Tom Power Commentary: “Creating an Economic Crisis for Political Purposes”

All eyes but few brains are focused on Washington, DC, where we are told the two political parties are again engaged in a dangerous game of chicken as we hurdle toward what has been described as a “fiscal cliff” that is now just 30 days away.
There are lots of ways of describing our current fiscal predicament, but it is certainly not some dangerous cliff. More accurate descriptive phrases might be “economic blackmail” or “political theater,” or the latest conservative attack on the legacy of FDR’s New Deal.
First, but not most important, we have to realize that there is no “cliff” over which we are about to tumble into economic destruction. As many observers have said, what we actually face is an economic “slope” that is not very steep. Tax rates might temporarily go up; cuts in spending might temporarily be made. All of that is reversible if we do not get purposely panicked, which, after all, is the political intent of those who created and maintain that imaginary “fiscal cliff.”
More important is the fact that the supposed fiscal crisis in which we find ourselves was purposely created as part of an extended economic blackmail aimed at eliminating most of the social programs created in response to the Great Depression eighty years ago. Those programs, including Social Security, later expanded to include Medicare, have been incredibly popular, for good reason: They, along with workplace pensions and medical insurance, lifted our seniors out of a concentrated pool of poverty into a modest middle class lifestyle.
“Free Marketeers,” of course, object to such public programs, no matter how successfully they have been. But, given their popularity, critics have found it difficult to launch an effective attack on them. The anti-government rightwing thinks it has created one now: namely the simple and powerful assertion that we cannot afford these social programs any longer. Social Security and Medicare, to critics, are not social insurance programs that people pay for across their lifetimes. Instead, they have been relabeled “entitlements,” implying that they are just foolish government giveaways.
But how does one convince Americans that we cannot afford the very same social programs all of the rest of the world’s developed nations have adopted?
A sense of impending crisis had to be created to dramatize our supposed poverty as a nation. The tool that was used was one of the routine votes that are taken every year to raise the total amount of public debt the federal government is allowed to incur. Congress has done this routinely for the entire 220 years we have operated under our Constitution. During war and peace, during depression and prosperity, our nation, like most businesses and households, has borrowed money to make investments, fight wars, and carry citizens through economic downtimes. This was not a corrupting or debilitating action. As our nation grew into the most durable, successful, and powerful economy on the planet, the federal government’s debt grew too.
That federal debt was not creating a crisis of any sort. During the world-wide Great Recession, even as our economy tittered on the edge of financial collapse because of reckless risk-taking on the part of Wall Street gamblers, investors, multi-national corporations, and other governments around the world chose the American dollar and U.S. Treasury bonds as the safest place to store their wealth.
But anti-government fanatics in our Congress decided to create a crisis by threatening not to allow the federal debt ceiling to be raised, effectively threatening to block the refinancing of existing federal debt or the issuing of new federal debt to fund the ongoing operations of the federal government, including its activities to support our citizens and businesses through the recession.
It was that political choice by anti-government ideologues that created a financial crisis where there was none. The government was having no trouble borrowing money. Interest rates were incredibly low. The rest of the world saw our federal debt as the most reliable investment available. But under our Constitution, Congress has to approve all federal borrowing. This created the perfect opportunity for economic blackmail: If you do not give us what we want, we will force the federal government into financial default even though there is no financial reason for such a default. The strategy was simple politically contrived economic blackmail.
The current supposed “fiscal cliff” came out of that political extortion. In return for raising the federal debt ceiling, the anti-government fringe demanded drastic cuts in the federal deficit. Those were written into the law that will take effect January 2nd. That is, the so-called fiscal cliff is a political artifact based on that earlier politically contrived stalemate over raising the federal debt ceiling.
Rather than being greeted with outraged at their irresponsible game of economic chicken that effectively holds the entire American economy hostage to the demands of a right-wing minority, there is a reasonable chance that the hostage-takers may succeed. All of the talk of a “Grand Bargain” to avoid going over the imaginary cliff, actually amounts to giving the anti-government ideologues what they most want: agreement that we can no longer afford Social Security and Medicare. Next up on the chopping block will be spending on education, unemployment insurance, federal environmental protection, regulation of Wall Street, union rights, etc.
This whole framing of our actual fiscal and economic situation is a fraud. The very policies that have undermined the middle class, brought the Great Recession down on us, and ballooned the federal deficit are now offered to us, without even a smirk or a smile, as the cure for what fiscally and economically ails us.
Rather than succumbing to the “Stockholm Syndrome” where hostages begin to identify with the hostage-takers, it is time for us to face our economic blackmailers and call their bluff.
There is no “fiscal cliff” and there is no need for any “grand bargain”. It is time, again, to politically just say “no.”

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