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November 11, 2012 9:09 AM The Deficit Scolds Are a Bunch of Frauds

By Ryan Cooper

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I was watching some Up with Chris this morning (update: posted above) and Hayes about came unglued making the point that few in Washington seems to get—that the problem with the fiscal slope (the set of tax increases and spending cuts set to take effect automatically next year) is that it will make the federal deficit too small. And yet we have the same parade of rattling deficit scolds who have been gravely intoning about how immoral it is to leave such a debt load to our children suddenly up in arms about this fiscal slope.

Consider this throwaway line from Andrew Sullivan:

We are facing automatic massive tax hikes and huge, crude spending cuts starting January 1 if we cannot get a bipartisan deal on Bowles-Simpson lines (of course there is room for tweaking and bargaining). A failure to get that kind of deal would tip the US and the world into a new global depression.

Every single thing about this is wrong or misleading. First, it’s true that the fiscal slope’s massive dose of austerity would probably cause a recession, but they will take effect only gradually. There is plenty of time to get a deal before the cumulative impact on aggregate demand would be noticeable, and the extra taxes collected could even be rebated to restore consumer spending. Sullivan’s implication that there are bone-crunching effects starting January 1 is wrong.

But more importantly, Bowles-Simpson is in no universe a solution to the problem of the fiscal slope. We could simply return to the status quo ante, ignoring this Ahab quest for a Grand Bipartisan Bargain altogether, and the problem would be averted. Proposing Bowles-Simpson (remember, allegedly a deficit reduction plan) as a solution for the fiscal slope is like saying, “There will be a famine, so therefore we must stop growing so much food.” The only conceivable reason for it would be to entice Republicans—but remember, the president holds all the cards after January 1st.

As Matt Yglesias points out, the GOP has no leverage here and things will likely play out as Obama desires. Dems get a bit more revenue, and the House gets to vote for tax cuts after they’ve gone up. In fact, the NYT today has a story about how John Boehner has been bluntly warning his caucus they’re going to have to swallow some painful votes.

But this moment has starkly revealed the fiscal scolds for what they are: a bunch of frauds. Not Sullivan, I think, he seems more just muddled by a weird crush on the Bowles-Simpson plan, but nearly all of the rest. Read this incredibly duplicitous letter from a bunch of CEOs sounding the alarm about this issue. What’s their recommended solution? Why, tax reform which just coincidentally includes lower rates for everyone.

Nobody cares about the deficit, least of all the people who whine about it constantly. Their preferences have been revealed.

UPDATE: Paul Krugman has more, including an amazing catch from a deficit scold org saying we should only cut “low priority” spending. Wonder what that means…

@ryanlcooper

Ryan Cooper is a National Correspondent at The Week, and a former web editor of the Washington Monthly. Find him on Twitter: @ryanlcooper

Comments

  • jim filyaw on November 11, 2012 10:50 AM:

    sullivan? that old queen knows squat about economics.

  • BillFromPA on November 11, 2012 11:01 AM:

    Quote: 'John Boehner has been bluntly warning his caucus they’re going to have to swallow some painful votes.'

    Yes, he was so good at leading his flock to make those painful votes in the past. He's the least effective House Leader in my memory, don't expect anything from him other than tears and embarassments.

  • BillFromPA on November 11, 2012 11:05 AM:

    Quote: 'John Boehner has been bluntly warning his caucus they’re going to have to swallow some painful votes.'

    Yes, he was so good at leading his flock to make those painful votes in the past. He's the least effective House Leader in my memory, don't expect anything from him other than tears and embarassments.

  • c u n d gulag on November 11, 2012 11:15 AM:

    Jim Cramer is on Meet the Republicans right now with Disco Dancin' Dave, giving us his "expertise."

    What a discredited ass!
    Why is he even on my TV?
    What, the usual idiots, like Ann Coulter, Ralph Reed, Newtie, and John McGrumpy all still trying to deal with reality?

    It's a "Fiscal Speed Bump," not a 'cliff.'
    A self-inflicted one at that!
    One whose effects won't be felt until the end of 2013!

