How the austerity class rules Washington

Ari Berman writes: In September the Committee for a Responsible Federal Budget (CRFB), a bipartisan deficit-hawk group based at the New America Foundation, held a high-profile symposium urging the Congressional “supercommittee” to “go big” and approve a $4 trillion deficit reduction plan over the next decade, which is well beyond its $1.2 trillion mandate. The hearing began with an alarming video of top policy-makers describing the national debt as “the most serious threat that this country has ever had” (Alan Simpson) and “a threat to the whole idea of self-government” (Mitch Daniels). If the debt continues to rise, predicted former New Mexico Senator Pete Domenici, there would be “strikes, riots, who knows what?” A looming fiscal crisis was portrayed as being just around the corner.

The event spotlighted a central paradox in American politics over the past two years: how, in the midst of a massive unemployment crisis—when it’s painfully obvious that not enough jobs are being created and the public overwhelmingly wants policy-makers to focus on creating them—did the deficit emerge as the most pressing issue in the country? And why, when the global evidence clearly indicates that austerity measures will raise unemployment and hinder, not accelerate, growth, do advocates of austerity retain such distinction today?

An explanation can be found in the prominence of an influential and aggressive austerity class—an allegedly centrist coalition of politicians, wonks and pundits who are considered indisputably wise custodians of US economic policy. These “very serious people,” as New York Times columnist Paul Krugman wryly dubs them, have achieved what University of California, Berkeley, economist Brad DeLong calls “intellectual hegemony over the course of the debate in Washington, from 2009 until today.”

Its members include Wall Street titans like Pete Peterson and Robert Rubin; deficit-hawk groups like the CRFB, the Concord Coalition, the Hamilton Project, the Committee for Economic Development, Third Way and the Bipartisan Policy Center; budget wonks like Peter Orszag, Alice Rivlin, David Walker and Douglas Holtz-Eakin; red state Democrats in Congress like Mark Warner and Kent Conrad, the bipartisan “Gang of Six” and what’s left of the Blue Dog Coalition; influential pundits like Tom Friedman and David Brooks of the New York Times, Niall Ferguson and the Washington Post editorial page; and a parade of blue ribbon commissions, most notably Bowles-Simpson, whose members formed the all-star team of the austerity class.

The austerity class testifies frequently before Congress, is quoted constantly in the media by sympathetic journalists and influences policy-makers and elites at the highest levels of power. They manufacture a center-right consensus by determining the parameters of acceptable debate and policy priorities, deciding who is and is not considered a respectable voice on fiscal matters. The “balanced” solutions they advocate are often wildly out of step with public opinion and reputable economic policy, yet their influence endures, thanks to an abundance of money, the ear of the media, the anti-Keynesian bias of supply-side economics and a political system consistently skewed to favor Wall Street over Main Street.

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2 thoughts on “How the austerity class rules Washington

  1. scott

    We lib/progressives have a bumper sticker phrase that rebuts all of them.

    The tax rate IS the discount rate for investment, expansion and hiringh

    Here’s how/why: presumably, those who resent taxes will take their profits and seek tax free avenues. As rates increase, the desirability of those deductible avenues increases. Those deductible avenues are all business expenses, from advertizing, to cost of employees, to expansion and R&D–all deductible and all pro-growth.

    Now, no businessman wants his taxes raised, nor anyone to force his hand. But, if we simplify the tax code it will reinforce the effect I’m describing, and will not liklely affect actual tax revenues from any particular firm. Though, it should expand GDP and in that way generate more revenue. It’s astounding that this historical truth has been obscured by supply side lies.

  2. scott

    Think about the corrollary of my point above; namely that low rates make it cheaper for firms to sell off facilities, cut workers for executive compensation and to generally make austerity moves. Hmmm, what happened to tax rates since Reagan? What happened to jobs and industry?

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