Austerity it is!

Another aspect of the Debt Ceiling Surrender by the Democrats that I haven't really written about is this: in the short term, while the economy is still in the crapper, we're moving to an austerity budget.  Deficits are going down, though it's not clear by how much yet- it's the opposite of stimulus.

So what I expect to see in the next two years is continued sluggish growth and high unemployment if we're lucky, and a new recession if we're not.

And here's the best part: conservatives can legitimately keep blaming Obama for it!  He's going to sign an austerity budget, but of course not one that's austere enough for their tastes.  Then while I'm arguing that we should have done more stimulus, they'll argue that Democrats controlled the Presidency and the Senate and passed a bill that they said would be good for the country, and it's not.  They'll campaign in 2012 on the talking point that not enough austerity is continuing to cause slow job growth, and Americans are going to listen- after all, this stuff is complicated and people don't have the patience to follow macroeconomic policy, but they'll react to this message: Obama bargained for this, he said we needed to "tighten our belts", and it didn't work.  Time for someone else to try.  President Romney or Bachman is going to urge us to tighten our belts more- none of that sissy tightening BHO proposed!

There could be one other hope in 2012: get progressives jazzed up and excited and turning out in high numbers, as GWB did with evangelicals during his campaigns.  But with this deal and with the President's rhetoric leading up to it, Obama loses the Left.

I can't vote for this guy again.  He's the worst negotiator in the history of politics. 

Must Resist Urge to Beat My Head With a Stick....

Debt Ceiling compromise news looks very depressing.  Reports say negotiators are getting close to a deal, which is better than default I guess, but a lot worse than a clean Debt Ceiling increase.  The terms as reported by Jon Cohn:

- A debt ceiling increase of up to $2.1 to $2.4 trillion (depending on the size of the spending cuts agreed to in the final deal).


- They have now agreed to spending cuts of roughly $1.2 trillion over 10 years.

- The formation of a special Congressional committee to recommend further deficit reduction of up to $1.6 trillion (whatever it takes to add up to the total of the debt ceiling increase). This deficit reduction could take the form of spending cuts, tax increases or both.

- The special committee must make recommendations by late November (before Congress' Thanksgiving recess).

- If Congress does not approve those cuts by December 23, automatic across-the-board cuts go into effect, including cuts to Defense and Medicare. This "trigger" is designed to force action on the deficit reduction committee's recommendations by making the alternative painful to both Democrats and Republicans.

- A vote, in both the House and Senate, on a balanced budget amendment.

Oy.  So the deal is tons of immediate cuts, zero tax increases, and a commitment to more cuts in the future.  There's a triggering mechanism for more cuts if the parties can't agree on more deficit reduction, the idea being that both parties don't want these automatic across-the-board cuts and will have incentive to avoid them.  But I don't see much incentive for Republicans to avoid them- they're fine with across the board cuts and no tax increases.  Liberals are "disappointed".  How about furious???

Any "automatic" trigger has to include tax increases somewhere, or the Republicans have no incentive to do a deal.

This may be premature- maybe Democrats are negotiating harder than reports say, and maybe there'll be something more reasonable at the end of the day.  But if this passes as reported now it really does mark the end of the Democratic party as the voice of the poor and middle class.  There's nowhere else to go, of course (a liberal friend of mine told me the other night that he'd vote for Romney over Obama at this point- I'm not going that far but I'd certainly think about a protest vote for a liberal third party candidate).

In 2000, while he was throwing the election to George W. Bush, Ralph Nader famously said that "there's not a dime's worth of difference" between Al Gore and GWB, so the vote should be for him.  That turned out to be disastrous.  But at least Al Gore was rhetorically making liberal points.  At least he had a track record of supporting left-of-center policies.  Barack Obama had such a track record in the Senate, and the Affordable Care Act was a great accomplishment.  This year, however, he's left the reservation.  If he and Harry Reid sign off on this, there really isn't a dime's worth of difference between them and arch-conservative Republicans.

