Wednesday, February 23, 2005

Stupid As A Fox

Less Bombshell, More Firecracker

When I first heard mention on the Sunday talk shows of the
secret tapes of President Bush, put together by today's version of Linda Tripp, Doug Wead, I admit that my pulse quickened for an instant. I grabbed my Sunday Times and quickly went through the cover story looking for the many revelations. Alas, it was an anticlimax. Yes, there was Bush's admission that he smoked marijuana (he might have even...inhaled! Gasp!), and he seemed to suggest that he had also used cocaine (or at least he was adamant about his lack of denial), but beyond that it was less epiphany and more mundane political playbook. The drug use corroboration might tone down the vitriol-infused reefer madness emanating from some moralistic circles on the Right, but I don't think consistency has ever been a major concern for extreme political movements of any stripe so I wouldn't hold my breath. In fact, the tapes cast Bush in such a favorable light that some on the Right, like William Kristol, wondered slyly if this wasn't a Karl Rove trick to make the President look better (ie sincere in his religious beliefs, more tolerant of homosexuality than his public policies, etc.). It certainly showed that he has more political savvy than one might expect. Above all, what I came away with is a sense that the Left has been underestimating this guy for far too long.

It is cheap and easy to make hay of the President's lack of intellectual curiosity, his ignorance of certain policy minutiae, and his famous mangling of the English language - all true to some degree or another. These shortcomings are treated as a victory to some on the Left, secure in their ability to assure themselves that no matter what this man is of limited intelligence so we can maintain the belief in our superiority. But to his supporters, these traits are endearing and comforting. Meanwhile, he proceeds to "ignorantly" win reelection, improving his Party's margin in both houses. Perhaps the moment is beyond overdue that we give the man some credit: like him or not, he is a shrewd politician, and while he may not be detail oriented, he has a pretty good grasp of strategery and what he intends to accomplish. At the very least, he is committed to a vision, which can easily trump wonkery when playing the political game. John Kerry didn't stand a chance.

It is in that light that we should analyze the highly irregular fiscal policy pursued by his administration and its allies in Congress. The new "cut and spend" paradigm has caught the opposition flat footed and uncertain. For example, how does the Democratic Party assail a Medicare drug benefit bill for its wasteful spending? That is an unfamiliar role reversal for the party dedicated to governmental largesse and social safety nets - a curveball that has led to hesitation. In that time of confusion and uncertainty, the Bush team has been able to accomplish much, although in the past few months they may have glimpsed the ceiling in the form of the recent push back on their duplicitous plan to dismantle Social Security.

Runaway Train

Kevin Drum mused on the new "third way" espoused by the Bush political machine:

In the past, Democrats were (roughly) the party of big government programs. People liked the programs but didn't like the high taxes that went along with them, so periodically they would revolt and elect a Republican.

Conversely, Republicans were (roughly) the party of fiscal responsibility and low taxes. People liked the low taxes but didn't like the stingy attitude toward government programs that went along with them, so periodically they would revolt and elect a Democrat.

George Bush and Karl Rove think they've found a better way: favor low taxes and big government programs. That way, everyone likes you and Republicans can rule forever.
Kevin might be right, that this is just a rank political strategy aimed at trying to please everyone, but I think that he is selling the President, and his political Rasputin, a bit short. Another misunderestimation. What cannot be denied is that this administration has turned budget surpluses into record deficits. Further, the plan to make the massive tax cuts permanent will insure ever increasing deficits as far as the eye can see. In typical misleading fashion, the administration's own plan to cut the deficit is based on fiscal numbers that assume that the tax cuts will not be made permanent. In other words, for Bush to have any success in reducing the deficits, he will have to lose on his tax cuts. Considering the makeup of both Houses: highly unlikely.

Further, these record deficits are impacting the value of
the dollar. If the dollar continues to decline, it could lose its status as the world's preferred reserve currency, which could set off a death spiral of increasing interest rates and less favorable terms for Treasury's to borrow abroad to finance the debt which could culminate in the Argentina-ization the American economy. As Praktike notes today, foreign banks are already beginning to set off ripples with their recent moves away from the dollar.

