PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. On Sunday evening, President Obama announced a deal to raise the debt ceiling. Here's a little bit of what he had to say.~~~BARACK OBAMA, US PRESIDENT: The first part of this agreement will cut about $1 trillion in spending over the next ten years, cuts that both parties had agreed to early on in this process. The result would be the lowest level of annual domestic spending since Dwight Eisenhower was president, but at a level that still allows us to make job-creating investments in things like education and research. We also made sure that these cuts wouldn't happen so abruptly that they'd be a drag on a fragile economy. The second part of this agreement is so important. It establishes a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit, which will then be put before the entire Congress for an up or down vote. In this stage, everything will be on the table.~~~JAY: Now joining us to give his take on the deal is Tom Ferguson. Tom teaches at the University of Massachusetts in Boston, and he's also a senior fellow at the Roosevelt Institute. Thanks for joining us again, Tom.THOMAS FERGUSON, PROF. POLITICAL SCIENCE, UMASS BOSTON: Hi, there.JAY: So, as you understand it, as of Sunday night, what are the highlights of this deal?FERGUSON: Oh, I'd say the highlights are--you know, it's a--frankly, it's a totally Republican-oriented package, in the sense, you know, it's--given all of the cash that has been earned by America's top income earners in the last decade, you'd think that a Democratic president with still a Democratic Senate could manage to sort of stick up for some kind of tax on the highest incomes, a tax rise, but he didn't do it. At no point did they make any serious effort in these negotiations. I mean, they were clearly planning for a very long time to do basically nothing in the way of tax rises on the wealthy, just like, you know, they did that deal, that ridiculous deal at the end of last year after campaigning, you know, about not extending the Bush tax cuts for the whole election thing. And, I mean, that's the highlight of it. Everything else is sort of rhetoric, although there's one interesting--I mean, you know, this is a multistage deal where you first extend the debt limit, then you create a commission; if the commission can't agree, then you will have a series of automatic cuts. And, you know, based on what we're being told tonight, a big chunk of those cuts, if their automatic cuts go into effect, like the old Gramm-Rudman-Hollings automatic cuts, those are going to come partly from defense. That's an interesting development. It's obviously serious enough to have some of the top Republican committee chairs with defense spending responsibilities suddenly coming out saying they're nervous about this deal. But, you know, basically this is a Republican deal.JAY: One of the things we know about it is that there's going to be $900 billion of cuts right away, and it's all coming out of what one would call benefits that ordinary people get from the government. So it's coming out of housing, it's coming out of transportation, it's coming out of education. So all the short-term cuts are out of social programs. No tax raises, as you say. So I guess the question is: do you think this is, like, the only pragmatic thing that Obama could have achieved? Is it a capitulation? Or is he just following up on a promise he made to conservative pundits when he first elected, where he said he was going to take on entitlement programs?FERGUSON: I'd say, this is the culmination of where his presidency has been going up to this point. I mean, this is a guy who has, you know, just not delivered on anything he promised the people who elected him, basically, and, you know, is now heading--presiding over an economy that looks like it's sliding back into recession, which is a point, you know, you really have to follow up on here, Paul. It's a pretty important point. I mean, as--based on what we know about this agreement, if they can't agree on more cuts, they will get--in that commission, they are going to do a kind of doomsday machine where they'll cut the--automatically. Now, some of those cuts would presumably come even in 2012. And, you know, you've got to say, with the American economy in its current position, what are they doing talking about making any near-term cuts at all?JAY: Yeah, all the current numbers show increasing depth of recession, and maybe double-dip, as they say. But job growth has practically stalled. So your point here is that not only are they not passing stimulus; they have this doomsday machine that's going to either, by agreement or otherwise, have far more significant cuts, which is an even bigger drag on the economy.FERGUSON: And I would add this, too. I mean, tonight there were some people in the White House and--saying in response to Democratic criticisms, well, we can do tax rises in the second stage, maybe by--in this committee that has to be set up. Now, you know, just think about this for a second. I believe that committee is going to start its work, you know, later this fall. I think it reports--meets in November or so. I mean, details aren't out yet. You know, what are the chances of those guys recommending any tax increase as we head into a presidential election year, when, you know, nobody could do it now when you're further away from an election, from a presidential election? This is just a pipe dream to think you're going to get any tax rises at all out of this thing. This package is designed to just