William K. Black.

Slate’s John Dickerson leads its (and CBS’) political reportage so his specialty is in examining what is actually driving politicians’ policies and their efforts to “spin” those policies. Dickerson authored an article entitled “Why Obama’s Outreach to Republicans is All About Obama” (March 12, 2013).

Is Obama Setting a Trap for Republicans?

Dickerson’s theme is one I have long emphasized: Obama is driven by concerns for his “legacy.” In more human terms, he is intensely vain about how history will perceive him. That is common, particularly in politicians’ final terms, and it can be a positive influence on policy. Dickerson also agrees with my warnings that Obama sees inflicting the “Grand Bargain” on the Nation as his means of achieving his legacy. Here is Dickerson’s introduction to his article.

“Is Obama Setting a Trap for Republicans?

Nah, he’s just trying to ensure his place in the history books. Like most days.”

Obama chose Bill Clinton, which is to say Bob Rubin, and Ronald Reagan as his models for the presidency rather than Franklin Delano Roosevelt. The Wall Street wing of the Democratic Party and Reagan shared the same fawning attitude towards finance, and their typically bipartisan anti-regulatory policies proved so criminogenic that they produced the recurrent, intensifying epidemics of accounting control fraud that drive our rapidly escalating modern financial crises. The remarkable fact is that none of this has discredited the policies or the policymakers. Jacob Lew is the latest in a long line of failed protégés of Rubin that Obama has chosen as his principal financial advisors.

One of the repeatedly failed policies that the Wall Street wing of the Democratic Party and the Republican Party agree on is the virtue of austerity. Austerity was the first, and paramount, pillar of the “Washington Consensus” – and both words in that term are revealing. The consensus was inflicted primarily on Latin America. It was a “consensus” – the amount of theoclassical group-think was and is chilling. It was a product of Washington, a bipartisan consensus embracing austerity. The Washington Consensus caused so much harm and rage that nearly a dozen leaders have won election in Latin America by running on a platform of opposing the consensus.

In the U.S. context there was always an important asterisk to the consensus because the Republican Party’s dominant leaders never believed in austerity when they held power. They cheerfully ran large budget deficits, which the Fed typically supported with stimulative monetary policies. The Republicans leaders went far beyond Keynes. Their “supply-sider” claims (which always proved false) were that tax cuts were magic and would promptly cause deficits to disappear.

Unfortunately, the Wall Street wing of the Democratic Party actually believed in austerity, and because the Democrats were in power the Republicans gleefully supported Clinton’s cuts in social programs. The budget surpluses quickly generated deficits in other sectors (see my colleagues Randy Wray’s and Stephanie Kelton’s explanation of sectorial balances in dozens of articles on our New Economic Perspectives blog) and helped drive our economy into recession. Recessions inevitably cause budget deficits to grow rapidly.

The Democratic Party has an enormous electoral advantage born of being on the right side of the most important domestic issues. The New Deal’s concept that the Nation should provide Social Security and health care to its people has produced a “safety net” that has transformed the Nation. Before Social Security, old age meant misery for most Americans. Before Medicare and Medicaid premature death due to lack of access to timely health care was common. These three programs (and remember that Social Security’s survivor benefits support millions of children) and food stamps (SNAP) have made America far more humane and productive. Americans love these programs. Republicans love these programs. Attacking these programs is political suicide for the Republican Party – unless a Democrat leads the unraveling of the safety net. Only a Democratic President can make it politically safe to inflict the Grand Betrayal of the Nation’s most popular and desirable federal programs.

That brings us back to Dickerson’s apt description of Obama’s “ambition” (or vanity). The specific context of his article is refuting the belief among Republican’s that Obama’s “charm offensive” on the Grand Betrayal is a “trap” by a clever politician. I agree with Dickerson’s analysis of this point. Obama’s effort is not a trap – he really does want to commit the Grand Betrayal. He not only wants to begin to unravel the safety net programs, he wants to cut social spending substantially. Only the Republicans can make it politically safe for Obama to commit the Grand Betrayal by giving him the fig leaf of moderate reductions in tax deductions. The irony is that the Republicans have become so extreme that they were unwilling to accept Obama’s repeated offers of surrender through the Grand Betrayal.

