by Dan Kervick, New Economic Perspectives
I thought I would take a break from the latest outburst of debt ceiling mania to call attention once again to the bipartisan plan of budget austerity and recession-tempting economic devastation that will be implemented in March in one form or another, and from which the debt ceiling debate is designed to distract us.
Jay Carney’s press conference last week leaves no doubt that the situation is substantially as I described it in my previous post. The White House commitment not to negotiate on the debt ceiling is mainly fluff. Their public position is that the Congress must lift the debt ceiling with a “clean” vote first, before a deal can be struck on the massive spending cuts that will take place automatically in March. Carney implores listeners to believe that the debt ceiling and sequester are “separate” issues, and insists that “this not a negotiation the White House is going to have.” But of course the entire press conference is itself a public gambit in an ongoing negotiation that obviously includes back-channel talks.
As before, the difference between Republicans in Congress and the White House is that the Republicans prefer a cuts-only form of austerity, while the White House prefers an alternative Shared Painer austerity party mix made up of both cuts and tax increases. Both plans, of course, will cause a significant fiscal drag on a stagnant economy that is in no condition to endure such a drag. But the European austerity disease, like an influenza virus slowly but inevitably spreading through the United States after making its way here from abroad, is now so deeply established in the US among the political class and the punditry that any hope of ordinary Americans escaping infection is just about lost.
Both Congress and the White House long ago let Americans know that they have no particularly pressing concerns about the millions of Americans whose forlorn abandonment constitutes the human reality behind the massive 7.8% unemployment rate – a figure that never seems to budge. Lowly working people without jobs don’t count for much in Washington these days. But it is both interesting and mildly surprising to see just how willing both parties in Washington are not just to prolong the new normal of permanent mass joblessness, but also to court a second recession and bring more serious political repercussions down on their heads.
Anyway, Republicans will try to spend the next few months convincing Democrats that they hate taxes so much that they are willing to swallow the 10% in defense cuts that are part of the sequestration. The White House will gamble that the Republicans’ defense industry constituents will come down so hard on GOP members of Congress that they will eventually accept more tax increases. They will split the difference no doubt, and also come up with some compromise on the debt ceiling. Whatever the precise outcome, both parties are as one on the plan to begin sucking large quantities of scarce dollars out of the wobbling economy beginning sometime in March. So get ready for the St. Patrick’s Day massacre.