Mid Summer Blues
from Peter Radford
No I haven’t disappeared. This is mid-summer and the living is supposed to be easy. And it would be were it not for the perpetual lunacy in Washington. I wonder whether America has ever been this ill served by its collective leadership.
Last week were treated to an outpouring of enthusiasm based upon the new GDP numbers. Growth was 1.7%. Wow. In normal times, back before the banks trashed the economy, the endless bailouts, various fiscal showdowns, tepid reforms, and Congressional gridlock – you know all those years ago – a 1.7% growth rate would have been greeted as the harbinger of bad times. Now, in our new world, people get almost giddy over it. Such is the distortion to our perspective that the failure of our leadership has wrought that we genuinely laud a weak report. It is as if we are so starved that any small morsel looks like a veritable banquet.
How did America get to be so small?
Small in attitude. Small in outlook. Small in opportunity. And small in scope.
The so-called land of opportunity is clearly gone. And we behave as if we want it gone. Nowhere is there the anger at the lack of leadership needed to break free of the mediocrity into which we have settled. Or, rather, the mediocrity into which we have been forced to settle.
I think if more people realized that our economic plight could be solved quite easily had we the courage to attack the problem they would rise up against the Washingtonian elite that throttles everything.
Within that elite, with it stunning lack of imagination and its numbing groupthink, lies the cause of our malaise. The rotten employment figures last week – 162,000 new jobs – and that weak GDP figure are the deliberate outcome of the actions of our leaders. Stagnation has become acceptable to them. They are scared. They are rudderless. They have no ideas. And they simply squabble.
The Republicans in the House have now voted forty – yes 40 – times to repeal Obamacare. This is farce. Worse, it isn’t humorous farce. They cannot succeed, yet they continue these entirely symbolic acts. At taxpayer expense. I have no clue in which world they now exist, but it isn’t this one.
The Republicans also continue their objection to each and every move the White House makes, no matter whether they previously espoused the same policy. This is not opposition. This is obstruction. Opposition is constructive and presents an alternative. Repetitive negation is no alternative.
This comes across starkly in the discussion – if that is what we can call the mud slinging – over the Federal budget.
The divisions within the GOP are now so deep that they cannot even bring a bill to the floor of the House. They disagree so strongly with each other. The extremists treat the sequester level of government spending as the starting place for further cuts – they want to get rid of all social spending if they can. Another group wants to roll back the sequester and start over at a higher, and less severe, level. This conflict produces gridlock within the Republican caucus, leaving the Democrats bemused onlookers.
It will get worse.
The budget is supposed to be in force by October 1st. That’s when the Federal fiscal year for 2014 begins. So we will be hearing about a succession of budget – aka appropriations – votes during September. Such is the gridlock, however, that it is extremely unlikely any substantive votes will take place. The Republican split prevents them bringing any of the multitude of annual appropriation bills to the floor for a vote. They failed just last week in such an effort. So the specter of a government shutdown looms once more.
Once we are beyond October 1st. Congress will fund government through what is called “continuing resolution” legislation. That is, they simply vote to keep that last budget continuing until they vote for a new one. This presents a sitting target for the extremists. All they have to do is to block a continuing resolution and funding ceases. This year is ripe for such obstruction. It is the first full year of funding for Obamacare, which the extremists revile. Any bill that includes health care reform funding will be fought over tooth and claw. This year, too, Speaker Boehner is demonstrably weaker – his control over the GOP caucus is diminished to the point of being negligible. This makes eruptions from the extremists very likely. Then, too, the gap between the House and Senate Republicans has widened. Indeed the dialog between them has almost vanished. The Senate GOP, or at least a big chunk of it, would like to adopt a more constructive approach and has thus lost patience for the trench warfare the House loves to toil away in. So we are likely to get two very different versions of Republican budgets, adding more confusion and reducing the prospect for progress.
In the middle of all this Republican dysfunction we have the Democrats who appear to be losing patience, and are less likely to lend Boehner a hand in passing legislation. Given that the Republican majority is split so badly, to get any legislation passed will need a bi-partisan vote. Currently the Democrats see no need to help Boenher find a way out of the hole he dug for himself.
It gets worse.
The law governing the sequester budget cuts has them kicking in a few days after Congress adjourns. But the Republicans are fearful that Obama may use adjournment to tinker with appointments to some of the huge number of empty jobs that Congressional opposition has opened up. So they want to extend the legislative session as long as they can. This means that the fights over the sequester will most likely take place sometime in January or February – a good four or five months into the 2014 fiscal year. If nothing else this will add confusion for the media reporting on the budget wars because it adds another moving part to an already helter-skelter legislative program. And the media is not renowned for understanding these things when they are static, let alone when they are in motion.
Then, naturally, there is the idiocy of the Obama administration and its obsession with discredited economists.
The bun fight that broke out over the Bernanke succession is both unseemly and unnecessary. Apparently Obama has a clear preference for Larry Summers. Equally apparently, most Democrats don’t. Summers will always be associated with the go-go years of Clinton, with Robert Rubin, with ill-fated bank deregulation, with opposition to derivative regulation, and a host of other errors. His arrogance has prevented him from any form of public contrition. His political ineptitude is legendary. And his intellectual vanity epic. Yet he continues to exert a hold over Obama. That his name even came up in the context of the Fed chairmanship – a position demanding diplomacy as well as an economic know-how – is baffling.
More baffling still is that Obama first turned to Tim Geithner to sound him out for the job. Really?
Between them Geithner and Summers created a bulwark within the administration preventing effective bank reform. Neither is qualified, on that score alone, to be Fed chairman.
Finally, in this list of gloom, we have Obama’s clockwork like calls for a “grand bargain” on the budget. By grand bargain he invariably means significant cuts to social programs in exchange for a few negligible tax increases. This time he is calling for a cut to the corporate tax rate and a concurrent reform of that tax to close loopholes.
By the way: I have never understood the logic behind social spending cuts. We are told these programs are somehow unaffordable at some future date, and are thus likely to need cutting back. And in order to avoid those future cutbacks we have to cut them back now. So we are being forced to make cuts … in order to avoid future cuts. And the logic here is what exactly?
Anyway, never has an Obama made a more pointless proposal. Most large corporations pay little or no tax. So the top line tax rate is irrelevant. Those same corporations have bought and paid for Congress through their lobbying and donation efforts. The chance that we get tax reform that isn’t twisted out of all recognition by special interest pressure is zero. So Obama’s call was senseless.
Then again, being the acute Washington insider that he is, Obama knows all this. He was simply playing to the audience, whilst knowing full well that he could have said anything and the Republican reaction would have been the same.
Which is to say they would oppose him.
And this is why the mid-summer blues are particularly blue this year.
We have all this to look forward to.
Time to go to sleep under the tree and to dream of when 1.7% GDP growth invoked concern and not good cheer. Those were the days. I wonder whether we will ever get back there.