My work has shown that Obama has, since the early stimulus bills, repeatedly sought to commit the Grand Betrayal and push austerity. The U.S. has escaped the full brunt of disastrous austerity and the Grand Betrayal because the Tea Party Republicans in the House and Democratic progressives have interacted in a manner that has made Republican positions on taxes so extreme that it was politically impossible for Obama to agree on a Grand Betrayal that was so extreme that it would satisfy the Tea Party. Obama has repeatedly offered to inflict through his proposals on the Grand Betrayal aggressive austerity similar to that which threw the Eurozone back into a gratuitous recession.

I have also explained how the Sequester is the fourth act of federal austerity since the 2011 Grand Betrayal negotiations began (plus severe austerity at the state and local government level) and that the cumulative effect is strangling the recovery. (Dickerson differs with me on this last point. He believes the February employment numbers demonstrate that the U.S. is in the midst of a strong recovery. It is not prudent to take one month’s preliminary economic numbers and predict anything. The U.S. recover is far less robust than it would have been had Obama and the Republicans not inflicted these austerity measures.)

Dickerson confirms what I have been arguing; Obama’s view is that his only hope for his legacy is reaching the Grand Betrayal. Wednesday, the national news was full of Obama saying that he wants a deal that will not “gut” Social Security, Medicare, and Medicaid. He is in openly in betrayal mode. He’s making it clear that “moderate” cuts in the safety net are acceptable to him. Indeed, he is proposing to begin to unravel the safety net and very large cuts to social programs even though that austerity is a terrible economic policy that will harm the Nation, betray the Nation’s and his Party’s promises on the safety net, and the most self-destructive political strategy the Democratic Party could take. The American people hate the Ryan Budget and its cuts to the safety net. The Democratic Party’s proudest accomplishments are the safety net and it will prosper politically if it follows the right policies and says “hell, no!” to any cuts to the safety net.

The extent to which Obama’s policies are driven by vanity, by his desire for a “legacy,” is revealed by Obama’s obsession with inflicting the Grand Betrayal on our Nation (and his own Party). It also reveals that Obama understands that by partnering with private health insurers and destroying the “public option” he created a health care reform that will never establish a “legacy.” It also reveals that he realizes his Nobel Peace Prize will never establish a legacy.

Here is how Dickerson presents Obama’s vanity and quest for the Grand Betrayal as his signature legacy.

“But to stay intact this [Republican] theory [that Obama’s charm offensive was designed to trap them rather than to secure a Grand Bargain] must survive at least two challenges.It misunderstands President Obama’s ambition (he cares more about his legacy than he does Congressional Democrats) and it suggests Obama learned nothing from his first several years in office when he attempted the strategy Republicans are accusing him of, and failed.

We know this much about Barack Obama: He is ambitious. When advisers wanted to go for a more modest health care bill in his first term, he pushed for Obamacare, citing his desire to do big things. We also know presidents think about their legacies in the second term. Republicans have long argued that the president’s ego is as large as the national debt. If you map out his DNA, it reads: me, me, me. So, what is likely to win the president greater glory in the history books: a grand bargain that leads to a healthy economy or the return of a Democratic House majority?”

Dickerson goes off the rails only in the last sentence after the colon. Dickerson asserts that inflicting austerity and beginning to unravel the safety net “leads to a healthy economy.” It does the opposite. Indeed, it is hard to conceive of a series of acts more damaging to the ongoing weak recovery or our future economy over the next decade than the Grand Betrayal. It also harms our people. Austerity is a horrific, economically illiterate policy. One need only look at the Eurozone – forced into a gratuitous recession by austerity – to see the folly of what the Republicans and Obama are trying to inflict on America. Italy, Greece, and Spain are not in recession – they are suffering from Great Depression levels of unemployment due to austerity.

