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Thu Dec 20, 2012, 02:22 PM

Let's Celebrate the Failure of the July 2011 Great Betrayal - Bill Black/HuffPo

Let's Celebrate the Failure of the July 2011 Great Betrayal
Bill Black - HuffPo
Posted: 12/20/2012 10:57 am

<snip>

In July 2011, President Obama and Speaker Boehner reached an agreement in principle on a deal crafted to inflict $4 trillion in austerity by raising taxes modestly, slashing social spending, and beginning to unravel the safety net. The deal would have been a disaster for America. Unemployment was 9.1 percent. The deal would have thrown us back into a recession and caused unemployment to surge. Recessions and increased unemployment cause tax revenues to fall and increase demand for social services (e.g., for unemployment compensation) - they produce large deficits. Austerity kills jobs and frequently increases deficits. The Eurozone is the latest demonstration of this fact.

We should, therefore, all be celebrating the failure of the July 2011 austerity deal. We almost committed an act of economic self-mutilation of tragic proportions. Instead, because of the failure to adopt austerity in July 2011 we followed an economic policy based on modest stimulus. As predicted by most economists (including my UMKC colleagues) that policy produced modest growth and modest reductions in unemployment. The recovery produced the sharpest reduction in budgetary deficits in modern U.S. history. The Eurozone's leaders' austerity policies forced many nations back into recession. Austerity was most draconian in the periphery where it produced Great Depression levels of unemployment, particularly for young adults. The dominant media meme about the "fiscal cliff" is that it is an insane austerity program that would force the U.S. back into a gratuitous recession and cause large increases in unemployment. Logically, that should cause the media to recognize that the far more severe austerity blows that Obama and Boehner sought to inflict on the U.S. in July 2011 at a time when our economic recovery was much weaker than it is today would have been disastrous and that we should be overjoyed that the deal fell apart.

The media, however, constantly warns us of the need not to repeat the "failure" to reach the July 2011 deal. They show no sign of recognizing the logical incoherence in simultaneously warning that the fiscal cliff's austerity must be avoided lest it force the nation back into recession and that it is urgent that we adopt austerity. Media reports virtually never explain that if the July 2011 austerity deal had been finalized the results would have been catastrophic.

The media is similarly incoherent when discussing (more precisely, ignoring) another key aspect of the fiscal cliff - its origins. The "fiscal cliff" is not really a cliff, but it is definitely an economically illiterate and self-destructive austerity program. That is the first key analytical aspect of the origins of the fiscal cliff - it was known to be an economically illiterate and self-destructive austerity program when it was adopted. The obvious question, which the general media studiously ignores, is why the parties agreed to the "fiscal cliff" deal when it was obvious that it would cause catastrophic damage to our economy and people. The "fiscal cliff" (austerity) deal is the deal that did not fail - it was the bipartisan deal that became law in August 2011.

It is revealing that no one in the media even attempts anymore to defend the bipartisan fiscal cliff (austerity) deal. The media normally have a romantic crush on anything bipartisan, no matter how much it harms the nation. The fiscal cliff austerity deal is so obviously stupid that even the media almost universally criticize it. This should prompt three obvious questions.

1. What idiot designed the fiscal cliff (austerity) deal?

2. Why did both parties support it?

3. Why did the media not denounce the deal before it was adopted?

The answers are:...


<snip>

More: http://www.huffingtonpost.com/william-k-black/obama-fiscal-cliff-austerity_b_2338440.html




13 replies, 717 views

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Arrow 13 replies Author Time Post
Reply Let's Celebrate the Failure of the July 2011 Great Betrayal - Bill Black/HuffPo (Original post)
WillyT Dec 2012 OP
1StrongBlackMan Dec 2012 #1
WillyT Dec 2012 #2
1StrongBlackMan Dec 2012 #3
WillyT Dec 2012 #4
1StrongBlackMan Dec 2012 #5
Jim Lane Dec 2012 #7
WillyT Dec 2012 #8
1StrongBlackMan Dec 2012 #9
Jim Lane Dec 2012 #10
sabrina 1 Dec 2012 #11
1StrongBlackMan Dec 2012 #12
WillyT Dec 2012 #6
smokey nj Dec 2012 #13

Response to WillyT (Original post)

Thu Dec 20, 2012, 02:37 PM

1. I couldn't make it through this President Obama hit piece ...

When someone writes pages asserting that President Obama is deliberately trying to force through austerity programming and citing to the rejected 2011 deal with boehner, as proof ... I stop reading!

Maybe, I'll go back to this piece later.

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Response to 1StrongBlackMan (Reply #1)

Thu Dec 20, 2012, 02:44 PM

2. Sorry You Feel That Way... But Bill Black Knows His Stuff...

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Response to WillyT (Reply #2)

Thu Dec 20, 2012, 03:51 PM

3. Can we agree that expertise in one area ...

does not translate into expertise in every area that touches one's area of expertise?

I have a great deal of respect for Black and his knowledge and work in the financial industry; but his characterization of the 2011 deal as austerity and his characterization of President Obama deliberately wanting to push austerity, I believe is way off. (Not that what I believe matters a tinker's dam.)

