Stewart vs Krugman and the Religion of Austerity
Bill Black: Obama has options, including the trillion dollar coin, to refuse to negotiate under the gun but he’s taken them off the table; both sides subscribe to the dogma of austerity
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And welcome to this week’s edition of The Black Financial and Fraud Report with Bill Black, who now joins us from Kansas City.
Bill is an associate professor of economics and law at the University of Missouriâ€“Kansas City. He’s a white-collar criminologist, a former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One.
Thanks for joining us, Bill.
BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.
JAY: So you’ve been talking in many of our interviews and you’ve been writing about what you thought was the likelihood of a coming grand betrayal, in other words, President Obama making deals for cuts to the social safety net and various other kinds of austerity measures, as part of a deal dealing to get the fiscal cliff done, and then to get the debt ceiling deal done. But President Obama recently has been saying he’s not going to, he says, negotiate under the gun of the debt ceiling. So isn’t that what you want to hear?
BLACK: Well, it may be. I certainly agree that you certainly shouldn’t make concessions to people who engage in extortion, ’cause if you do, they’ll simply extend the debt limit for only a very short time period, and they’ll keep coming back, and it’ll be the death of 1,000 cuts. So Obama, if he has any competence as a negotiator, should be refusing to give in to the extortion.
Problem is that he’s been engaged in unilateral disarmament as a negotiator leading up to these talks. He had a couple of ways, clear ways, that he could have completely defused what Donald Trump called his “nuclear weapon” of threatening to use the debt limit to extort concessions from Obama. One is the requirement under the Fourteenth Amendment to pay U.S. debt, and the second was the idea of minting this $1 trillion platinum coin.
JAY: Okay. Let me just ask you about the coin thing, ’cause John Stewart on The Daily Show went after Paul Krugmanâ€”
JOHN STEWART, HOST, THE DAILY SHOW: If somebody’s ruining their brand with a $1 trillion coin idea, I don’t think it’s the non-economist. [snip] So I stand by our research on the topic, the due diligence, and my ignorant conclusion that a $1 trillion coin minted to allow the president to circumvent the debt ceiling, however arbitrary that may be, is a stupid [bleep] idea.
JAY: â€”’cause Krugman apparently in one of his articles took this as a serious idea that he could do this, and Stewart was kind of ridiculing him about it. I mean, this is a serious thing he could do. I mean, do you think it’s a legitimate policy alternative? And let’s explain to everybody this is the idea the Treasury mints a $1 trillion coin, deposit itâ€”the Fed mints it, is that it? Who mints this coin, anyway?
BLACK: The Mint mints the coin.
JAY: The Mint mints the coin. Under whose direction? Treasury Department.
BLACK: Under the Treasury, and which is to say the president’s direction. And they couldâ€”and the law expressly says you can make it in whatever denomination you want. So if people are trying to extort you using the debt limit, make it a $1 trillion coin, or $2 trillion, $4 trillion. It doesn’t matter. And then you deposit it at the Federal reserve, and, poof!, all of the leverage goes away by the House Republicans and the Tea Party in particular that’s trying to use this nuclear weapon of extortion where they hold hostage the U.S. economy.
So it was actually a very good idea. And, you know, it would have required all of about $0.80 worth of platinumâ€”that’s literally how much platinum would have been required, because you just make it a clad, you know, coin.
And for reasons that, you know, make perfect sense as a humorist, you know, John Stewart’s had a lot of fun with this. And then Paul Krugman, I think, made the tactical mistake of playing in John Stewart’s garden by saying, hey, this is, you know, a serious idea, and you didn’t research it at all; it just sounded funny to you, so you made fun of it. And, you know, John Stewart says, yes, that’s what we do; we make fun of ideas.
But then Stewart added: and obviously it’s a stupid idea. Well, no, obviously it isn’t a stupid idea. And if Stewart knew more about economics, he wouldn’t think it was a silly idea. But, you know, he is a humorist.
JAY: But that being said, President Obama, I think, has said he won’t do it.
BLACK: Well, Obama has said he won’t do either of these things that would remove the leverage of the Tea Party to extort America and threaten to destroy our economy. So that’s really completely imprudent on Obama’s part. When you have somebody like the Tea Party threatening the U.S. economy and you have the ready ability to defuse that nuclear weapon, you should use that authority. And so this is at best an irresponsible action.
