Deal or no deal?

Great conversation going on on CNN right now. Finally, finally, on the eve of a potential debt-ceiling deal passing through Congress, CNN's Ali Velshi is saying what has needed to be said throughout this process, and he's stridently challenging CNN's token Republican correspondent Alex Castellanos while he's at it. Maybe he (or others) have been saying this before and I haven't been picking up on it since I don't watch TV. What's he saying?

• It's the unemployment, stupid. As long as unemployment remains at 9.2%, all else is basically a moot point in the economic conversation. People who don't have jobs don't have money and don't spend the money they don't have on stuff they don't need, which is what we call "growth." (That's my dig on modern capitalism, not Velshi's, but it needs to be part of the conversation.) High unemployment = sucky economy = self-reinforcing economic death spiral. Simple as that. As long as unemployment remains mysteriously absent from the political debate, we're inherently talking band-aids at best, not real fixes.
• The debt-ceiling crisis is entirely self-imposed (by Republicans -- and we can't say that enough). Castellanos made a U.S.-Greece comparison, saying that we're spending ourselves into oblivion like Greece, and Velshi jumped in to say that's not it at all: Greece can't issue bonds; we have (deservedly or not) a AAA credit rating and can issue all the bonds we want. Apples and oranges. The Greeks spent themselves into oblivion, we put the gun to our own heads.
• The multiplier of government spending, and the un-economics of the cuts-only proposed deal: ostensibly, cuts and tax hikes have equal effects on the economy (they both take money out of citizens' hands and arguably reduce confidence/investment). As Velshi points out, though, government spending disproportionately affects the least-well-off citizens, who put most or all of the money they receive right back into the economy to purchase essentials. (I'd note that the implication is that essentials might be foregone if the government doesn't aid these people, but since they neither matter nor make themselves heard, I'd probably just be howling at the moon.) Anyway, tax cuts benefit the more-well-off, who don't spend every dollar they have (witness the record corporate cash holdings and CEO pay packages co-existing with the historically shitty economy). Bottom line: we'll see nearly 100% of money given to the neediest re-invested in the economy almost immediately, while money retained by the wealthiest will trickle into their trust funds and not "down" throughout the economy.
• Velshi's greatest hits: "I [speaking as the Republicans] just saved a life because I didn't kill somebody tonight." "We have now plugged the hole that we [Republicans]...shot into the bottom of the boat." "I don't understand how this [cuts-only deal] will create a single job."
  

These are all excellent, well-made points that are absolutely critical for the country to hear and understand. I might be a C+ student in economics, but since the Tea Party have clearly never taken economics, I'll take the liberty of running through a quick econ lesson here:

GDP = C + I + G + X, where GDP is the Gross Domestic Product (the most-used indicator of economic performance, the total value of all goods and services produced within a country in a given time), C is consumption (people and businesses buying stuff), I is investment, G is government spending and X is the export balance (value of exports minus value of imports). Pretty much since the Industrial Revolution, we've experienced the (completely unnatural) miracle of unceasing economic growth. That is, GDP has been steadily rising throughout the world (especially in the global North and West). Even with notable hiccups like the Great Depression, we're so conditioned to the false norm of perpetual growth after centuries of it that the economy is completely unprepared to confront the end of the party. Now, the music hasn't stopped, but C, I and X have taken huge downturns in the recession. That's pretty much what defines recessions: individual and corporate consumers lose confidence and/or disposable income, so they decrease spending, investment and export. To keep growth steady or increasing, the only option left is G: government spending. This is basic Keynesian economics, borne out by the Great Depression, New Deal and WWII: economy (C + I + X, GDP) crashed, FDR borrowed to increase G through the New Deal, then G finally went into overdrive to fight WWII. War and Depression over, C + I + X went way up as we all know. So did G, but the post-War "American Century" was fueled by private spending. Long story short: government spending is critical to picking up the slack in C + I + X during recessions (that's a lot of slack), and the only way to do so is to borrow. If the current stimulus has failed, it has thus failed through smallness, not over-largeness.

Secondly, unemployment is a "lagging indicator:" it stays low as recessions develop (it still takes time to lay people off), but stays high even after recoveries (it takes a while for businesses to decide to hire and then do so). Thus, to claim that our despicably high unemployment rate is a direct failure of the Obama administration is wishful thinking at best: remember, the recession started under the Bush administration, and unemployment picked up under the Obama administration mostly because it took until after "01/20/09" for the "lag" to end. That unemployment hasn't been a higher (i.e. all-consuming) priority of the Obama administration is inexplicably crazy to me, but to simply assert -- as most Republicans do -- that it is somehow purely the fault of Obama and his agenda is fallacious and/or outright untrue.

