Negotiations to raise the debt ceiling came down to the wire Monday night with the winners and losers striking a compromise deal. President Obama proved he can “kind of” stand over above petty recriminations to encourage a politics of compromise from the moral high ground. The Democrats proved they cannot govern and achieve their goals at the same time, a truly contradictory skill they have come to master. The Republicans proved that an opposition party can control public policy, and that they can do so only by ceding authority to an even smaller, shriller fringe element like the Tea Party. In short, there are winners and losers in this “second great compromise,” but in the end we all are losers.
How did we get here?
The American economy has been hijacked for decades now by Wall Street, political elites, and their technocrat cronies. (Is no one else disturbed that most U.S. Treasury Secretaries are former CEO’s of Goldman Sachs?) Starting with deregulation under the Carter Administration that accelerated under Reagan, Bush the Elder, and Clinton, we arrived at the 2000 Presidential Election just in time for Bush the Younger to hi-jack an election in Florida and institute his economic policy of capital robbery. What Clinton started in 1999 by signing the Gramm-Leach-Bliley Act, which repealed part of the Glass-Steagall Act of 1933 that regulated the banking, insurance and the financial sectors after the Great Depression, Bush the Younger finished by signing the Commodity Futures Modernization Act in 2000. The stage was now set and the actors were in place for the great financial collapse of 2008: bankers could be their own insurers, insurers could be their own bankers, auditors could cook all their books, and speculation on futures for sub-prime mortgages and other technical financial “instruments” could be traded with impunity.
The financial collapse could therefore not only be predicted, it had been predicted before. One only has to look closely at similar financial mechanisms in deregulated environments that caused the Great Depression, the Savings and Loan scandal of the early 80’s, Black Monday in 1987, and the global currency meltdown of 1997. In all these cases, the money changers were put in charge of the Temple by their political hacks, and in all cases their economic policies of “liberalization” and “modernization” spelled doom and gloom for the rest of us.
What does this compromise mean?
The debt deal in Washington DC amounts to nothing more and nothing less than a continuation of the economics and politics of this status quo. Under Reagan’s administration the debt ceiling was raised 200 percent to accommodate the insane policy of a nuclear arms race, and in 1988 after eight years of military build up the national debt stood at $3 trillion. On this day in 2000 the national debt was almost $6 trillion; today it is $14.5 trillion and rising faster than any previous time in history. One can conclude that raising the debt ceiling is not helping matters, and indeed this is the nugget of truth in the caterwalling of the Tea Party.
The fact is that U.S. economic policy is not sound. It is predicated on three things:
1. profit maximization for global corporations and their share holders that disinvests in U.S. production and labor in search of cheaper commodities that can be made abroad and sold at home.
2. hyper-sustained consumption to fuel the U.S. economy despite the fact that we are increasingly a nation of debtors and an economy without good-paying jobs.
3. lack of vision for a greener, more sustainable future (see 1 and 2 above).
These factors are fixed by an even more pernicious set of factors at the nexus of economics and politics: lack of political will to reform campaign financing, an ideological chimera that believes money is free speech, and a Supreme Court decision ironically called “Citizens United” that permits unlimited corporate contributions to elections. With these pieces in place, it is clear that the puzzle is all but finished. There will little to no change of the dominant economic policy that is, in fact, the great problem of the 21st century.
What’s next?
In all this doom and gloom there is not much of a silver lining. Reaching a compromise on the debt ceiling means a smaller less social-capital-friendly government in which the middle class and the poor shoulder more social responsibilities that private markets are likely to capitalize on. For example, health insurance companies will make more profit on an increasingly unhealthy and aging population, while Medicaid and Medicare benefits shrink. The unemployed will receive less help in a job market that increasingly shrinks around them. Students will pay for more of their education as government financial aid decreases. And the poor will suffer the most as institutional forms of assistance evaporate.
Although the Tea Party juggernaut appears to be the winner by forcing a $2.1 trillion spending reduction over the next 10 years, the fact remains that by the end of that period the national debt will be even larger than it is now and America will be a less “kinder, gentler” nation. The “second great compromise” has won us nothing but a short-sighted and mean-spirited political victory. Moreover, it is doubtful that either the economic policy to blame for this or the ideological fixation that drives it will change any time soon. In 2021, what will America look like? The answer is the same as it ever was: more economic inequality, less democracy, more desperation, less hope. ::KPS::