JAY: Now, is this partly because Obama knows that the corporate backers of the Tea Party, for example, the Koch brothers, don’t want this to happen, in the sense they don’t want another paralyzed economy, they don’t want the debt ceiling legislation not to be enacted, and so that Obama’s kind of calling their bluff?
BLACK: I wish that were true. I mean, you can certainly see a much harder politician saying this is just going to hurt the Republican brand, that they’re going to threaten to ruin the U.S. economy, and if they ever did it, in fact it would cause such economic devastation that it might destroy the Republican Party. So that, of course, is a possibility, that Obama is that, you know, strategic and trying to bait the Republicans into doing their worst, with the idea that it will hurt the Republican brand.
Another possibility, though, of course, is that he wants the excuse to give in. And remember, we just had him propose to make concessions to the Republicans in which he was going to make very sharp cuts in social spending, and sharp cuts in the safety net as well. And we were saved only by Harry Reid, who took the Obama instrument of surrender and literally threw it in the fireplace and burned it up rather than to make that proposal. And before that, in the broader discussions in the fiscal cliff, Obama was very much in favor of an austerity packageâ€”back in July 2011 and November 2011, Obama was very much in terms of an austerity package. And even now, Obama is saying, once we get past this extension of the debt limit, we’re open to doing the grand betrayal. So I think all he’s saying is, I’m going to fight you on the debt extension, but then I’ll give you the deal anyway. The Republicans, of course, are saying that they are going to demand austerity as the price of doing anything on the debt limit.
And so the column I just did today looked at what were theâ€”you know, how did we get here? How did this austerity idea that has repeatedly caused recessions and depressions, where did it come from in recent times? And it turns out it’s the Pete Peterson Institute. And Pete Peterson, of course, is the Republican billionaire who’s said that he’s going to spend his fortune trying to unwind the safety net in America, that he wants a combination of lower taxes and dramatically reduced social spending, and then, you know, to really go afterâ€”his ultimately goal, he has said, is to privatize Social Security. And, of course, this is the great dream of Wall Street in terms of their fees.
So I look back, and the Pete Peterson Institute is the placeâ€”and it still employs the senior fellow, an economist named John Williamson, a Brit, at least originally, who proposed the Washington consensus. So I went and looked at the original document, which he published in 1990â€”it was a speech he actually gave in 1989â€”in which he coined the phrase Washington consensus, ’cause, of course, there’d been a lot of reinventing history in his writing since. The original piece is entirely in the context of the Latin American debt crisis, and it starts out right at the first paragraph and says, hey, here’s the deal: we’re going to give some delay in the South American debt, Latin American debt, and in return we’re going to require them to agree to strong conditionality, which is code for whatever we tell them to do, right? And the very first thing on his listâ€”and he called it central to the whole idea of the Washington consensus was austerity.
So austerity, deregulation, privatization, the whole neoliberal agendaâ€”although he objects to that termâ€”is there in the first document as a way of forcing Latin American nations to agree to a completely new governance structure imposed by Washington, D.C., for the benefit of American banks and the IMF to collect debts from Latin America.
Now, that of course was a terrible experience in much of Latin America and accounts for why we have so many Latin American leaders elected over the last ten years on a platform of rejecting the Washington consensusâ€”in other words, elect me ’cause I am going to fight against the Washington consensus. Go forward in time and this is the same mindset that caused Europe to adopt austerity.
And I have another recent column about, you know, Germany has just announced that in the fourth quarter, growth went sharply negative, probably by 0.5 percent, which is a lot. That would be, like, the equivalent, if you straight-lined it out, of -2 percent growth for a year. And the Eurozone has been as a whole forced into recession.
This news on Germany means that that recession is getting far worse in the Eurozone. And as I’ve stressed before, places like Spain, Italy, and Greece have Great Depression levels of unemployment.
And so we have an idea, a terrible idea, austerity, that makes recessions worse, that creates Great Depression levels of unemployment in many countries, that will not die, no matter how much damage it causes to the world. And, of course, when really bad ideas refuse to die, even though they’re proven to be bad ideas time after time, then you know you’re dealing with dogma, not with science.
So that which is called neoliberal economics is one of the only areas that I know of that purports to be a science in which we have gone dramatically downhill in the science content over the last 50 years, such that it isn’t a science at all anymore, it’s a weird religion of austerity that actually takes pleasure in causing suffering in other nations.
JAY: Alright. Thanks a lot for joining us, Bill.
BLACK: Thank you.
JAY: And thank you for joining us on The Real News Network.
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