tax code. I suggest that you use another source for your news, one that has some credability. I doubt that you will as by your languague you are stuck in last century, still wondering why the black women is riding at the front of the bus.

        • Betta

          Oh yeah, Ms white lady calling somebody a racist. You are an obamabot who supports a well known LIAR who can’t prove who he is with his FAKE birth certificate and STOLEN SSN# (a FELONY). YOU, Joan, are an enemy of the US supporting a fraudulent illegal alien usurping the office of POTUS.

          Further, I don’t give a rat’s ass WHAT you resent. I’ll call him “BOY” all I want! I can think of some other choice names to call him as well. Calling him “BOY” (there, I did it again) is being nice.

  • adriancrutch

    Petersen who is actually greek was been paying to build a Corporate World that has nothing to give the middle class! Luckily the hurting the republicans are placing on us are gradually having the opposite effect. There are only so many flakie ideas they can hatch before it all implodes on them.