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Bill Black: Likely outcome is no change to Obamacare but more cuts to social safety net

The Obama administration is planning to make further cuts to the social safety net in order to reach a political settlement with Republicans over the government shutdown, said economist and professor Williams K. Black.

“It’s the grand betrayal, as opposed to the grand bargain,” said Black. “They want to cut the safety net, they want to cut other social programs—again—in the midst of a relatively weak recovery, where this could dramatically harm the recovery and potentially even throw us back into recession.”

Black also said that the government shutdown was caused by a handful of Tea Party Leader interested in a “demonstration of power.”

“It’s about a very few leaders within the Tea Party, in particular Cruz in the Senate—who have performed brilliantly, tactically, in making it politically essential for the Republican Party in Congress to adopt the Tea Party version of tactics,” said Black.

The shutdown also demonstrates the power held by the Koch Brothers, who want “no effective regulation, no effective environmental laws, no effective prosecutions of elite businesses,” said Black.

Story Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And welcome to The Black Financial and Fraud Report with Bill Black, who now joins us from Minneapolis.

Bill’s a white-collar criminologist, a former financial regulator, and author of The Best Way to Rob a Bank Is to Own one.

Thanks for joining us, Bill.


JAY: So make some sense for me of what is motivating Tea Party forces here. It seems to me all they’re really proving, to most Americans, at least, other than their own base of true believers, is that the Republican Party’s unfit to rule. And while this might cause some problems for President Obama and the Democrats, I don’t see how it does them much damage. Who does the Tea Party represent? Who’s pulling their strings? They have a lot of billionaire backers. I don’t see how this helps them either.

BLACK: It doesn’t help the bankers and the backers in general. It does, however, potentially down the road, just in terms of a demonstration of power.

So this isn’t about the Republican Party. This is about–in fact, it’s not even about the Tea Party. It’s about a very few leaders within the Tea Party, in particular Cruz in the Senate, who have performed brilliantly tactically in making it politically essential for the Republican Party in Congress to adopt the Tea Party version of tactics.

But while it is tactically brilliant in their ability to manipulate the Republican Party, it is strategically disastrous for the Republican Party, and probably for most of the Tea Party folks as well, because they’ve asked for too much. They’ve asked Obama to give up the only thing that he really has done that he cares about, which, of course, is Obamacare. And if Obama gives up under this kind of coercion, he might as well simply resign tomorrow, because while he would have to the title president of the United States, he would have none of the power. The Republican–again, the Tea Party folks would use the constant crises that they would set up with the debt limit, which they can make as short as they want, those renewals, to create the same kind of extortion power. And Obama knows that, which is why he essentially must say no to their proposals, at least the proposals made so far by the Tea Party folks.

JAY: Now, in the past when we’ve seen this confrontation over–similar confrontations over the last couple of years, you’ve talked about President Obama and his grand bargain. And he’s–I should say bargains, ’cause in one of our previous interviews, you went through–I think it was four or five of these, quote-unquote, grand bargains where President Obama essentially gives concessions that the Republicans want. I mean, is the outcome here not that he gives up on health care, but he gives another important concession somewhere else, and then everybody calls it a victory–Obama saved health care, but the Republicans actually get some other big cut either in the social safety net or something else of the sort?

BLACK: That’s the obvious deal to be had. As you know, I think it’s a terrible deal. It’s the grand betrayal, as opposed to the grand bargain. But it’s already being rumored on the Republican side, and it’s the only climbdown for the Republicans that potentially works.

Of course, it would be, again, Obama snatching defeat from the jaws of political victory if he were to do all of those things, and it would be very bad for the U.S. economy. But the president still sees the grand bargain as his legacy. And so, yeah, really, for a good three years, the Republicans had victory anytime they could have kept the Tea Party restrained and could simply go forward with what they call the grand bargain. It was there to be had on the Obama side.