take it out of ordinary citizens. You know. And in this second stage, when that commission, where the automatic cuts come, if the committee can't agree, it will also hit at least Medicare--seems to be plainly indicated that that can be cut, too. There was some pious rhetoric about, well, we're going to make sure that it hits the providers and not the people. That's just crazy, I mean, in an oligopoly. I've talked about this with you before. And when you've got a chain of oligopolies, as you have in Medicare, the notion that you can make the oligopoly pay instead of the customer is really quite fantastic.JAY: Now, some people are suggesting, certainly the White House is, that Obama didn't have a choice here. He keeps saying this isn't the deal I really wanted to do. But he did have an alternative here, and many people are suggesting, including former president Bill Clinton--this isn't just people from the progressive Democratic Caucus, and Bill Clinton certainly was never a member of that--that he could--that President Obama could have used the Fourteenth Amendment, he could have used his executive power and simply said, I'm going to raise the debt ceiling here, and if you want to go challenge me, go ahead. And, you know, the worst-case scenario apparently could have been maybe the House could have impeached him, but the Senate would never ratify, so he--. So it's back to where we were with health care and, as you said, the Bush tax cuts. He just won't wage a fight.FERGUSON: Paul, look, it's one of the wonders of the world, right? I mean, the Bush administration abuses executive authority in the most amazing way possible, in some cases, you know, even refusing to acknowledge that they have memos that are saying you can't have memos and things like that, and you get relatively little pushback, but you get all kinds of folks saying, gee, it would be really terrible if Obama invoked the Fourteenth Amendment. My take is, you know, none of that was even necessary. All the guy had to do was set up three or four months ago with a good national campaign to explain to the population what their stakes were in tax cuts and Medicare. I mean, and I have to say this. You know, let's not be taken in here too much. The poll evidence here is overwhelming. People don't want cuts to Medicare, and they didn't want any to Social Security. I like to think that the long campaign lots of folks made on that point, to just sort of straighten out the fact that Social Security doesn't add to the deficit, you know, has had some effect. But the--he could have talked--made issues of these things. They never did. They just--from the beginning they were--it was obvious to me, and I--you know, at the risk of--I mean, I actually told you this, I'm sure, some weeks back--it was obvious he was going toward a deal that was mostly or entirely spending cuts almost from the get-go. I mean, that's just the long and the short of it. He never--these are folks who talk about raising taxes on the rich and then never come through, just like they talk about doing something for ordinary Americans on unemployment and they never come through.JAY: So the real underlying problem here you're raising is not just that the consequences of the cuts in the social programs, but that this helps push the economy into a deeper recession.FERGUSON: I think you have both short and long-run problems. The short-run problem is obviously, yeah, I mean, what are these--I mean, it's clear they need to do something to stimulate the economy. I mean, you can always do so-called balanced-budget multiplier things where you actually tax as much as you spend and you actually drive the economy up on that, even though that's a well-known principle. It's been ensconced in the literature since, I think, the late 1940s, even though lots of people, you know, Republicans, profess to find it, you know, a contradiction in terms. These guys got to do something, and this has made it a lot harder. This is a little scary. It has--now, I've spent a lot of time in my life studying the Great Depression, and you could see in 1931, two years--after two years of this, lots of governments and lots of countries pause for a minute, consider whether they should do something, and then most of them make the choice to go back into austerity. And from there on, everything just gets worse and worse. So this is a pretty scary situation. You know. And if I were an American who'd lost my house or it had been sold, you know, by some mortgage broker, a crooked mortgage that, you know, cost you tons of money, and after having to pay for the bank bailout and watching the Wall Street just sit there and get incredibly rich while not doing any serious loaning to American industry, you know, I'd be just furious. I mean, this is really too much. I mean, I think we've gone beyond the bounds of sort of any acceptable democratic policy. I mean, I have to say that, you know, I'm not in the business here--I'm--when I'm talking to you, I'm an analyst; I'm not an advocate. But, you know, if I step out of that role for a second, I entirely understand Senator Sanders when he said somebody needs to primary this guy. People have to stand up. The Democratic Party has become quite like the old Republican Party, while the old Republican Party has become--well, in some cases, what can I say? Somewhere over the rainbow.JAY: Thanks very much for joining us, Tom. And I know you know the rather darkly colored rainbow. Thank you for joining us on The Real News Network.
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