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Greenwald: Obama Gutting Core Democratic Principles

22 Friday Jul 2011

Posted by in Democrats, drone strikes, George W. Bush, Libya, Medicare, Obama, Social Security, Wall Street

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Yet another gem from Glenn Greenwald in today’s Guardian:

“[I]n 2009, clear signs emerged that President Obama was eager to achieve what his right-predecessor could not: cut social security. Before he was even inaugurated, Obama echoed the right’s manipulative rhetorical tactic: that (along with Medicare) the program was in crisis and producing “red ink as far as the eye can see.” President-elect Obama thus vowed that these crown jewels of his party since the New Deal would be, as Politico reported, a “central part” of his efforts to reduce the deficit.

The next month, his top economic adviser, the Wall Street-friendly Larry Summers, also vowed specific benefit cuts to Time magazine. He then stacked his “deficit commission” with long-time advocates of social security cuts.

Many progressives, ebullient over the election of a Democratic president, chose to ignore these preliminary signs, unwilling to believe that their own party’s leader was as devoted as he claimed to attacking the social safety net. But some were more realistic. The popular liberal blogger and economist Duncan “Atrios” Black, who was one of the leaders of the campaign against Bush’s privatization scheme, vowed in response to these early reports:

The left … will create an epic 360-degree shitstorm if Obama and the Dems decide that cutting social security benefits is a good idea.

Fast forward to 2011: it is now beyond dispute that President Obama not only favours, but is the leading force in Washington pushing for, serious benefit cuts to both social security and Medicare.

[…]

The same Democratic president who supported the transfer of $700bn to bail out Wall Street banks, who earlier this year signed an extension of Bush’s massive tax cuts for the wealthy, and who has escalated America’s bankruptcy-inducing posture of Endless War, is now trying to reduce the debt by cutting benefits for America’s most vulnerable – at the exact time that economic insecurity and income inequality are at all-time highs.

Where is the “epic shitstorm” from the left which Black predicted? With a few exceptions – the liberal blog FiredogLake has assembled 50,000 Obama supporters vowing to withhold re-election support if he follows through, and a few other groups have begun organizing as well – it’s nowhere to be found.

Therein lies one of the most enduring attributes of Obama’s legacy: in many crucial areas, he has done more to subvert and weaken the left’s political agenda than a GOP president could have dreamed of achieving. So potent, so overarching, are tribal loyalties in American politics that partisans will support, or at least tolerate, any and all policies their party’s leader endorses – even if those policies are ones they long claimed to loathe.

[…]

He has gone further than his predecessor by waging an unprecedented war on whistleblowers, seizing the power to assassinate U.S. citizens without due process far from any battlefield, massively escalating drone attacks in multiple nations, and asserting the authority to unilaterally prosecute a war (in Libya) even in defiance of a Congressional vote against authorizing the war.

And now he is devoting all of his presidential power to cutting the entitlement programs that have been the defining hallmark of the Democratic party since Franklin Roosevelt’s New Deal. The silence from progressive partisans is deafening – and depressing, though sadly predictable.

[…]

Obama is now on the verge of injecting what until recently was the politically toxic and unattainable dream of Wall Street and the American right – attacks on the nation’s social safety net – into the heart and soul of the Democratic party’s platform. Those progressives who are guided more by party loyalty than actual belief will seamlessly transform from virulent opponents of such cuts into their primary defenders.

And thus will Obama succeed – yet again – in gutting not only core Democratic policies, but also the identity and power of the American Left.”

Forecast for the Obama “Compromise”: “Weak Growth, Little Decline in Unemployment”

22 Wednesday Dec 2010

Posted by in budget, economy, Obama, Obama administration, Taxes, Unemployment

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Dean Baker writes at The Guardian:

“The enthusiasm of the US business press for the compromise tax package worked out by President Obama and Republicans in Congress led to a mini-euphoria of upbeat economic projections for 2011. While the economy will do better with this tax package than if no deal were forthcoming, much of the discussion has exaggerated the potential stimulus to the economy.

First, it is important to remember that although the total package is scored as costing almost $900bn over two years, almost everything in this package simply leaves in place current tax rates and spending. The biggest portion of the tax cut continues the tax rates put in place by President Bush in 2001. The continuation of these tax cuts, including a lower estate tax rate, accounts for almost $400bn of the $900bn.

Adding in the cost of a technical fix to the Alternative Minimum Tax, which is done every year, and the continuation of a series of smaller tax breaks, brings the total to $670bn. This portion of the package buys exactly zero stimulus, since it simply amounts to continuing tax policies already in place. Had these tax breaks not continued, it would have been a drag on growth, but their continuation does not provide any additional momentum to the economy. The $60bn cost of extending unemployment insurance for another year can also be put in this category.

The only net stimulus in this package comes from replacing the $60bn Making Work Pay tax credit in 2011 with a $110bn reduction in the payroll tax and the allowance full expensing of new investment. The latter is projected to cost $55bn a year for the next two years. The full expensing in this deal replaces a provision of the 2009 stimulus package that provided for 50% expensing, which means that the net boost to the economy is half this size.

In sum, the net stimulus for the economy from this package in 2011 will be in the range of $70bn, or about 0.5% of GDP. This is not likely to provide a substantial boost to growth.

While the tax deal will be a net positive to growth for 2011, there are many other factors that are pushing in the opposite direction. First, much of the spending in the original stimulus package will be coming to an end in the first two quarters of 2011. This includes both infrastructure spending for projects that will be nearing completion, and also assistance to state governments that allowed them to better weather difficult fiscal times.

State and local governments continue to face large budget shortfalls. They are finding it increasingly difficult to paper over their budgetary gaps (most state and local governments are required to run balanced budgets), and will have to resort to further cutbacks and tax increases in the year ahead.

House prices are once again falling, with the most recent data showing an 8.5% annual rate of decline. This pace is likely to accelerate in the months ahead. The housing market had been supported through the first half of 2010 by a first-time buyers’ tax credit. This had the effect of pulling many purchases forward from the second half of the year or 2011. As a result, sales have fallen by almost one third. As inventories build up again, many homeowners will be forced to make substantial price cuts to sell their houses.

Declining house prices will be another blow to consumption as homeowners recognise that they have lost even more wealth than their had previously believed. The current pace of decline implies a loss of more than $1tn in wealth over the course of a year. The actual loss of wealth could easily be twice as large if the rate of price decline accelerates.

Another factor depressing consumption is the recent bump in interest rates. While interest rates are still extremely low in both real and nominal terms, the current 10-year Treasury rate is close to a full percentage point above the lows hit in the late summer. This rise in interest rates will bring to an end the wave of mortgage refinancing that had helped to free up tens of billions of dollars for consumption. Relatively few homeowners will see much gain in refinancing at current mortgage rates.

It is also important to recognise just how slow the underlying rate of growth in the economy actually is. Most analysts have highlighted the overall GDP growth figure. But this number has been inflated over the last year by a rapid build-up of inventories. Over the last four quarters, GDP growth averaged 3.2%. However, final demand growth averaged just 1.3% over this period. In the most recent quarter, inventories were accumulating at almost the fastest rate on record. It is unlikely that the rate of inventory accumulation will accelerate further. Rather, the rate is likely to slow – meaning that inventories will be a net drag on growth in coming quarters.

In sum, there is every reason to expect that 2011 will be another year of weak growth, with little, if any, decline in the unemployment rate. The economy will be somewhat stronger as a result of this tax package being put in place, compared to a scenario in which nothing was done, but this is very far from the fabled “second stimulus” that some are acclaiming.”