And some points of my own:

• Let's unpack the oft-cited "family finances" argument trotted out by the Tea Party. They claim that the government needs to live within its means like families. First of all, plenty of families don't do that: they have credit cards, they have mortgages, they have home-equity credit, whatever. Second of all, it is definitely not how the government operates, nor how it's meant to. We actually started building our AAA credit by taking on more debt, not balancing the budget: Alexander Hamilton (one of those Founding Father types the Tea Party are so eager to talk about) consolidated all post-Revolutionary state debts into Federal debt as a way of enticing the states to hang together politically and support the Federal government. That it worked isn't justification for indiscriminately taking on debt, but it's worth noting. Next, it's vital to keep in mind that the money the administration is requesting now is needed simply to pay off our old obligations: in family terms, the mortgage, not the fancy vacation. Families in dire straights should think twice about going deep into debt to buy expensive trinkets in future, but ceasing payments on the mortgage just because they suddenly realized there was a money crunch is neither logical nor possible. Where were today's debt hawks when we were tax cutting and double-war-fighting our way from a budget surplus to the current deficit?
• What's really in the new "deal?" I haven't had a chance to fully read through it yet, but this is important stuff. In addition to putting the government on a certain path for the foreseeable future, it will also tell us what each party's agenda, non-negotiable and compromised points are. That said, consider the cuts in context: is cutting defense spending a good idea in the abstract? Yes. But in the middle of two still-unfunded wars? Probably not. Remember the "Pottery Barn rule?" ("You break it, you buy it.") Well, we invaded two countries and we now have a moral responsibility for the end game in each of them, as well as the continued material and financial support of the (precious few) men and women actually doing our fighting for us. If we suddenly decide to save money on armor and bullets in an IED- and enemy-rich environment, the country will have failed its troops. The NYT ran a poignant story the other day about soldiers and Marines asking Chairman Mullen about what would happen to their paychecks if the government defaults when the Chairman visited Afghanistan. How dare the Republicans, Tea Partiers and anyone else who wants to mess around with default keep wearing those obnoxious little flag pins and spouting "support the troops" and "God bless America?" You go drive the IED-infested roads in a thin-skinned Humvee with nothing but your lapel pin for body armor and no paychecks coming in.
• Even if we get an 11th-hour deal, it won't be good enough, no matter what's in it. Re-imagining the U.S. and global economies is far too big and important a task to cobble together in the nick of time. Let's say this deal passes (it's probably better than even money). Any representative, senator or administration official who grand-stands, photo-ops, signs autographs, sings their own praises or otherwise takes any more credit or draws any more attention to themselves than to hang their head in shame and apologize to the American people for the lunacy of the crisis deserves public shaming and no chance at re-election. If the deal passes, we will have loaded the gun, put the barrel in our own mouth, fired and somehow dodged the bullet (this time). That should be cause for sober, somber reflection, not self-congratulation. By the same token, any media outlet that runs a couple of days of triumphal headlines and then moves on to the next celebrity melt-down or crisis du jour deserves equal blame. We've done tremendous damage to ourselves domestically and internationally (yes, Tea Party, there really are 193 other countries in the world -- and they're watching us, even if you're not watching them) in this manufactured crisis, and if we accept anything less than sincere apologies and honest work going forward from our government, we will only have allowed ourselves to have been duped again. If this doesn't convince us to demand better, we have the government we deserve.
• On changing the terms of the debate: the Times ran an article yesterday on freshman Tea Party representatives discovering "the power of saying no." (No wuckin' fay, right?) Multiple Tea Partiers said with straight, pained faces, how hard it was to look Boehner in the eye and tell him "No, sir" in response to his order that the freshmen "get [their] ass in line." Think about that: the freshmen are on such a debt-jihad bender that when Boehner's inner professional politician starts getting really worried about default and starts demanding compromise, they still refuse!! And the president and the papers still tell us both parties are equally at fault and aren't that far apart on a deal. That's laying on the BS thicker than the speaker lays on the fake tan. And, "In an e-mail to Republican House members, Mr. Boehner noted that 'discussions are underway on legislation that will cut government spending more than it increases the debt limit, and advance the cause of the balanced budget amendment, without job-killing tax hikes.' " My emphasis, but note what he's doing. This is basic Big Lie tactics, people: the more you link little (not-very) subliminal messages like this in people's minds, the more they start to drink the Kool-Aid. (Oh, and the balanced budget amendment is a crock of shit: see the point on family vs. government finances above.)
• And, once more with feeling, what the hell are you doing, Mr. President? Not only is he neither educating nor leading the Congress or the country, but he's prepared to sacrifice some of the most important Democratic priorities (little bitty programs like Social Security, Medicaid and Medicare) to placate the Tea Party crazies. Not only is he way to the right of his base, he's to the right of even the majority of Republican voters! What gives? If he put Social Security on the table confident that Republicans would demand more anyway in order to show us how crazy they are, he needed to say something to that effect. That he didn't has me deeply worried that he's actually willing to horse-trade the Democrats' sacred cows (which happen to undergird the American social contract) so he can feel warm and fuzzy about making a compromise. Worse, we don't really have a say in this if he pulls it off. Thought One: what kind of raging Marxist Mau-Mau Muslim uber-socialist trades away Social Security and tax raises with hardly a whimper (i.e. when are the Republicans going to figure out they've actually got a fairly conservative President on their hands?)? Thought Two: what if (God forbid!) they do figure it out? How screwed are we going to be if and when the Tea Party realizes that, rather than a Mau Mau, they've finally got a Democrat in the White House who may very well give them what's left of the New Deal and the unions on a platter. Yes, entitlement programs need re-working, but run that through your mind...
• Finally, on the crime that is pledge-signing: when all but a handful (less than 10) congressional Republicans have signed anti-governing pledges, what are they doing in office (and why on Earth do we keep putting them there?)? Fifty years ago, the country worried that Jack Kennedy was going to be a tool of the Pope. Now, we actively encourage/demand that our elected representatives sign intransigence pledges saying, in essence, that they won't govern. People, what are we doing?! We should be more careful what we wish for, because we may get exactly that. And what do you know: farmers have come out against immigration reform, business and bank leaders have come out against the debt debacle, etc. Who's over-interpreting their mandate now?