Eventually, though, these policies of deficit spending and devaluation of the dollar will force a reckoning. According to Drum, these will be the options:

-They start cutting back on programs.
-They start raising taxes.
-The economy eventually goes kablooey due to persistent and increasing deficits.

Unless the laws of arithmetic and/or economics change dramatically in the near future, I don't think there's a fourth choice. Do Bush and Rove understand this? Maybe. Maybe they vaguely realize they've gotten themselves in a jam but don't see a way out. Or maybe they just don't care because the piper won't have to be paid until Bush is out of office. I don't know.

Regardless, though, those are your three choices and all the loony talk in the world won't change the essential reality. So which one does the Republican party really prefer? Stay tuned.
I think Drum is correct that the choices will be limited to the ones he listed, but there is a good chance that he is falling into the same trap when describing the administration's role in these matters. He posits three alternatives: that the Bush team doesn't grasp the nature of the problem (not a chance), that they are stuck in an unexpected "jam" by their please-all-constituencies approach, or that they intend to pass the buck along to the next administration. Of the three, the third option is the most plausible, but I think that there is a fourth that Drum is ignoring: what if inciting an economic crisis, or the perception thereof, was no accident but the plan all along? What if Bush is smarter than we think.

It's The Deficits Stupid

Nadezhda doesn't like to jump into the Social Security fray too often, and it's a shame because she has much in the way of explanation to offer us less knowledgeable types. Luckily, like Michael Corleone, just when she thought she was out, they pulled her back in (ed note: that is probably the one and only time I will compare Nadezhda to an Italian gangster, fictional or otherwise). Her
latest effort is in keeping with her tradition. Although bordering on wonkish, the shorter version is: deficits matter more than other fictions and shortcuts. On the Trust Fund:

The Trust Fund is essentially a useful heuristic device. Yes, the federal government has an obligation to provide the trust fund with cash when the trust fund is called upon to pay out benefits, and failure to meet that cash call would be a default on government obligations. But since Congress can change the benefits and thereby change the calls on the trust fund, everybody's "property interest" in the trust fund can be eliminated with one set of votes and a stroke of the pen.
So despite the attempt to position Social Security as a separate entity, it is essentially a product of the overall fiscal picture, and dependent on budgetary flexibility to survive. Piercing the illusion, however, is risky business:

When you look at Social Security as part of the broader fiscal system, President Bush is indeed right -- there is, in fact, a crisis on the horizon, and a horizon that's far closer than 2042, or even 2018. Yet the Democrats haven't made hay with this logical response to the Social Security proposals, apart from occasionally remarking that the real crisis is in health care not Social Security. Why? Putting Social Security into the broader debate about fiscal policy puts Social Security on the same playing field as discretionary spending. And given the radical nature of the first Bush Administration when it comes to fiscal policy -- and a GOP-controlled Capitol Hill -- the Democrats quite understandably haven't been willing to risk that.
Ironically, or maybe not as per the above discussion, President Bush has been in some ways the most accurate in his appraisal of the current system:

The interesting thing is, on the GOP side, President Bush seems to have come closest to acknowledging my three-part mantra: he's backing away from "crisis," he maintains that the Trust Fund is notional, and he's started to recognize that taxes might have to be increased and benefits reduced. That, of course, hasn't stopped him from peddling the ideological goal of privatization, even though it's increasingly been proved by the Democrats to be a total nonsequiteur to the "problem" as posed by Bush. [emphasis added]
So from Nadezhda's insightful analysis, we can get a better picture of Social Security's problems, and the fact that its continued existence is inextricably linked the overall fiscal health of our Federal government. As noted, the Bush administration's fiscal policy has taken us to the brink of fiscal crisis, and thus threatened the continuation of cherished entitlement programs such as Medicare and Social Security - but the whole time people are delving into esoterica about trust funds and wage indexing and facts and figures that cause eyes to glaze over even for dedicated policy watchers.