Losing by Winning

The more I read about the Debt Ceiling crisis, the more it becomes clear that Democrats, expecially the President, have decided that they are finally in sight of winning a political battle.  They're showing the country how crazy and unreasonable the Republicans are: "Look! We're offering them practically everything they say they want, and they still won't take it!  See, they're impossible!". 

So Obama starts with an offer of a deficit reduction package that is tilted 85-15 toward spending cuts, even though the deficit was caused mostly by the Bush tax cuts.  This despite the fact that polls show most Americans in favor of raising taxes on the wealthy to close the deficit.

And I think it's working so far- the Republicans look absolutely crazy to refuse subsequent offers that keep all the Bush tax cuts and just attack a few tax loopholes in exchange for cuts to Medicare and Social Security.  If Democrats can keep pushing hard on this, they might make gains in the 2012 elections.

But look what they've lost! They've ceded all the policy ground to the GOP.  Democrats, including Harry Reid and Nancy Pelosi, are on record supporting plans to solve the deficit problem almost exclusively through spending cuts, and it's rumored that Obama floated an offer to go 100-0 with spending cuts until Senate Democrats shot him down.  To suggest going 50-50, as Bernie Sanders has done, is seen as a wildly radical idea, even though tax cuts caused much of this problem.

So we win the battle but lose the war.  Discretionary spending is going down to levels not seen since the 1970s.  Social Security benefits are going down one way or another, without even a thought to raise withholding from paychecks or start deducting more from high-income earners.  Democrats are suggesting an increase in the age of Medicare eligibility.  If Democrats won't fight for basic stuff, then what's the point?

And in addition to all that, these policies aren't going to work in bringing the economy back according to most economists, and that's what really matters for re-election.  Democrats might end up losing the politics as well as the policy.  But for this liberal it's hard to even care about the politics- may as well lose now, if winning looks like this.

Debt Ceiling and Some Rambling Thoughts on Hilary & BHO

Great piece here by Ross Douthat in the NYT.  He's a conservative columnist who makes the interesting point that Republicans didn't plan their endgame in the Debt Ceiling talks.  They've been so completely uncompromising that Obama can't possibly acede to their demands (can he?), but in pleasing the Tea Partiers they may lose everyone else in the end.

When I think about the deal that Obama was offering, as a liberal I'm glad they didn't take it.  I think BHO gave away the store.  Maybe he knew the GOP wouldn't take it, but I don't think so- as I've said before, I think Obama believes his own rhetoric about bringing people together, even in the face of all evidence to the contrary. 

I hereby officially declare that I think Hilary would have been a better president.  I was not a fan of hers in 2008 and preferred BHO (I think I voted for Edwards in the primary, but I honestly can't remember).  One of my main issues with the Clintons is their obsession with triangulation and finding the center of the debate, but I'm shocked to find Obama seems more obsessed with finding the right-of-center part of the debate and staking that out in his quest for a deal.  He just doesn't seem willing to stand up for anything- he offered to cut Social Security and Medicare in the current negotiations, in exchange for closing tax loopholes that should be agreed to by anyone.  Luckily the Republicans can't take yes for an answer.

The Republican Party Split

I've been reading lately about the GOP split looming between the Wall Street low taxes crowd and the Tea Party nuts who want the US to default on its debt.  As the Debt Ceiling default gets closer, it seems that Republican elites are starting to worry that they've joined forces with people who are just too crazy to ally with.  This portends a possible breakup of the coalition that has been very successful- old-time economic conservatives allied with Christian evangelicals, who seem to be the people doubling as Tea Party crazies now.

The coalition has worked because the populists in the heartland and South cared about different stuff from the moneyed coastal types.  The elites could live with abortion and gay rights restrictions as long as they got their low taxes.  They even converted lots of evangelicals, who really shouldn't be low-tax types (I don't think there's anything in Jesus' teaching about lower taxes creating economic growth, after all), but are now into it hook, line, and sinker.