    Jayzooh H. Keerist ignoring the 30 pieces of silver jingling around in Juda's toga!!!

    Will President Obama keep listening to Geitner, and Sommers, and the same gang of dunces?

    Why, oh why, won't he ever listen to Krugman, or Baker, or Reich, or any other person who's been right on economics for the last 30-40 feckin' years?!?!?!

    Someone needs to pop his DC bubble.

  • Kathryn on November 11, 2012 11:22 AM:

    I hate pundits. From the moment Pres. Obama won this election, all they talk about is how Obama has to compromise in the direction of the Republicans. We all know, the president will not get everything he wants in dealing with these crisis but he has plenty of leverage also. Pundits seem to think he should adopt the Mitt Romney's approach wholesale, idiots. So no change in the MSM. Meanwhile as I sit monitoring the movements of my German Shepard who had hip replacement surgery Friiday, an ad just ran on NBC about the spector of a rise in the taxes on capital gains, lol. Yep, that's just what the majority of Obama voters are worried about, in fact, it's a non issue for most of Romney's voters too.

    David Gregory is a tool, listening to MTP, but Steve Schmitt is refreshingly honest.

  • Patango on November 11, 2012 11:22 AM:

    Exactly Ryan ,and mr hayes , wall st and their romney party are trying to wag the dog as usual , I can not listen more

    THE DEFICIT IS RUINING AMERICA , then , RAISING TAXES WILL RUIN THE ECONOMY

    america has to be done with this nonsense from the last 4 years

    Wall st is not offering solutions , they never have , after watching wall st romneys inept decision making the last year , it is safe to say these wall st titans are not all that bright after all

    They want to give us some advice? they can start by explaining to us all why giving them $3 trillion never created any jobs ? then we can go from there

  • exlibra on November 11, 2012 11:26 AM:

    [...] Bowles-Simpson is in no universe a solution to the problem of the fiscal slope. -- Ryan Cooper

    Especially since -- as I seem to remember -- even the Bowles-Simpson commission couldn't agree/sign off on a proposal. That is, there is no Bowles-Simpson plan *to* accept.

  • Domage on November 11, 2012 11:45 AM:

    Yes, the deficit hawks are frauds. As history has demonstrated rather conclusively, deficits only matter when the president is a Democrat.

    Worse, Simpson-Bowles is an even more massive fraud. The only people on the entire commission who saw any merit at all to the Simpson-Bowles proposal were the two authors, Simpson and Bowles. Everyone else on their own commission looked at it and found it terrible. That, however, has not stopped the innumerate and forever-moral-scold Village from pushing for it endlessly. Most tellingly, whenever you hear one of the Villagers discussing the need for Simpson-Bowles to be implemented, its effect on the deficit is much less prominent in the conversation than the need for everyone ELSE to suffer.

  • c u n d gulag on November 11, 2012 11:47 AM:

    Slightly OT – But if you thought we just had an election that might have popped the DC bubble amongst at least some of the pundits, get over it.

    Jayzoos H. Keerist, with a panel of feckin’ twits, instead of Apostles!!!

    Doris Kearns Goodwin, a good writer, a sh*tty pundit, and, as a historian, no Barbara Tuchman, she, was just on Meet the Republicans with Disco Dancin’ Dave, and came up with this bipartisan gem.
    I’ll paraphrase:
    ‘President Obama needs to bring business leaders into government.’
    Ok, not a bad idea, that! But who, pray tell, Doris?’

    ‘FDR brought in the presidents of Chrysler and Sears & Roebuck.’
    Yeah, Doris, we know that – but who now?

    ‘Why wouldn’t the President bring in Mitt Romney to deal with companies on how we keep manufacturing jobs here?’

    OY! OY!! OY!!!
    TEH STOOPID! IT BURNS!!! IT BURNS!!!
    OH, WHAT A WORLD… WHAT a world… what a world…

    Here’s a FECKIN’ historian who’s ignorant about the last 20 feckin’years.
    Just who the FECK do you think was one of the leaders in the “Save money, ship the jobs to China” faction in the American business world over the past few decades, there Doris?
    Yes, lets bring in a cat, to work with businesses on how to make a better mouse.

