After Wall Street and other big-money interests were safely back in the saddle, the debate over "deficits" began anew -- a debate that only seems to grip Washington after Wall Street, wealthy individuals, and other big-money interests have had their turn at the trough. The Republicans led the charge, as always.
Once Obama bought into the GOP framing -- minimal tax hikes (e.g raising the highest tax bracket from 35 to 39.5 percent) along with devastating cuts to Medicare, Social Security, and programs for the poor -- the (highly limited) debate was on: How many of these "deficit-reducing" cuts should we make, and where?
After the initial stimulus, which was successful but not large enough, Washington stopped talking about the real measures needed to fix the economy -- measures which would also ensure long-term deficit stability. Instead we saw a repeated ritual dance in which the GOP held the government itself "hostage" while the Administration, reluctantly or not, acceded in large part to deals that emphasized spending cuts rather than meaningful tax increases.
That distracted us from the real crisis in this country. And here we are. But a funny thing happened on the way to the fiscal forum: The "deficit emergency" -- never our greatest priority -- began to heal, at least as much as it can be healed under these economic conditions.
Here are some of the signs that The Problem, at least as defined by Washington's conventional wisdom, has passed:
A Break in the Clouds
Health care is unacceptably expensive in this country, and unacceptably inefficient too. We still need to address that. But the soaring rate of medical inflation has stabilized for the moment, even though it's outpaced wage increases. Long-term deficit projections look much better as a result.
The Federal government came surprisingly close a balanced budget last month. These numbers fluctuate, of course, but this shows how close we've come to deficit stability with the measures already in place. That's quite an accomplishment -- although it's a bitter one, given the price most Americans paid for it.
And despite all the doomsayers, global investors still believe in the U.S. government -- and the U.S. dollar. That's kept the Federal government's fiscal picture far rosier than the so-called "deficit hawks" predicted.
The Real Agenda
Let's stop pretending this is a debate about "fiscal responsibility" or "facing reality": It's about keeping taxes as low as possible for the wealthy and corporations while shifting as much pain as possible onto lower-and middle-income Americans.
Cuts to Social Security? They're meant to pre-empt a much wiser and fairer approach to that program's funding: Lifting the payroll tax cap which currently exempts high income.
Cuts to Medicare? They're intended to make the elderly pay more -- or suffer more -- so that Washington doesn't have to rein in the for-profit interests who are ruining our healthcare system.
Cuts to programs for lower-income Americans? Hey, they don't vote that much -- and they certainly don't write fat campaign checks.
Nothing more can be done to reduce the deficit until we address our real problems: jobs and income. More cuts will make the problem worse, not better. We need to spend for the short-term -- on jobs, growth, and opportunity -- if we want real stability in the long-term.