A desire for a legacy can prompt a leader to struggle to secure the passage of the equivalent of Social Security, Medicare, Medicaid, or food stamps (SNAP). Any president would be justly proud of such a successful effort that simultaneously improved the economy and made our Nation vastly more humane. Obama is a Democrat who has been so deluded by Bob Rubin’s embrace of austerity and disdain for the safety net and social programs that Obama intends to build his legacy on the wreckage of our economy, the betrayal of those most in need, and beginning to tear down the foundations of his Party’s greatest domestic triumphs.

Dickerson employs the same leitmotif as the authors of the Washington Post article about the 2011 Grand Bargain negotiations that I discuss below. He emphasizes Obama’s obsession with securing a place in history through “an accomplishment … [that would] light up the history books.” He writes that what drives Obama is “ambition” and the desire to accomplish something grand that would “reflect direct glory on Obama.”

Dickerson misses something critical about Obama’s vainglorious pursuit for this legacy at our expense because he assumes that austerity and large cuts to social programs “leads to a healthy economy.” Dickerson must believe that austerity and social spending cuts so obviously leads to a healthy economy that it isn’t worthwhile to explain how this miracle happens or explain to the readers that most economists think that Dickerson’s claim is false and the theoclassical economists who agree with Dickerson’s claims are primarily rabid Republicans who have been shown to be wrong about virtually every important economic issue and prediction.

Here is Dickerson’s explanation of the Obama administration’s supposed pro-austerity, pro-cuts to the safety net analysis.

“The president and his advisers believe that a grand budget deal would help an economy that is poised to take off. Recent economic data, including February’s strong jobs numbers, confirm their view that economic conditions are on the upswing. If the president can contribute to fixing the budget mess, consumers and companies will spend more and the economy will blossom. The president would be able to claim he revived the economy after the worst downturn since the Great Depression.”

It is dubious that Obama believes any such thing and it is near certainty that administration economists do not believe this claim. Competent economists never put confidence in the – preliminary – numbers for a single month, particularly where that month followed a month of epic bad weather. The U.S. is recovering because, unlike the Eurozone, we refused to inflict severe austerity on the Nation. The stimulus, however, was far smaller than economists believed was needed and from 2011 to the present we have inflicted increasing austerity on the Nation through the 2011 budget deal, the re-imposition of the full payroll tax, the tax cuts on the wealthy, and the Sequestration. This has strangled the recovery, making it unusually weak.

The “budget mess” we are suffering from is austerity. Austerity means some combination of raising taxes and cutting federal spending. Both of those measures reduce already inadequate public and private sector demand – reducing or reversing the recovery. If we cut demadn and employment gains, consumers and companies will spend less. As I explained, had Obama succeeded in inflicting the Grand Betrayal on the Nation in 2011 he would have thrown us back into a gratuitous recession. Obama, and Obama’s aides, do not publicly claim that inflicting large cuts in social programs, including the safety net, and raising taxes substantially would mean that “the economy would blossom” because he would be ridiculed for his economic illiteracy if he said anything that dishonest. If Obama’s aides are whispering their “blossom” claims on a not-for-attribution basis to reporters then they should know better than to believe the claims.

What Dickerson and the Obama administration mean when they refer to the “budgetary mess” they mean the repeated Republican extortion through threats to refuse to extend the debt limit. The Republican efforts have created a budgetary mess, but the answer is not to give in to that extortion by inflicting the Grand Betrayal that gives the Republicans what they wanted to achieve by through their extortion. Obama had the correct answer to this extortion. He repeatedly proclaimed that he guaranteed that the Republicans’ extortion would not succeed. He guaranteed that he would not cut a penny of spending in response to the extortion. The Republicans cannot cause the U.S. to default on its debt and survive as a national political party. In prior columns I have also explained two means Obama could use to remove the Republican’s ability to use the debt limit as a weapon of extortion. Obama, however, gratuitously renounced both of the means to disarm the Republican’s ability to use the debt limit to extort. His brave promises that he would make zero concessions in response to extortion – that he would call the Republicans’ bluffs – have obviously become inoperative. (Obama could give lessons on how not to negotiate. He is remarkably bad at it.)

What Dickerson misses because of his belief in austerity and cuts in the safety net is that Obama has always explained his quest for his legacy from the Grand Betrayal on the grounds that it will cause the Nation’s most needy to suffer, betray the Nation’s and his Party’s promises to safeguard the safety net, and harm his Party by distressing its progressive base. Obama sees his claim to historical greatness arising from his “courage” in being willing to betray.

