Thursday, January 31, 2013

Is the Deficit Narrative Finally Bowing to Reality? Maybe .. a Tiny Bit

[Note: After this post was sent out in the morning Dorf on Law email, I lightly edited the online version, to correct some typos, grammatical errors, and unclear phrasing that had survived the writing process.]

-- Posted by Neil H. Buchanan

My column today on Verdict discusses a welcome development in the discussion of the government's fiscal situation: the sudden realization that the "debt problem" is not such a problem after all.   Specifically, forecasts now show that the debt-to-GDP ratio is going to be falling for several years, and will only return to its current level about a decade from now.  That, at the very least, provides breathing room to determine whether the slowing of health care cost inflation is for real, and more generally to try to make that happen.

I am not saying that this reality is now widely understood, but it has at least reached the point where political insiders like Tim Geithner admit it out loud.  The Center on Budget and Policy Priorities -- surely a left-leaning organization, but nevertheless borderline deficit scolds -- promoted the idea in a recent release.  Martin Wolf, writing in the Financial Times, began his column last week like this: "The US confronts huge challenges, at home and abroad. Its fiscal position is not one of them."

If reality starts to take hold in the public debate, the argument that we need to cut everything (except military spending) because of the "entitlement crisis" (a crisis that was never a sure thing, and that was definitely never about the entitlement program known as Social Security) simply loses force.  This obviously threatens the importance of the people who are deeply committed to using deficit scare tactics to bully people into believing that we need to dismantle (but not rename) Medicare, and generally to force cuts in spending on everything that actually helps people.  Suddenly finding themselves on the defensive, the scolds are furious.  I am on the email list of one of the most prominent deficit scold organizations, and they sent out a blast email yesterday assuring everyone that "the debt problem is not solved."  They cannot allow it to be deemed a non-issue, because it is simply too useful to them.

The clown prince of deficit scolds, Paul Ryan, is clearly rattled.  With his inexplicable ability to masquerade as an intelligent budget analyst still unchallenged by reality -- even after having harmed the Republican 2012 ticket, his "stature [has] increased within the party," according to a news article in The New York Times, as he "will increasingly be expected to set the tone for Republicans, particularly on fiscal issues" -- Ryan is nevertheless in full panic mode, trying to convince anyone who will listen that the debt situation is horrible, horrible, horrible.  He is so desperate that he actually said that if Hillary Clinton had become President in 2008, rather than Obama, “we would have fixed this fiscal mess by now.”

Right.  Because the Republicans were extremely anxious to work with the Clintons again.  Given that Obama out-Clintoned Bill Clinton, especially when it came to fiscal policy capitulation, this is one of those moments where one just has to laugh at the notion of Paul Ryan posing as a non-extremist.  He complains that President Obama is "not looking to moderate, that he’s not looking to move to the middle."  Apparently, the reason Romney/Ryan lost was that the public failed to appreciate the Republicans' moderation and bipartisanship.  Again, right.

The best recent quote from Ryan, however, has to be this: "I don’t think that the president thinks that we actually have a fiscal crisis.  He’s been reportedly saying to our leaders that we don’t have a spending problem, we have a health care problem. That just leads me to conclude that he actually thinks we just need more government-run health care."  Only an ideologue who still hears his echo chamber complaining about Obamacare and death panels would try to throw that curveball.  Even Ryan's own trusty charts (at least the ones that he took from credible sources, like the Congressional Budget Office) have shown for years that any scary long-term scenario is driven entirely by health care spending.  Obama is (finally, mostly) right: We do not have a spending problem.  We might have a health care problem.

These cracks in the monolithic view calling for austerity are, of course, welcome.  Even so, it is still astonishing to see the power of the conservative, anti-government narrative.  It continues to be the case that supposedly unbiased news articles take as established fact that spending is out of control, and that deficits are threatening to destroy the economy.   Some of it seems trivial, even as it reinforces the false narrative.  For example, in a news article last week about House Majority Leader Eric Cantor (maybe the only House Republican who is worse in every way than Paul Ryan), a Times reporter described the budget situation earlier this month as follows: "The Treasury Department was using 'extraordinary measures' to keep paying the nation’s debts, even if, technically, the government had blown past its borrowing limit."

"Blown past its borrowing limit"?  Actually, borrowing was proceeding at the pace that Congress had set, which was slowing because of the tax increases in the Biden/McConnell tax bill.  No matter.  Like Professor Dorf's interviewer on NPR earlier this month, who used those exact words, the reporter apparently believes that it is uncontroversial to describe any increase in debt above an arbitrarily low level as being like the Dukes of Hazzard running whiskey past the revenooers.

Last Friday, the Times inadvertently showed how the narrative is so insidious, in a story about the confirmation hearings for John Kerry to be Secretary of State.  In one of the teasers at the bottom of page A1 -- prime space to get readers interested in stories that cannot fit on the front page -- the headline read: "Fiscal Focus for Kerry."  The article itself carried the headline: "Kerry Links Economics to Foreign Policy."

My first thought upon reading those headlines -- even though the headlines themselves did not directly say so -- was that Kerry had reverted to his "centrist Democrat" mode, joining in the mindless deficit bashing that surrounds him in Washington.  In fact, however, the article (like the hearing itself) only briefly mentioned budget policy.  Kerry did say that Congress's "first priority of business" should be to put America's "fiscal house in order."  Notably, however, he preceded those words by referring to "these days of fiscal crisis, and [speaking] as a recovering member of the Super-Committee."  He followed that up with this:
"But to protect our nation and make good on all our promises, as well as to live up to our ideals and meet the crisis of this moment, it is urgent that we show people we can get our business done in an effective and timely way. It is difficult enough to solve some of the problems we face, but it becomes near impossible if we ourselves replace our credibility and leverage with gridlock and dysfunction."
So, "getting our fiscal house in order" was not about too much spending, or high deficits.  It was a comment from a man who had spent fruitless hours on the insane Super-Committee that had been created by the 2011 debt ceiling crisis that the Republicans had manufactured.  His argument was that it harms America to have the budget process permanently gridlocked by the Republicans' constant hostage-taking.

Which means that, yes, Kerry did "link economics to foreign policy," and he did call on Congress to fix its budget mess.  The narrative is so strong, however, that any discussion of "budget mess" is almost certain to be read as "too much spending."  We could -- and have -- put America's fiscal house in order, as a matter of spending and debt paths.  But this is another way in which the Republicans' hijacking of the narrative allows them to drive the discussion.  When they break the budget process, we have to discuss fixing the budget process, which leads people to think that there is something wrong with the content of the budgets, not the process itself.

The narrative is deeply ingrained, and if it ever changes, it will take a very long time to do so.  Even so, recent developments offer some minimal basis for hope.  Maybe we will be some day reach the point where the anti-government subtext is not lurking in every headline about deficits and budgets, no matter how neutral those statements might be.  Maybe.