Sleight Of Hand

Therein lies the brilliance. Conservatives have learned, sometimes the hard way, that they can't just come out and say to the voters that, philosophically, they are opposed to Social Security and Medicare and they would like to do away with them, yet that is an accurate description of the conservative ethos. There is a reason Social Security has been called the electoral third rail. So their only recourse is to create conditions that themselves dictate the desired outcome, to which they can appear as innocent bystanders and reluctant practitioners. If you doubt the intention, or the motive, consider the
internal memo leaked last month:

For the first time in six decades, the Social Security battle is one we can win -- and in doing so, we can help transform the political and philosophical landscape of the country...[this is] one of the most important conservative undertakings of modern times.
The first move in the chess match was to spike the deficits to unwieldy levels, while allowing for a devaluation of the dollar. Then, roll out the Trojan horses, secret weapons designed to appeal to Democrat's ideological leanings, beginning with Medicare. When the Medicare bill was introduced by the White House, they prevaricated about the costs. $400 billion they said, over a decade, and when the Medicare actuary (Richard Foster) was going to disclose what he believed to be the actual costs to Congress ($500-600 billion), his job was threatened with termination and he was silenced. Well, now it turns out Foster was an optimist. The actual costs of the Medicare bill are now believed to be approximately $750 billion, but hey, who's counting? As I said above, this was brilliant political maneuvering because the Democrats were boxed into a corner by their own ideology so that they felt they had to go along with this proposition. But consider this: the Bush administration took a system, Medicare, that was in dire financial straits and proceeded to saddle it with an enormous new liability that will only hasten the day when it is considered too cumbersome to continue. And in the process, they further ballooned the deficits inching nearer to d-day. Beware of Republicans bearing gifts.

This explains why, despite Nadezhda's observation that Bush is accurately describing the Social Security dynamic, he continues "peddling the ideological goal of privatization, even though it's increasingly been proved by the Democrats to be a total nonsequiteur to the 'problem' as posed by Bush." Privatization is another Trojan horse, made attractive by the hyping of a crisis. In order to fund the transition costs for Bush's scheme, the government will have to borrow in the neighborhood of $4 trillion. That's trillion with a "t". We can debate the merits of a partial privatization of Social Security, but can anyone with a straight face tell me that the federal government can afford to borrow $4 trillion dollars at this point in time? Especially when it does nothing to address the fact that we might need to shore up funding in the future regardless. Just another globe to place on Atlas's shoulders in the expectation that he will eventually shrug. Beware of Republicans bearing gifts.

We could chalk it up to Bush being stupid about economic matters. We could say that he is trying to please all constituencies and is a victim of circumstance, or that he is running up a big bill that he plans on passing to the next administration. But maybe he's outsmarting us all. Maybe he is playing a deliberate game of chicken with the oncoming runaway train of fiscal reckoning. The wealthiest Americans have certainly been building up a good amount of padding to cushion any fall. And there is brilliance in the subterfuge: Social Security and Medicare will be dismantled by a government whose hands are tied by a paltry stream of revenues and an overwhelming mountain of liabilities - themselves created, in part, by programs that the liberals signed off on under the assumption that they were sound. Oh yeah, and a crisis in the value of the dollar wouldn't hurt either. In the throes of such a financial collapse, or on the brink of one, the Democrats' ability to mount a compelling defense of these entitlement programs will be severely weakened - or so the theory goes.

In the meantime, the GOP will do their best to make sure the revenue draining tax cuts are made permanent, off the table so to speak when addressing the budgetary shortfalls. The whole time aided by the
double-talking, yet respectable seeming, Alan Greenspan and a legion of self serving economists who preach the gospel of entitlement reduction, but tax cut sanctity. If you think they'll play fair on this, can I direct you to the insidious campaign about the "real agenda" of the nefarious AARP.

That is how Grover Norquist and the leaders of the conservative movement will finally be able to starve the beast. Not by a frontal assault, but through the back door. And who better to pull off such a maneuver than the seemingly guileless George W. Bush. Who would see it coming?

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