Everyone should read a detailed Washington Post article discussing, on the basis of insider interviews with White House and Republican leadership sources, the Grand Bargain negotiations in 2011. “Obama’s evolution: Behind the failed ‘grand bargain’ on the debt” (March 17, 2012).

http://www.washingtonpost.com/politics/obamas-evolution-behind-the-failed-grand-bargain-on- the-debt/2012/03/15/gIQAHyyfJS_print.html

The article is particularly useful for examining Obama’s motivations because his staff were open about Obama being driven by his obsession with his place in history. The article was written at a time when the Parties were not yet locked fully in their “blame” mode. The Obama administration did not attempt to refute or even criticize the article. The article is also useful for my purposes because the Washington Post is infamous for its devotion to austerity and its desire to unravel the safety net. The article assumes, implicitly, that austerity and huge cuts to the safety net and social spending are obviously essential. The article was not written by critics eager to block Obama’s effort to inflict those cuts on the Nation or to criticize Obama’s pursuit of his legacy.

Here is how the article describes Obama’s motivations.

“Against the vehement advice of many Democrats, including some of his own advisers, Obama was pursuing a compromise with his ideological opponents, a “grand bargain” that would move into unmarked territory, beyond partisan divides, pushing both parties to places they did not want to go.

From the White House point of view, those few days show a politically selfless president willing to rise above the partisan fray and make difficult choices for the good of the country.”

“Politically selfless” policies that would push Democrats “to places they did not want to go” meant that Obama in 2011 proposed making significant cuts to the safety net and enormous cuts to social programs. Obama’s legacy, from his perspective, rested on betraying the Party’s base by betraying the Party’s most successful programs that were supported even by a majority of Republicans. The authors were certain of Obama’s central goal and his central dilemma: “He was caught between his own aspirations for historical significance and his inherent political caution.”

The next passage in the article, which the authors accepted as if it were revealed truth instead of economic illiteracy, is the administration’s ode to austerity and significant cuts to the safety net.

Dan Pfeiffer, the White House communications director, recalled that the president and his team felt the weight of the global economy “on our shoulders.”

“Is there political benefit to coming to a big budget deal with John Boehner? Sure,” Pfeiffer said. “But every other political and message imperative was thrown out the door to prevent a disaster and do the right thing for the country. That’s why we were willing to do things we wouldn’t normally do.”

Austerity, in response to the Great Recession, causes a “disaster” – it does not prevent it. Had Obama and the Republican leadership have succeeded in inflicting austerity on the Nation through their proposed Grand Betrayal in mid-2011 they would have thrown the Nation back into recession. Unemployment would have risen above 10% and Obama would have been crushed in the 2012 election. But for purposes of this column, the point I wish to document is that the authors of the Washington Post column were not out to criticize the cynical betrayal. The authors treated the negotiations as attempting to achieve a “Grand Bargain” and at all points the authors assumed (without analysis) that the Grand Bargain was not only desirable but also essential. The tone of the article was that the failure to reach the Grand Bargain was tragic for our Nation. The reality is that when the Grand Betrayal was not adopted in 2011, the Nation barely dodged an artillery round that would have blown up the entire recovery.

The authors, and the Obama administration officials, treat the fact that most Democrats would view the deal as the Grand Betrayal, as proving Obama’s “politically selfless” bravery. The more Democrats and anyone needing to draw on the safety net criticizes Obama’s deal as the Grand Betrayal, the more Obama claims that his actions prove his courage and validate his “aspirations for historical significance.” The Washington Post article repeatedly returns to variations on Dickerson’s leitmotif of Obama’s vain obsession with his place in history. It refers to his “grand ambitions” and his goal of “making history.”

The unusual problem progressive Democrats have in preventing Obama from inflicting the Grand Betrayal is that the more they oppose the deal the more Obama interprets his own actions as courageous and “politically selfless.” It is nearly impossible to penetrate a narcissist’s obsession that others recognize and praise his greatness.