The Obama Austerity Package

by Benjamin Studebaker

Even I failed to anticipate that the end of February would approach and the president would make no serious effort at preventing the March 1 budget sequestration from taking effect. At the end of January, we noticed that, with sequester included, the United States was prepared to see an austerity package 1.9% the size of GDP in 2013, more austerity as a share of the economy than was seen in Britain in 2011 or 2012 (though not both combined). What’s important to note is that, despite Obama’s recent token effort to get congress to repeal or further delay sequestration, which accounts for $78 billion of the $304 billion in spending cuts and tax increases planned for this year, all of this is his fault and his fault alone.

Why is this Obama’s fault? Our democratic politics tends to have a collectively short memory, but if I may, let’s go back to 2011 and remember how we got here:

  1. In April 2011, congress decided to start a fight over the debt ceiling.
  2. In August 2011 instead of  using the 14th Amendment or minting the coin, Obama makes a deal and signs the Budget Control Act of 2011, which creates a fiscal cliff if there is no “grand bargain” on the budget before the end of 2012.
  3. In Summer and Fall of 2012, everyone starts to notice that the fiscal cliff would plunge the country back into recession (an admission that implied some agreement with the Keynesian point of view).
  4. In December 2012 Obama cuts another deal whereby he eliminates most of the planned austerity, but not all of it–the payroll tax holiday ends, some of the spending caps inflicted by the budget control act remain on the books, the taxes of the rich go up, some Obamacare taxes come on the books, and the budget sequestration is delayed but not cancelled.
  5. With February of 2013 ending, it appears that sequestration’s delay will have proved ephemeral, and that it will be added to the austerity planned for this year.

All of this comes back to one fateful decision in 2011 in which Obama decided to cut a very bad and foolish deal rather than use the 14th Amendment or attempt to mint the coin. Barack Obama, a democratic president, will now be responsible for more austerity in one of the years of his presidency than the conservative-led coalition government in Britain has enacted in any of the years in which it has been in power. The American austerity package is competitive with all but the most extreme of those passed in Europe:

What has happened in Britain, that country with the most similar austerity packages? See for yourself:

The nascent recovery that appeared to be in progress in 2010 was strangled out of existence by cuts in 2011 and 2012, causing a double dip recession that is now, in the face of yet another quarter of contraction, threatening to go triple dip.

What makes this worse is that, at least in these other countries, the leadership has been open about its use of austerity. David Cameron in Britain is proud of his austerity position and constantly promises to follow up his cuts with more cuts. In contrast, Barack Obama campaigned in 2012 on a platform of opposing the deep cuts desired by republicans. It is a betrayal of the American people and of the American economy, and when growth slows or reverses as a result in 2013, he has left the door open for republicans to argue that it’s all because Obama has opposed cuts. What has really happened is that Obama has opposed the cuts in rhetoric while quietly allowing UK-level austerity to go on the books, a disaster that will mislead the public into believing that there have been not cuts and that any bad economic performance is the result of the lack thereof.

Most people will never look at graphs like this one, posted by Paul Krugman, showing a strong statistical relationship between the size of the austerity package and the weakening of the growth (austerity is in total cuts and tax increases as a percentage of GDP 2008-2012; growth is the percentage change in GDP over that period):

All they will see is a president who said no to spending cuts and an economy that subsequently performed more poorly. They won’t look up the figures, and neither will the “news” channels that inform them. They will play right into the hands of the republicans and set them up for another strong showing in the 2014 mid-terms, which will only serve to make further austerity and growth reduction or reversal more likely.

The left will make its excuses and try to blame the republicans in congress for it, but people won’t buy it, nor should they. When you control the presidency it is absolutely unacceptable for laws to be signed that will lead to a weakening of the economy unless they are signed over and above a veto. Barack Obama has never once in the course of the budget debate used the veto. He has never once used the powers given to the executive branch through the 14th Amendment. What he has done is capitulated and demonstrated weakness, and those on the American left who continue to sympathise with his position would, were they in power, make similarly weak leaders.

It is shameful for the most powerful actor in the government to preside over a year of austerity that he himself claimed to have opposed and even more shameful for that year of austerity to be deeper and more painful than those experienced in countries where the government really is run by people who want to cut the state. A man who has the power to do good but chooses not to use it is no less bad than the man who openly uses his power to do ill. Obama is not better than Cameron or Romney or Rajoy or what have you; he produces the same policy outcomes by his actions or lack thereof.

Oddly enough, it was during the summer of 2011 when my opinion on Obama turned–that was the first time in which I was completely convinced a superior outcome was possible if not for something the president did or did not do. I had been disappointed by the lack of a public option and the smallness of the stimulus package, but I had given Obama the benefit of the doubt that perhaps congress really had made doing more infeasible. When it comes to the Budget Control Act of 2011 and any and all evil that results from it, the blame is the president’s and the president’s alone.

What makes it worse is that the progressive rhetoric, the hopey-changey stuff, it makes everyone believe that left wing policies really are being enacted by this government, so that when bad things do happen, they are blamed on the stimulus and growth in the size of the government that was promised but never came to pass rather than on their absence. The lefty rhetoric in the absence of the lefty policies perversely makes it harder to enact real left wing policies in the long run. Who knows how many people will have had their view of what the state can do forever tainted or corrupted by Barack Obama’s misleading rhetoric in the face of his right-wing deeds? Who knows how many future left wing reforms or policies will never happen as a result of the aid and comfort this president gives to the right wing through the mismatch between his words and deeds? Utterly despicable.