So while I enjoy my wistful hopes that this will destroy the Republican party (I know, I know- not very likely but a guy can dream), I'm reminded of some conventional wisdom that has turned out to be wrong.  We warned in 2010 that the Tea Party was nothing more than the same old Republican party recycled, that they would just be "don't tax but still spend" politicians once they got in there, or that they would be co-opted by the power of Washington and would continue to run up deficits just like Republicans have been doing for 30 years.

But it seems to have turned out a little differently.  To their credit, the Tea Party House members are sticking to their guns and demanding lots of cuts to government.  They're also sticking to their guns on taxes of course.  They've never said they would compromise in congress, so they're sticking with their principles there too in refusing to deal with the fact that the House is only one half of one branch of government and they have to deal with other powers in order to govern.  In short, they're everything they said they'd be, much to my surprise.

The problem is that the implications of what they said they'd be aren't any better than if they were just plain old-fashioned Republicans.  US default would be a big deal, and seems to be a possibility.  Responsible Republican elites had better sit up and realize what they're reaping.

The MSM's Lame "Even-Handedness"

Not too bad an article here in Time by Fareed Zakaria.  It quite rightly notes that many important differences between Greece and the US, highlighting how silly it is to say that we're in the same boat when we're not.

But then Zakaria writes:

The great truth facing the U.S. is not that we lack solutions to our problems but that our political system seems unable to do anything. With a deficit as large as the one we face, it should be clear that we cannot sort things out through either spending cuts alone or tax increases alone. (Spending on Social Security, Medicare and Medicaid is set to rise from 10% of GDP now to 15% by 2030. That is simply unsustainable.) And yet the two parties seem stuck in adolescent fantasies, one ruling out tax increases, the other ruling out any serious cuts in entitlement spending. Sure, in a country of 312 million, people will disagree. But on the deficit, the disagreement is not a theological one. Debates over money are always amenable to compromise. You can split the difference!

This is the Mainstream Media bending over backwards to be "even-handed" and declare a pox on both their houses. But look at the bolded sentence- it's wrong. Only one party is ruling out anything. Democrats are not ruling out cuts to entitlement spending or walking out on talks whenever it comes up. Obama is offering Social Security cuts right now! Only one party is refusing to compromise- the Republicans.

Now the Tea Party types would say "that's great- we shouldn't compromise at all", and that's certainly the right of those politicians.  There are some things that one should not compromise on.  But let's please call it like it is- one side wants to make a deal, and the other side wants a capitulation.

Stimulus Fallacies

Paul Krugman has it right here.

Anyway, I don’t believe that it’s all political calculation. Watching Mr. Obama and listening to his recent statements, it’s hard not to get the impression that he is now turning for advice to people who really believe that the deficit, not unemployment, is the top issue facing America right now, and who also believe that the great bulk of deficit reduction should come from spending cuts. It’s worth noting that even Republicans weren’t suggesting cuts to Social Security; this is something Mr. Obama and those he listens to apparently want for its own sake.


Which raises the big question: If a debt deal does emerge, and it overwhelmingly reflects conservative priorities and ideology, should Democrats in Congress vote for it?

Mr. Obama’s people will no doubt argue that their fellow party members should trust him, that whatever deal emerges was the best he could get. But it’s hard to see why a president who has gone out of his way to echo Republican rhetoric and endorse false conservative views deserves that kind of trust.

Now it's clear that more stimulus spending is a hopeless cause.  But it didn't have to be that way- that's a product of choices, in both the policy and politics realms, that didn't have to be made. I blame Obama for not shooting high enough in the interest of being "moderate", and then coming out and telling everyone that the amount of stimulus he did was "just right". So now he's lost his chance, and the subsequent pathetic recovery is going to be blamed on him. Even if he got all the stimulus he could get, if he were saying "I want more of this, but conservatives won't let me have what I want- this will have to do", then it would be easier to argue a liberal point of view now.