JAY: Now, the big date coming up is whether or not the debt ceiling will be raised or not. That seems to have Wall Street more in jitters. If in fact this continues to that, there is all this discussion about different options for Obama, whether he uses I think it’s the Fourteenth Amendment or a platinum coin, although it seems to me he’s ruled out all these other options.

BLACK: Yes, and he’s done so not out of any clever tactics. You know, there is a game theoretic reason why you could give up options, except that these options of course would have removed all of the power of the Republicans, and in particular the Tea Party folks, to extort favors. And Obama has refused to use any of them. So he is one of the worst negotiators in terms of any theories we have about how he ought to do negotiation that we’ve ever seen.

Now, the debt limit isn’t like the budget limit. If the Republicans mess with the debt limit, it will have immediate extremely negative consequences. And so what the Republicans don’t seem to have figured out is that while the debt limit is, you know, the equivalent of aiming an elephant gun, they’re aiming it at their own heads. And if the Republicans actually triggered not even the default but the antecedents to the default, the markets will go crazy and the Republican fat cats will demand that there be an immediate change, just as when they voted down the TARP funds. You know, and that lasted all of about 48 hours before they realized that they were going to doom not just the Republican Party, but they were going to doom a whole bunch of their radical Republicans as well, and they immediately fell back into order.

JAY: And to what extent can all this actually affect 2014 and control of the House? Is gerrymandering so drawn out now that these Republican seats can’t be taken even if this kind of craziness continues?

BLACK: It’s the worst of all worlds. No, it isn’t true that gerrymandering means that the Democrats can never control the House again, but it has meant that there is a comfortable Republican margin even though Democrats nationwide in House elections got roughly a million and a half more votes over the Republicans. And so, you know, people talk about, well, both parties do it. Yeah, but the Republicans do it, like, about 20 times more than the Democrats do. And so the gerrymandering is the only reason that the Republicans control the House.

And the worst of all worlds is even though they’ve created lots of safe seats, in the sense that a Republican is definitely going to win, they are not safe in the primary elections. And so this is how the Tea Party has terrorized the Republican Party and gotten them to act, you know, like their puppy dog is by threatening to, as they call it, primary any Republican who isn’t the most extreme Koch-ite that you can imagine.

JAY: Koch-ite meaning the Koch brothers.

BLACK: The Koch brothers. Right.

JAY: But I don’t see how the Koch brothers gain from what’s going on now, when it might lead to a weakening overall of the Republican Party.

BLACK: Well, again, first, the Koch brothers don’t care about the Republican Party. They don’t care about the United States of America. And they are incredibly wealthy. They are pure ideologues, in very large part.

What they do care about is making sure there’s no effective regulation, no effective environmental laws, no effective prosecutions of elite businesses. And they believe that this kind of power, which after all has taken offline, for example, a number of the regulatory agencies–and, you know, the EPA has lost all kinds of folks and such–they, the Koch brothers, love all of this. And what they mostly love is that they have demonstrated that they can take over one of the two major parties in the United States of America and use it for what is obviously an improper means, right, that we will extort you to get rid of legislation that was validly passed by both houses of Congress and signed by the president of the United States. And this is, from their purpose, a demonstration of raw power that is supposed to make people fear them in the future. That’s what the Koch brothers get out of it.

JAY: Just finally, if there is another grand betrayal, what might be on the table next? As we know or as you’ve pointed out before, President Obama wants a lot of this restructuring, and this kind of good cop, bad cop routine, you know, allows him to do some of this without looking like it’s his fault. But what might be next?

BLACK: Oh, they’re going after the safety net. In truth, it’s the same old grand betrayal. They want to cut the safety net, they want to cut other social programs, again, in the midst of a relatively weak recovery where this could dramatically harm the recovery and potentially even throw us back into recession. So it’s all the same terrible ideas recirculated. And again the indications are that the administration wants still what it calls the grand bargain.

JAY: Alright. Thanks for joining us, Bill.

BLACK: Thank you.

JAY: Thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

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William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.