Wednesday, March 13, 2013

We are like rats in a lab of the Great Austerity Experiment (aka sequester)

We John Q Public citizens ought to feel like a rat in an economists’ laboratory experiment waiting  to see if  the Great Austerity Experiment  will hurt us enough  to be replaced by a Grand Bargain. Movement toward  eventual compromise is  showing  some shoots of green, but freeze warnings have been issued, too.
 Right leaning  economists tell  us that the sequester (austerity) is not so large since  cuts  are only 2.5%  of the budget yet it   will grow  our economy because it begins to reduce the deficit now.  That 2.5% is deceptive  because so much of the budget is exempted.   Cuts  are closer to   13   % of  the military budget and    8  % of programs affecting the poor, education, and  science, and  national parks .   Economists and the independent Congressional Budget Office  predict that  the sequester’s austerity approach  in the midst of recovery from the Great Recession  will increase  unemployment  to  9% and our growth will fall to 1%.  Even the much cited Simpson Bowles debt reduction commission warned against making budget cuts while the economy was recovering from the recession.
 Last week  hope sprouted . The GOP  stopped  threatening what  Peggy Noonan,  Wall Street Journal columnist, has called “government by freakout”.    We have been leaping off cliffs into some scary abyss  every month since November  and we were still facing government shut down and the reincarnation of the 2011 debt ceiling debate later this spring  .   There were even whispers   of  reviving  a Grand  Bargain later in the summer after the Great Austerity Experiment  plays out.
The President   kindled  the thaw.  Responding to criticism that he had not reached out enough and that is why the GOP claimed they would not compromise,  Pres. Obama  called their bluff and invited to dinner  some  rank and file senators.    He even invited Rep. Paul Ryan, the GOP’s  Tea Party policy wonk, to lunch. Ryan recently resurrected his proposal to voucherize Medicare.  Obama’s  outreach continues into this week and next , attending both party caucuses in the House and Senate.  The last time he visited a GOP conclave was in his first term, when  the same  Rep.  Ryan belligerently challenged the president’s math  and the GOP dug  in deeper as the  party of  no.  It is a wonder the President wants to try that approach again.
Some say the GOP won because  they forced the President to talk with them.  On the other hand,  they may have lost this particular  excuse not  to compromise.    The monkey  of being uncooperative  has settled once again on   the GOP’s  back,  leaving them   vulnerable to being  blamed for  continued gridlock.
The Senate is where  a Grand Bargain can take root, but the Republican  House is where all good attempts go to die. John Boehner,  GOP House Speaker  issued a freeze warning for any signs of a compromise  spring. .    He  commented on revenue raising by closing tax loopholes  (called tax hikes by the GOP) when he retorted, “If the President continues to insist on tax hikes, then I don’t think we are going to get very far”
 There are a few Republican Senators who have indicated a willingness to raise more revenue in return for more cuts and  if the Administration bends on some on entitlements.  Those are essential  elements of a Grand Bargain.   Even Simpson-Bowles deficit  reduction commission  concluded you just cannot reduce the deficit  without more revenue and changing eligibility ages for Medicare and Social Security. There are   less  traumatic ways to revamp such entitlements  than what Ryan  or Simpson-Bowles  propose.  The extent  of trauma  can also  be reduced by increasing revenue, too.  
Meanwhile, we rats in the lab of the Great  Austerity Experiment will be the first to know   if austerity  timed in a recovery will  cause  us enough pain and anger to thaw House members .
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This is a version of my column that ran in the today

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