Of course the unfortunate (for me) truth is that Obama just isn't a liberal. He's obsessed with being a centrist, as defined as the midpoint between liberals and conservatives. When conservatives went over the cliff, Obama decided to go halfway down the chasm to stay in the middle. And it hasn't helped him politically at all- conservatives still think he's a communist, it doesn't matter how close to their positions he goes.

So I'm madder at Republicans, who I think care more about their electoral victories than about the country's economic health, but I'm pissed at Obama and the Dems too, for not fighting at all for liberal values. If the economy tanks and Republicans sweep in 2012 it will be the Democrats' fault for having no guts.  Liberals can't seem to muster the courage of their convictions.

So as the economy continues to stagger, Republican chances in 2012 keep looking rosier.  And if they win, their Tea Party-dominated crackpot policies will make things even worse and Democrats will be back in 2016. But why should we have to put up with that?

Competition in Health Care

A friend sent me this short blog post from Mark Perry, which points to a company that performs blood tests on the cheap, with a transparent pricing plan, and is succeeding well thanks to its successful attempt to use a market-based approach in the industry.  The quite reasonable argument is that more market-based solutions can bring down health care costs.

But then Perry ends with this:

At the same time that Obamacare is planning a complete government takeover of health care and medicine in America that will stifle competition and raise prices, the market continues to offer many new, innovative, alternative solutions to health care that are competitive, affordable and convenient.

It's unfortunate that the writer would follow up a perfectly legitimate point about a way to decrease health care costs with this kind of polemic and fact-free sentence. ObamaCare is not "a complete government takeover of health care and medicine in America". It's the creation of health care exchanges, mandates to get health insurance, subsidies to help the uninsured afford it, taxation to pay for it, and a panel to reduce Medicare expenditures (a program that was already a "government takeover") through refusing to pay for treatments that aren't effective. A complete government takeover would be the UK system. A partial government takeover would be the Canadian system. This is neither of those.


And I have to point out that the evidence in terms of costs is pretty striking- the US currently has the system with the lowest amount of government involvement in the Western world, and the US also is #1 in health care costs in the Western world. The next-most privately-dominated system is Switzerland's, and it is #2 in health care costs per capita. All the evidence in the health care field points to the sad fact that the free market does not produce cost-effective results due to the unusual nature of medicine.  In fact, administrative overhead inherent in a competitive system is a primary driver of higher costs.

The market has completely failed to produce cost-effective outcomes over the past 50 years in the US. I don't see how that's even debatable. Where our system produces the most satisfaction is in Medicare- the Single Payer part of the system, and also one in which government-run spending is more cost-effective than the privately run alternatives.
I think that conservatives could have had more competition (and could still have it), as well as tort reform, if they would just compromise with Democrats and agree to universal coverage. Democrats were dying for some Republican cover on this bill. We can have the best of both worlds if Republicans would take yes for an anwer.

Government Non-Defense Discretionary Spending Has Not Grown

....but that's what everyone in Washington wants to cut.  I can't say it any better than this does:

And Democrats are fighting to keep the ratio of spending cuts to tax increases at 5:1 in favor of spending cuts, while they control the Senate and the Presidency.  Sickening.  I'm reminded of Ralph Nader claiming in 2000 that there's just no difference between Republicans and Democrats.  That's not exactly true, but I have to ask again why we need a "center-left" party that won't fight for anything the center-left believes in.

Another Gaza Flotilla

Well the international anti-Israel Left is preparing another flotilla to go to Gaza.  These stories don't make me proud to be a member of the Left- the inconsistency in this area is endemic and impervious to reason.  In Gaza you have a region ruled by an Islamic Theocracy that is officially and unofficially dedicated to the destruction of its more powerful neighbor, Israel.  The government of Gaza is holding an Israeli soldier, Gilad Shalit, prisoner although he has been accused of no wrongdoing.  Homemade rockets are regularly launched on Israeli towns within range, targeting civilians.  Hamas is not willing to negotiate with Israel and not willing to make peace, since it is dedicated to Israel's destruction and the murder of all of its Jews.  Israel, in an attempt to keep its people safe, has a blockade set up trying to stop weapons from coming in.  The blockade has caused great hardship for people in Gaza, as many goods can't get through. 

