The American economy under our Great Libertarian Experiment

The fight to “defund” Obamacare (see last week’s post) is a brilliant sleight-of-hand. Keeping everyone focused on the implementation of one new government program distracts us from the deep cuts in government spending on practically everything else.
We don’t know precisely how President Barack Obama and the Republican-controlled House of Representatives will reach an agreement to avoid shutting down the federal government and avoiding a default on the national debt, but it’s likely to involve further spending cuts in exchange for… well, nothing really. Obamacare—passed as a conservative, market-based alternative to a single-payer universal health coverage system—was already the law of the land, and Republicans will surely continue to solicit contributions by promising to repeal it.
What Obama is trying to preserve is the notion that universal health insurance is a public good (a decade ago the parties differed on how to, not whether to, achieve that goal), but the price of this small step toward the international norm has been an austerity program that should be delighting libertarians and small-government conservatives. Obama has often publicly supported the idea of cutting government even when the economy is in great need of more spending and investment, as when he made the commonsense but economically questionable assertion in his 2010 State of the Union speech that “families across the country are tightening their belts and making tough decisions.  The federal government should do the same.”
The point is, despite the introduction of what detractors call “socialist medicine,” the overall response to the Great Recession and disappointing recovery has been just what libertarians want: a smaller government. It may not be as small as they’d like it to be, but in a nation this big and complicated, all changes are incremental. We don’t need to wait until House Republicans vote to cut farm subsidies (if they ever do) as well as Food Stamps to evaluate the effects of government cutbacks. The age of libertarianism is already here.
In the current issue of Mother Jones, Kevin Drum looks at the age of austerity, here and in Europe, and compares it with previous responses to economic crises. In afollow-up blog post, he notes:
With Washington DC's attention focused on the antics of Ted Cruz and the tea partiers, who are threatening to shut down the government unless Obamacare is defunded, it's easy to lose sight of the bigger picture: Aside from Obamacare, the budget battles of the past three years have been exclusively about the Republican obsession with cutting spending while we're trying to recover from the worst recession since World War II….
Reagan, Clinton, and Bush all benefited from rising spending during the economic recoveries on their watches. Only Obama has been forced to manage a recovery while government spending has plummeted.
Drum’s magazine story is worth reading in full, but he makes a strong case that the Obama administration should be treated as a case history in dealing with a recession in precisely the manner that deficit hawks prescribe:
…with recovery still perilously weak in 2010, the obvious response would have been a second dose of stimulus spending. But the political world was already moving in the opposite direction. Republicans had voted against President Obama’s first stimulus bill almost unanimously, and there was little reason to think they’d be any more receptive to a second round. Nor was it just Republicans. By the fall of 2009, with the economy still on life support, the Wall Street Journal was already reporting that there was internal disagreement within the White House about whether to push for more stimulus or to begin a pivot toward addressing the country’s mounting deficits. In the end, for reasons both political and ideological, Obama decided that he needed to demonstrate that he took the deficit seriously....
First came budget deals in 2010 and 2011 that reduced the deficit by $760 billion. Then, in August 2011, Obama struck an agreement with Republicans to resolve the debt ceiling crisis, which produced about $1.1 trillion in spending cuts along with the promise of more from a congressional supercommittee. At the end of 2012, the fiscal-cliff showdown resulted in $850 billion in tax increases and spending cuts. Finally, in March, sequestration cuts (cued up when the supercommittee failed to produce a deal) kicked in, to the tune of another $1.2 trillion. Taken as a whole, these measures have cut the deficit by $3.9 trillion over the next 10 years. And that doesn't even count the expiration of desperately needed stimulus measures like the payroll tax holiday and extended unemployment benefits.
Andrew Sullivan links to the Drum story and, characteristically, puts in dramatic terms, saying that the push for spending cuts was partly the result of partisan “sabotage to make Obama first a one-term and now a failed president.”
But Slate’s David Weigel doesn’t let the Obama administration off so easily. He points out that the sequestration spending cuts are getting more popular because Obama and his appointees continue (as in the State of the Union passage mentioned earlier) to preach austerity rather than addressing sluggish growth and joblessness:
Look, if you mention deficits before employment, which of those problems sounds more important? The deficits, obviously. If you canonize lower spending, and then mention that there are some thoughtless spending cuts that are killing jobs, you're tacitly saying that the thoughtless cuts did some good. This is a big, nagging liberal problem—literally nagging, as non-Obama Democrats are tired of hearing it.
Hmm… who are these “non-Obama Democrats” and where will they go in the future? It’s hard to imagine Hillary Clinton becoming their leader, since she would be seen as repudiating her husband’s austerity policies (during economic expansion, not contraction) as president in the 1990s. Will someone make a splash by attacking Obama’s acquiescence to conservatives on fiscal policy—the way that Obama implicitly attacked Clinton and other congressional Democrats for acquiescing to George W. Bush’s foreign policy?
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Samuel Winsor
4 years ago
Calling our recent spending cuts a "grand libertarian experiment" is quite a stretch. Libertarianism is much more than austerity for the sake of austerity, which seems to be the motto of the fiscal conservatives in the modern GOP.


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