    Jayzoos, Doris, keep babbling about Lincoln, FDR, and LBJ. But when it comes to anything that’s happened over past 40 years – PLEASE STFU!!!

    Why can’t our pundit’s “Go Galt!”?

    You want a better country? 'First, kill all the pundits!'

    OY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    End of rant.

  • Neildsmith on November 11, 2012 11:50 AM:

    If no one cares about the deficit, then there is no reason to let the Bush tax cuts expire. There is no reason to return the payroll tax rate to its previous level and there is no reason we need an estate tax. We can leave the mortgage interest deduction in place and let the hedge funders treat their income as carried interest. The rate on capital gains can remain low too.

    And really... Sullivan is a conservative. If it weren't for the fact he is gay and likes to smoke pot, he'd have never voted for the President. He knows the GOP hates him so he supports the President. But make no mistake... this is the same guy who helped defeat the Clinton health care effort. He hasn't changed.

  • jjm on November 11, 2012 12:07 PM:

    When the GOP took the house in 2010, Obama thought he needed to negotiate with business, hence his choice of Bill Daley and his dalliance with Simpson Bowles.

    It didn't work then and would work less so even now. Daley quit, horrified that the GOP had no use for normal businesses, only vulture capitalists. The GOP thought they were on such a roll and would soon be rid of O so they didn't bother to lift a finger.

    I think his own party is so energized and so alert to the idiocies of Romney that if Obama even stepped a foot in that direction there would be he** to pay. And why should he? He beat them fair and square--with our help.

    But the MSM will continue to imply that 'of course' O will be extending an olive branch (see NYT) or giving in to ludicrous GOP demands... just because their owners are hoping he will

  • stormskies on November 11, 2012 12:10 PM:

    The vast amount of these 'pundits' are nothing more than corporate props who sole purpose is to create 'narratives' and 'story lines' that in fact the corporate agenda itself. And that mean, for the most part, the Repiglican agenda.

    And it's not going to change, even now. Thus, we are stuck with creeps like David "I am not a used corporate condom" Gregory spluttering and sniveling his propaganda over and over.

  • AnOn on November 11, 2012 1:58 PM:

    It was ok by Republicans that our first intellectually challenged president Bush 43 went around claiming political capital after his re-election...
    Why don't the pundits give Presdent Obama his due, and call out Mitch McConnell on his reflexive adversarial stance?
    Something wrong there.
    All I hear is how the president has to man up, get to the table, golf more with republicans (that was David Gergen's crazy statement).....

  • Tom Marney on November 11, 2012 2:39 PM:

    Since 2008, the overall amount of indebtedness in the US-- public and private-- has decreased. In effect, the US government is borrowing money at near-zero interest rates and distributing it to private entities which then use it to pay down higher-interest debt. It's really hard for me to see that as a problem.

    The crowding-out effect of large deficits doesn't kick in until something resembling full employment (5.5% or so) is reached. More importantly, the multiplier for government spending is greater than one until employment reaches that level, which means that cutting spending actually increases the deficit. Just ask the British about that.

    Most importantly, the problem with the US economy-- the world economy, in fact-- is that investors literally have more money than they know what to do with. The supply of capital is greater than the supply of viable investments, and has been for many years. The way back to sustainable growth is to get employment and the supply of capital back to where they need to be. Deft use of the tax system is a key way of accomplishing this.

    It's not really that hard to understand. :/

  • cwolf on November 11, 2012 3:14 PM:

    Simpson-Bowels is a recipe for slowly starving half the nation & demolishing the middle class, while Romney & his NASCAR owner friends party.

    As you say, Sullivan just has a crush on Bowels so I think we can dismiss his opinion on this matter.

  • square1 on November 11, 2012 11:35 PM:

    This lame duck session should be amusing. The heads of the Ryan Coopers of the world will explode in cognitive dissonance as they try to reconcile why Obama and the Dems will fight to pass a Grand Bargain in the mold of Bowles' & Simpson's plan despite the fact that Dems "hold all the cards" and that "nobody cares about the deficit."