Now it seems to me that the way to stop a blockade by a more powerful neighbor is to agree to stop trying to kill its people.  Since that's not an option for Hamas, the blockade continues.  It's unclear to me what the Leftist activists organizing the flotilla really want- peace would be nice of course, but their side in this war doesn't want peace.  The old Left has a knee-jerk response to suffering which is to take the side of the oppressed.  I tend to look at things that way too- I'm not very sympathetic to powerful forces (like big businesses fighting unions, for example) complaining about the unfair tactics of their weaker adversaries.  But we have to look deeper at the facts of the matter- you have a Palestinian polity that is openly dedicated to Israel's destruction and yet expects Israel to let them import materials that can be used for weapons.  It's insane.

So This article from The Nation really does it to me when it references the "...May 2010 flotilla, the same flotilla that included the Turkish ship Mavi Marmara, which was attacked by Israeli commandos, who killed nine passengers."  I guess anti-Israel people don't want to dwell on the details of the 2010 incident.  To refresh memories, a bunch of ships were trying to run the Israeli blockade and all were boarded by Israeli commandos.  All but one were turned away without incident.  On the Mavi Marmara, however, "Israel said its marines were attacked by activists wielding metal bars, clubs and knives", and defended themselves.  The activists of course dispute this story, and the UN panel investigating it has yet to put out its findings. But the Israeli version of events is certainly plausible.  Then when you search YouTube a bit you can find actual footage of the Israeli version of events, confirming it beyond much doubt. 

Now if we Jews have learned nothing else from thousands of years of pogroms, discrimination, and extermination campaigns against us, it's that if you don't take care of yourself nobody else is going to do it for you. Jews are finished walking docilely to the gas chambers and letting history judge them as the Good Guys. Many in the international community really like the image of the Ghandian martyr facing his own death with dignity, in opposition to the bestial thugs doing the killing. But the martyr still ends up dead, and the posthumous praise is no comfort. 


It doesn't seem as if there's any way to convince the Left to change its view, so maybe Israel is doomed to become an international pariah.  And it would be preferable if Israel would stop building settlements in areas that will eventually need to come under Palestinian control.  But in the end, the country is going to defend itself.
Am Yisrael Chai.

Obama and Israel

My Conservative friends often challenge me about President Obama's policy in the Middle East and alleged hatred of Israel.  As a zionist myself, it's a tough subject; I hear that the overwhelming feeling in Israel is that Obama is bad for them, and that country yearns for a return of a strong "pro-Israel" president like George W. Bush.

It seems to me that Obama's Middle East policy hasn't done much to move the ball forward toward peace.  He seems to suffer from some naivete about the region, which is understandable given that it's never been a major focus of his throughout his career.  So his early focus on Israeli settlements in the West Bank (which I also oppose and believe are a barrier to peace) has not had the desired effect- Netanyahu and the Israeli Right has just dug in its heels more, and Palestinians have taken to demanding withdrawals from Settlements in order to come to the bargaining table.

On the other hand, I don't think American neo-con policies have really helped Israel either.  For all GWB's (clearly sincere) love of Israel, he was also ineffective in moving things in a positive direction.  In fact, the Iraq misadventure may have taken things in the opposite direction, and it appears Iran made lots of progress in developing their nuclear program under Bush's watch.  Maybe the real lesson is that progress in the Middle East is just really hard to make.  The greatest progress toward Israel's security was made during the Carter administration, when a peace treaty with Egypt was signed.  Now Carter isn't very friendly toward Israel, but his approach seemed to work pretty well (it didn't hurt that an Arab leader, Anwar Sadat, made a monumental and perhaps fatal decision to make peace during that time).

Now I'm not a single-issue voter, but if I thought American policies were going to destroy Israel, I guess I'd become one.

