22 May 2011

Deficit Discourse (3) ~ The Oligarchy Comes Into View

Yesterday I posted a graphic from The New York Times showing that regardless of party affiliation the public thinks job creation and economic recovery are considerably more important than deficit reduction. It turns out that the public is pretty smart. They know where the shoe pinches.

But suppose one were really, really wound up about deficits? In the past I have posted graphics [1] [2] showing the sources of our current deficit woes - primarily military adventures abroad and the Bush tax cuts bequeathed to us by Republicans and more or less enthusiastically embraced by the Obama administration. (Let's be fair, it was less enthusiasm than political incompetence on the part of Democrats that insured the tax cuts would be renewed last winter.Lesson? If you have a majority use it to advance important policy goals because you may well lose it and then you are screwed.) In any case, the underlying problem has not altered one bit as the graphic I've lifted here makes clear. As this graphic indicates (the grey portion at bottom) the non-war, non-oligarchic (tax cut) portions of the pubic debt account for a declining portion of the deficit going forward.

So, why have the Obama administration and the Congressional Democrats allowed the Red-state types set the economic agenda? The mandate of the 2010 elections hardly is as crystalline as the deficit hawks claim. End the wars rescind the tax cuts and we need not be cutting programs that impact only poor, working class and middle class Americans. But that is bound to infuriate our oligarchs. And there is the nub of the problem: the Democrats are not interested in doing that.

Yet they may not have a choice. Because it also is becoming clear that job creation, even as an explicit policy, is not a sufficient remedy for our political economic problems. As Dani Rodrik has pointed out here and Mark Thoma amplifies his point here, a good portion of the problem is distributive. And in order to remedy that pattern it is necessary to step on some oligarchic toes.

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