The Failure of the Strong and the Weak

It is impossible to understate the disaster that will unfold from the 12th hour agreement reached by two political parties in a bi-cameral legislature and the executive branch of government. The parade of celebrating personalities are unable to inspire anyone to believe that this is a great moment.



Before anybody has even seen the ink, Sen. Lindsay Graham is tearing into the agreement's cuts of defense spending as abitrary, unwarranted, and weakening the defense America—although we have the largest defense budget in the world. Boehner leaked so many versions of the talks, including at one point parroting the President (vote yes Democrats!), he showed he is clearly an errand boy, without the integrity, intellect, or skills his office demands. Obama continues to have the largest blind spot in politics, although many of his advisers (Daley and Jarrett) have better instincts; he has chosen a path of no return in the name of compromise. It is a quixotic bargain.

By any measure, the agreement is failed policy. Estimates suggest that the GDP could shrink drastically, by 2% in the intermediate term and job losses of 750K and 1M could be associated with the cuts. Moreover, the details of programs and items defunded will have their own multiplier effect. Not only jobs, but the quality of American life and governance will be negatively impacted and impaired. You can not grow an economy without increasing aggregate demand. Tax cuts have proved to have marginal utility, andhave not increased labor or income growth for 90% of Americans. Government is the effigy of the common good.



Telling is the fact that no legislator on either side pointed out that this week five year Treasury bills were auctioned at negative interest rates. The US paid 96.5 cents to borrow a dollar for five years. We actually earned money by borrowing in the latest auction! (See Paul Krugman's blog post, “When People Pay You to Take Their Money.”)

The play we just witnessed was over power, not policy.The play we just witnessed was over power, not policy. These are two entirely different ends.

Economic policy is about debating wrong or right.
Political economy is about justifying power and might.

The whole deal has hinged on an appalling lack of information and a tenacious clinging to disinformation. And those who held high positions abandoned thier traditional roles. The strong are to protect the virtue of society and provide for its welfare. The weak are to remind us of our common bonds and fralities. This policy is not a clever decoy that subverts tradition--it is too rich in irony. Instead, it is a dipterous combination of draconian fiscal policy, legislative mal-intent, and personal failure by the strong and the weak.