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The Right Message

The progressive counter-attack against the President’s emerging “austerity” political strategy and program is beginning to emerge. In the last few days, we’ve seen posts by Nancy Altman and Eric Kingson of Social Security Works, Jane Hamsher, Robert Kuttner, and Dean Baker writing against the thrust by the Administration, the National Commission on Fiscal Responsibility and Reform, the Peter G. Peterson Foundation and its network of related organizations, and the deficit hawks in the Congress, seemingly aimed at Social Security. These posts make or imply a number of points sometimes in the form of questions. They are:

— The commission is unaccountable.

— It meets in secret.

— Its members will keep their recommendations secret until after the election, and then will present them to a lame duck Congress that is itself unaccountable.

— That Congress will avoid open hearings, and debates, and also floor amendments in the House and Senate on the recommendations.

— The Commission lacks diversity in both opinion and also in racial and gender makeup.

— The Commission members appear to have already made up their minds that America’s fiscal problems are mainly due to over-spending rather than under-taxing, and, even though they insist, that everything is”on the table” seem to have decided that military spending can’t be cut.

— The co-chairs, Erskine Bowles and Alan Simpson, based on public remarks they’ve made appear to have a clear agenda oriented toward cutting Social Security and Medicare.

— Since the Commission appears to have already made up its mond about its findings, it’s whole process is just a way of avoiding accountability in the upcoming elections. It’s all just an end-run around the democratic process

— The Commission is working very closely with Peter G. Peterson, a multi-billionaire who has been persistently seeking the end of Social Security as it currently exists for decades. Peterson is leading a public effort calling for Americans to get ready for “tough choices” on entitlements and has held a “Fiscal Summit”, funded press outlets, made deals with the Washington Pot and CNN, funded America Speaks, an organization whose purpose it is to educate Americans in the Peterson deficit hawk point of view through a series of town halls held across the nation, and, evidently, a Peterson-funded non-profit organization is funding Commission Staff.

There is no particular reason at this time to focus on Social Security, which is now in surplus to the tune of trillions of dollars, and is many, many years away from financial difficulty even from the point of view of the most avid deficit hawk.

— Americans, when polled, have shown that they prefer tax increases to cutting Social Security benefits.

— To protect our grandchildren, the Commission shouldn’t be focused on cutting benefits and spending, but should be investing in providing jobs for parents and good educations for those grandchildren.

— Peterson has set up a network to control the media environment and is “buying off” the Press. He has been setting it up for years and is playing a similar role in this area to the one The Kaiser Foundation played in the health care reform fight.

— The Current budget deficit will be used to justify Social Security cuts.

— Peterson is setting the agenda for the Commission which will take Defense cuts and Medicare expansion off the table as means to cut Government spending. Instead that agenda will formulate questions with only one answer, cut Social Security.

“It’s going to be important to tell the tale of Peterson’s inexorable march and diffuse the notion that the Commission is simply responding to temporal economic factors. This is class war, pure and simple. The rich against the poor. Hedge fund billionaires and defense contractors against senior citizens struggling to get by.”

— As a cure for the financial crisis, austerity will be worse than the disease.

— Obama is using his fiscal commission to seek “a bipartisan consensus on both spending cuts and higher taxes.”

— The nations of the European Union are being used as an object lesson to justify the thrust for austerity.

— “The budget deficit here and overseas does need to return to a more moderate level — after we get an economic recovery.”

— “In this context, it is insane to think that we can recover from a financial panic and an economic recession by inducing a worse recession in the name of fiscal soundness. For now, while the real economy heals, there is no substitute for aggressive central bank intervention to restore markets in sovereign debt. The right grand bargain is tough financial reform and limits on Wall Street–so that this crisis is never repeated. The wrong grand bargain is austerity for everyone else.”

— To meet the present crisis, “. . . the new consensus in economic policy thinking is that we have to cut Social Security to establish our credibility with bond markets.”

— But the crisis we’re in now is due to the same people who were completely incapable of seeing the $8 trillion dollar housing bubble and the crash of 2008 coming, who persuaded us that we had to bail out the banks to save the financial system, and that we had to tolerate the outrageous bonuses that have accompanied the Banks getting back on their feet.

— These are the same folks who now tell us that we have to have austerity, and specifically that they want us to cut Social Security to please the bond markets, which really means, that they just want us to cut Social Security.

In the main, these are good talking points against the deficit terrorist effort. But, I can just see now how the proponents of these cuts will reply to them. They will say, well that’s all well and good, however, everything we’ve done is all justified because there really is a very serious crisis on our hands, and that is the crisis of fiscal unsustainability, of rapidly increasing deficits, national debts, and debt-to-GDP ratios, which will eventually make it impossible for the United States to borrow money at reasonable rates to fund our deficits. As our interest bills go higher and higher over time, a greater and greater proportion of the Federal Budget will go to financing the debt, and the United States will begin to face solvency problems, because it won’t be able to borrow and then we’ll have a ruinous tax burden for everyone and austerity anyway. On the other hand, if we impose a measure of austerity now and show that we are credit worthy there will be no borrowing problem, and the austerity will be less extreme.

In short, they will reply, we have a real problem, and it is that we are proceeding on an irresponsible path, that will lead eventually to insolvency, because Governments, like families, can’t run deficits forever, can they?