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Response to 1StrongBlackMan (Reply #3)

Thu Dec 20, 2012, 06:04 PM

4. Sure We Can... Black Wrote One Hell Of A Book, Too...



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Response to WillyT (Reply #4)

Thu Dec 20, 2012, 06:33 PM

5. I read it ...

And I'm not questioning his finacial industry chops ... I'd feel more comfortable if he had written a book entitled:

Negotiating in the Public Sphere: The many angles to be seen

or,

A Cost Benefits Analysis of the 2011 Grand Bargain: and the Coming Fiscal Cliff

I'm just saying!

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Response to 1StrongBlackMan (Reply #1)

Thu Dec 20, 2012, 11:07 PM

7. The assertions that offend you are supported by verbatim quotations from Obama.

If you do go back to it, i'd be glad to read your reactions. Are the quotations garbled, misinterpreted, or taken out of context?

For example, if you do not trust Professor Black, you may consider this bit of evidence he adduces, which I reproduce as I just cut and pasted it from the ABC News website ("Obama Threatens Veto on Bid to Avoid Automatic Cuts as Supercommittee Fails", Nov. 21, 2011):

President Obama said today he will veto any efforts to get rid of the automatic spending cuts that will be triggered by the supercommittee’s failure to reach a bipartisan solution to deficit reduction.

“There will be no easy off-ramps on this one. We need to keep the pressure up to compromise, not turn off the pressure,” the president said this evening. “The only way these spending cuts will not take place is if Congress gets back to work and agrees on a balanced plan to reduce the deficit by at least $1.2 trillion.”


That sure sounds as if Obama is indeed trying to force through austerity. I voted for him anyway, despite my opposition to such austerity policies, so on a personal level I'd be delighted if you could prove that Professor Black is wrong.

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Response to Jim Lane (Reply #7)

Thu Dec 20, 2012, 11:13 PM

8. THANK YOU !!!


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Response to Jim Lane (Reply #7)

Thu Dec 20, 2012, 11:26 PM

9. Don't you think ...

that this is a leveraging of pressuire; rather than, pushing austerity?

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Response to 1StrongBlackMan (Reply #9)

Fri Dec 21, 2012, 05:16 AM

10. If he's supposedly leveraging pressure, what's the pressure FOR, if not austerity?

If all he wants is to ensure that the Bush tax cuts for the rich aren't extended, he need only promise -- loudly and repeatedly -- to veto any extension.

And if it's some 10th-dimensional-chess leveraging maneuver, why did he use his bully pulpit to endorse the idea that, in tough economic times, government must tighten its belt? That simply increases the public pressure for deficit reduction. He could instead have used the bully pulpit, before a nationwide TV audience, to explain why, in the view of sensible economists (i.e., those operating within the reality-based community), tough times call for stimulus, which means that deficits should increase, not decrease.

I think he should have been hammering this point from Inauguration Day onward. He should have proposed a stimulus package in line with what apolitical economists were recommending, which would be somewhere around three times as large as what he did propose. Then, when opposition from Republicans and Blue Dogs meant that only a smaller version could be passed, he could have returned to the airwaves a year later with a new message: "Passing a stimulus package of $800 billion helped, and you can see by these charts that we turned around the job loss that was going on under Bush. Unfortunately, as we told you then, it wasn't large enough, so the recovery, although welcome, has been anemic. I'm now proposing Stimulus II as the next step."

With public opinion being shaped, at least to some extent, by clear explanations of economic reality, maybe the results of the 2010 midterms would have been greatly different.

Before Obama, the President who faced the worst economic situation upon taking office was FDR. What I've described above is a sort of 21st-century version of FDR's approach. He wasn't at all averse to angering the Republicans. The result was that the 1934 midterms practically obliterated the Republican opposition in Congress, instead of empowering it as 2010 did.

Yes, I realize that Obama didn't have the kind of support in Congress that FDR had even in his first two years. That's why I recognize that, unlike Roosevelt, Obama wouldn't have been able to get his whole program through. But I think the way to leverage pressure was not to give the impression that deficit reduction was important, but rather to stand up for a clearly left-wing program, stressing jobs instead. Obama wouldn't have been able to campaign on a Roosevelt-style record of accomplishment. His substitute would have been to point to some accomplishment and to lambaste the Republicans for blocking his full program.

Frankly, when I look at the whole record, I just don't see a cunning leveraging of pressure. I see a President who missed a 1932-style opportunity by not being bold enough.

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Response to 1StrongBlackMan (Reply #1)

Fri Dec 21, 2012, 05:41 AM

11. I think Bill Black knows what he is talking about.

One of the most honest and knowledgeable people on these issues.

The President stopped using the language of Austerity after the emergence of OWS when it became clear that the people were angry and that they knew a lot more about the corruption on Wall St (Obama doesn't think any crimes were committed, just moral failings, this despite the overwhelming evidence to the contrary) than Washington insiders who assume they can manipulate the people, realized.

We stopped hearing that WE needed to 'share the sacrifice' and 'eat our peas' etc when it became very clear that such talk would likely lead to either a low turnout in the upcoming election, or a complete abandonment of the entire process.

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Response to sabrina 1 (Reply #11)

Fri Dec 21, 2012, 10:38 AM

12. No doubt ...

Black is knowledgeable about the financial industry and the fraud within it ... No argument there.

But I don't want the best heart surgeon to pull my tooth.

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Response to WillyT (Original post)

Thu Dec 20, 2012, 08:48 PM

6. Last Kick From Me...


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Response to WillyT (Original post)

Fri Dec 21, 2012, 10:47 AM

13. Kick!

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