Austerity American Style (Part 1)

Rasmus, Jack
Date Written:  2013-08-01
Publisher:  Against the Current
Year Published:  2013
Resource Type:  Article
Cx Number:  CX19875

Obama’s signing a token “Fiscal Cliff" tax agreement on January 1, 2013 raising taxes on only the wealthiest 0.7% households while effectively removing the Bush tax cuts from the deficit debate; the Obama administration and Republican radicals in the House jointly allowing the $1.2 trillion in 'sequestered' spending cuts to take effect on March 1; and then Obama's unilateral offer to the Republicans, within days of the sequestered cuts taking effect, to cut an additional $630 billion from Social Security and Medicare lead to a convergence between the Obama administration and House Republicans.The article looks into deficit cuttings negotiations and its results.



To better understand how the past four years of deficit cutting negotiations between Obama and House Republicans represents a grand collusion, it is useful to recap briefly the milestones in the history of deficit (aka austerity) cutting. Within days after the Teapublicans took over the House of Representatives following the 2010 midterm elections, the Obama administration fully embraced the Simpson-Bowles Commission’s recommendations as the basis for negotiating a “grand bargain” in deficit reduction.

The Commission’s approximate $4.4 trillion total target was agreed to, moreover, by virtually all parties in Congress, including Tea Party radicals — and has been ever since. That includes House Tea Party annual budget proposals in 2011-12 by Paul Ryan, by the Gang of Six in the Senate, and by outsiders like ex Senators Domenici and former budget director Alice Rivlin, and all others.

It’s always been $4 trillion and change as the total deficit reduction target. The difference between Obama and Democrats on the one hand and Tea Party radicals on the other was the ‘mix’ between spending cuts and tax revenue hikes, between defense spending and social program costs; and between taxing the wealthiest 2% and the middle class.

In June 2011, Vice-President Biden was assigned by Obama to begin negotiating the basis for the “grand bargain.” He and House Speaker Boehner attempted and failed, even though Biden had offered a package of 87% spending cuts to only 13% tax hikes. The following month, Obama took over the negotiations with Boehner. With no counter concession from Boehner, the president offered to cut Social Security and Medicare by $700 billion. Indeed, from the very beginning offering big cuts in Social Security-Medicare has been the Obama bargaining tactic by Obama to entice the Teapublicans to a Grand Bargain.

But Boehner and the Teapublicans did not bite on Obama’s offer. Instead they demanded an “all spending cuts” agreement in exchange for raising the federal government debt ceiling in August 2011. They got their way: Obama and the Democrats caved in on all his demands for some tax revenue hikes. All they got from the August 2011 “debt ceiling deal” was an agreement from the Teapublicans not to raise the debt ceiling issue again until after the November 2012 elections.
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