And then they’ll go on to argue that even Bob Kuttner agrees that “The budget deficit here and overseas does need to return to a more moderate level — after we get an economic recovery,” and even Keynesian economists like Paul Krugman believe that deficits can’t be run forever, and that we need less Government spending in the long run, and even Dean Baker is on record as saying that deficits can be a real problem under certain economic conditions. So, we are talking about a real problem and the way in which we differ from you progressives who are arguing against our position is not that you don’t think that deficits are a problem, but that you don’t think they are one right now. So, how about compromising on setting in place a framework for reduction in Government spending when the time is right, years down the road. That way you’ll be showing that you’re fiscally responsible, and we’ll get something important which is a set of controls on spending that can become operational when a measure like the debt-to-GDP ratio reaches a certain level that you and we can agree upon. And also, we can make small changes in Social Security that are not overly painful, but that build in a more responsible fiscal framework for the future.

To avoid an outcome and counter messaging like this, that is very likely to emerge from the political conflict over austerity, and to lead some bi-partisan compromise that includes cuts in Social Security, none of the messages we’ve seen from the posts by Altman and Kingson, Hamsher, Kuttner, and Baker are really sufficient. Messaging that can fight the kind of downward spiral of compromise that the deficit hawks are trying to set up has to go more directly at their assumptions. It has to argue along these lines.

1) There is no deficit problem for the National Commission on Fiscal Responsibility and Reform and the US Government to respond to in the first place. We are looking at a fantasy problem whose purpose is to distract us from the real issue of the impact of specific Government spending efforts relative to the Public Purpose.

2) There is no emerging solvency problem either for any of our entitlement programs, or for any other US Government programs. The President, and the other deficit terrorists are wrong when they say: “we are running out of money.” That is another fantasy that cannot apply to a Government sovereign in its own currency and owing no debts to anyone in any currency other than its own.

3) There is no need for an austerity program, and there will be no solvency risk for any of our Grandchildren, or any debt burden that they will have the least difficulty in managing, even if the Government continues to run deficits indefinitely.

And 4) the whole deficit terrorist position of the President, The Commission, and the Peterson Foundation and related interest groups is based on an erroneous and misleading analysis of our economic situation. Being charitable, this may be because their understanding of the monetary system, and of economics in a fiat monetary system is equivalent to their understanding of the economics that apply to people and other entities that are users of currency rather than issuers of currency. That is, they are confusing the players using dollars with the scorekeeper of dollars, who has an unlimited amount of points.

Uncharitably, however, many of the deficit hawks may understand very well that there is no solvency risk for the Governments sovereign in their own currency, but they may prefer to maintain the illusion that there is, because they think that then they can profit more from international markets, and prevent the people of various nations from realizing that interest rates on Government debt instruments can be entirely controlled by the Governments themselves, and imposed on the international markets, just as the Japanese Government has imposed near zero interest rates for short-term debt since the 1990s.

Messages 1) to 4) need to be sent by mainstream progressive organizations, because they are the only ones that can prepare the way for the total victory we need over the deficit terrorists. The people of the United States need an expansion of entitlements and the safety net. Not a contraction. The economy needs this too as a stabilizer of aggregate demand and as a hedge against excessive recession. As a nation we cannot afford to have the Administration and the Petersons of the world gain one inch of territory on the issues of cutting Social Security and Medicare. To prevent that, we need to discredit "their problem" as a the fantasy it is, and persuade people that the problem is the recession and lack of full employment, not imaginary fears about insolvency, deficits, or inflation appearing in the midst of a near depression.

Even more we have to persuade people that numbers like the deficit, the national debt, and the debt-to-GDP ratio are not measures of government profligacy, but measures of the extent to which the non-Government economic elites have created a failing economy that must be supported by the automatic stabilizers we have in place to protect against the consequences of their failures. The values of these measures will become less frightening when we treat the real problem, the ruined economy. And, until then, their relatively high level presents us with no solvency risk, and no threat to the well-being of our grandchildren or the future of the United States. Finally, we must message about the unimportance and irrelevance of the deficit so that it won’t continually be used by our leadership as an excuse for not solving American problems. If we fail to do that, we will be in a continuing fight over Government spending based on the very fact of it, every time we want to pass some progressive legislation, ignoring, in the process, the only relevant question about it, namely whether implementing a particular policy and the spending that goes along with it will benefit us or not.

(Cross-posted at All Life Is Problem Solving and

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Joseph M. Firestone, Ph.D. is Managing Director, CEO of the Knowledge Management Consortium International (KMCI), and Director and co-Instructor of KMCI’s CKIM Certificate program, as well as Director of KMCI’s synchronous, real-time Distance Learning Program. He is also CKO of Executive Information Systems, Inc. a Knowledge and Information Management Consultancy.

Joe is author or co-author of more than 150 articles, white papers, and reports, as well as the following book-length publications: Knowledge Management and Risk Management; A Business Fable, UK: Ark Group, 2008, Risk Intelligence Metrics: An Adaptive Metrics Center Industry Report, Wilmington, DE: KMCI Online Press, 2006, “Has Knowledge management been Done,” Special Issue of The Learning Organization: An International Journal, 12, no. 2, April, 2005, Enterprise Information Portals and Knowledge Management, Burlington, MA: KMCI Press/Butterworth-Heinemann, 2003; Key Issues in The New Knowledge Management, Burlington, MA: KMCI Press/Butterworth-Heinemann, 2003, and Excerpt # 1 from The Open Enterprise, Wilmington, DE: KMCI Online Press, 2003.

Joe is also developer of the web sites,,, and the blog “All Life is Problem Solving” at, and He has taught Political Science at the Graduate and Undergraduate Levels, and has a BA from Cornell University in Government, and MA and Ph.D. degrees in Comparative Politics and International Relations from Michigan State University.