Yesterday I was talking with a wise relative who pointed out that just because Netanyahu is disgusted with the US president, that doesn't mean there's a dispute with Israel per se.  The dispute is more between Obama and the Israeli Right, which happens to be ascendent right now there.  So today I looked around for what the Israeli Left is saying about BHO- it's not quite so negative.

(JTA) -- Israeli opposition leader Tzipi Livni praised President Obama’s Middle East policy speech and warned that Prime Minister Benjamin Netanyahu was opening a rift with the United States by criticizing it.

"An American president that supports a two-state solution represents the Israeli interest and is not anti-Israeli," Livni, the leader of Israel’s Kadima Party, said on Friday. "President Obama's call to start negotiations represents Israel's interests."

She said that “a prime minister that harms the relationship with the U.S. over something unsubstantial is harming Israel's security and deterrence.” According to The Jerusalem Post, Livni said that such a prime minister should resign.

"I am saying this loud and clear," she said.

Her stance was criticized by Otniel Schneller, a Knesset member from her Kadima Party.

“Obama’s speech has placed before Israeli society and its representatives the challenge of unity and national agreement,” Schneller said. “The political disagreements and aspiration of the opposition parties should not overpower their responsibility for the future of the state.”

One item, granted, but I'm glad to see that some in Israel see things the way I do.

Stimulus vs..... what exactly?

I think it's important to remember some things about the liberal and conservative proposed responses to our current economic doldrums. 

Liberals argue for Keynesian stimulus, i.e. government deficits through higher spending on infrastructure a la FDR and the New Deal.  The theory is that this will put people back to work by stimulating demand, since lack of demand is the key problem in the current recession. 

Conservatives argue that the above is wrong, that government spending can never replace private sector spending in efficiency, and therefore running up these huge deficits is a terrible burden on future generations. (Of course, deficits were seen by Republicans as no problem at all during the good times of the mid-'00s when conservatives were running things, but we'll leave that for another day).  Instead conservatives are arguing for lower taxes, balanced budgets, and fewer regulations on business.

The Liberal argument is that deficits are needed now, due to the unusual situation we're in, but in the long term liberals agree with conservatives that government should strive toward a balanced budget when things return to normal.  In other words, deficit spending is a temporary measure, not a philosophy for all times.  Conservatives, on the other hand, are proposing the same policies during the recession that they propose during booms- lower taxes and less regulation of business.  There is literally not a smidgeon of daylight between their proposed policies now and their proposed policies in 2004 when things seemed to be going well economically.

So Conservative philosophy seems to be that governments shouldn't do anything different during a recession and slow recovery than it should do during a boom- government is seen as getting in the way in both cases.  That means that in our recent crisis, government would have been best to leave everything alone and let the market work it out.  Like Herbert Hoover did in 1929.

Now maybe it's true that Keynesian stimulus, in spite of all the historical evidence in its favor, doesn't work. Maybe conservatives have a point in saying it will make things worse.  But what do conservatives have to propose that we do?  Every plan their politicians put out seems to rely on government doing less- but it's pretty clear that government doing less will doom us to many more years of glacially paced recovery, or a double dip recession.  Conservative plans basically concede that we're stuck with that, the markets have to fix it, and the People will just have to live with 9% unemployment for years until the Invisible Hand works it out.

Keep in mind that "getting out of the way" is a passive plan, and will yield very slow results.  There's just no way to picture the economy moving into overdrive quickly because taxes go down again (making our deficit worse, by the way).

It's amazing that an economic agenda that was completely ascendent from 2001 to 2007 and produced the worst period of growth during any expansion, followed by the worst recession in 70 years, still has a huge number of adherents after such complete factual discreditation.

Oh, one more thing: Barack Obama is now essentially endorsing the conservative plan of austerity.  Here's Krugman yesterday.  Yes, he favored stimulus in the worst days of the crisis, but now he's buying in to the need to cut back government spending in the face of 9% unemployment.  FDR did the same thing in 1936- pulled back on the stimulus too soon, leading to another recession.  I hope it doesn't take WW III to get us out of this mess.