Citizen Action Monitor

It’s a “fake debt crisis,” says Executive Director of economic think tank

No 230 Posted by fw, July 26, 2011

Given that we’re on The Real News Network, we should talk about the fake debt crisis first, right? I don’t think that we have an acute problem with default any time within the next 15 to 20 years. I think the biggest danger to what I call public solvency of America is out-of-control, runaway medical costs coupled with the demographics of the baby boom.” — Rob Johnson, in an interview with Paul Jay

Although the interview dealt with two main topics – entitlement programs and the debt crisis and Obama’s deal with Big Pharma to get his pro-pharma health care plan passed – this post will focus on the debt crisis, which was discussed in the first half of Jay’s 11-minute interview with Rob Johnson. Johnson, an international investor and consultant to investment funds on issues of portfolio strategy, is a Senior Fellow of the Roosevelt Institute and also the Executive Director of INET (Institute for New Economic Thinking).

Watch the full interview here, followed by a transcript of the debt-related segment of the interview.

TRANSCRIPT of the debt-related segment

Easier to Attack the Weak than the Wealthy (video), The Real News Network, July 26, 2011

As early as Jan 2009, Obama assured conservative columnist David Brooks that he would take on the big entitlement programs

Paul Jay – As I’ve been saying in some of my other interviews, in January 2009, President Obama met with some conservative columnists and apparently, according to David Brooks, reassured them that after some period of stimulus he would take on the big entitlement programs, Medicare and Social Security. So this debate that was going on for several months past — will they be on the table or not? — apparently, at least in President Obama’s mind, was settled some time ago. Which means, how much of all of what we’re seeing is somewhat of political theater? — on the other hand, with some very real and serious repercussions.

Now joining us to talk about all of this debt ceiling debate is Rob Johnson. Let’s just start with what do you make of, first of all, President Obama, his administration’s role in all of this, how this negotiations going on? We’re told that there’s a bit of an uprising in Democrats in the House, that there’s going to be a package that Obama’s going to propose or agree to, mostly all about cuts and very little about revenue.

“Obama aspires to be a referee, not particularly a Democrat in the budget negotiations”

Rob Johnson – Well Barack Obama’s spent very little time in the Democratic Party – four years in the Senate. So even though he is the Democratic president, he’s always sought to rise above. President Obama appears to aspire to be the referee, the leader who is above it all, non-partisan as he says, “the President of the United States” not particularly a Democrat in the budget negotiations.

Paul Jay – But if you go back to the promise, according to David Brooks, the commitments he makes to these conservative pundits that he is going to take on entitlement programs, it seems he had a real agenda about all of this even though he didn’t talk publicly about it. He certainly didn’t campaign on it.

Obama may not have talked publicly about taking on entitlement programs, but he said the opposite to fundraisers

Rob Johnson – Well when you say he didn’t campaign on it, not to the people, he may have campaigned to the fundraisers and what you might call the Robert Rubin wing of the Democratic Party, the economic policy team that he brought in, lock, stock and barrel, the whole group. They had always been in favour of entitlement cuts, cuts to teachers’ pensions and the various things that we see playing out in this slump.

Paul Jay – Why is it this wing of the Democratic Party wanting these cuts? I understand from a straight Republican point of view, at least in terms of their ideological framework they’ve always been in this sort of place. But why is this wing of the Democratic Party, why do they want these cuts?

For Obama and the Democratic Leadership Council, MONEY = POWER and getting re-elected is Job 1

Rob Johnson – Well, what you might call the DLC, the Democratic Leadership Council wing of the Democratic Party view themselves as pragmatists. These are people who say, “You gotta raise money.” They don’t say that out on Main Street. They talk nice flowery ideological stuff out on Main Street. But in the strategy room, you gotta to be practical, you gotta raise money. The Chamber of Commerce, all those guys helping the other side, so when you’re gonna do things to keep our fiscal accounts in balance, you’re not gonna beat up Wall Street, you’re not gonna beat up the military industrial complex, you’re not gonna beat up the medical complex.

Paul Jay – when you say raise money, you gotta raise campaign money?

Rob Johnson – You gotta raise campaign money to keep the party vital, to keep the party alive, to keep the media budget that is necessary.

Paul Jay – Because agenda item number one is get re-elected?

When you’re bailing out Banks Too Big to Fail, you cut “diffuse, weak, interests like senior citizens”

Rob Johnson – That’s right. If you’re not in power, it doesn’t matter. So, to stay in power you need money. To stay in power you need money – you start busting the budget by handing out candy to all your friends, some would call corporate welfare. And when you’re doing that, you gotta be able to cut other places. When you screw up, then you have to have a Big Bank Bailout. You just spent what Simon Johnson said was 40 percent of GDP, will be the change in the debt to GDP ratio resulting from this crisis. When you use that much, everybody’s afraid how’re we going to have what you might call capacity in reserve for the next crisis. So instead of going and taking on the tough – like pharmaceutical industry, the insurance industry, or something – what you start doing is what you might call using the logic of collective action and cutting those diffuse, weak, interests like senior citizens, like the people who have paid for Social Security and run a surplus all of these years, now get to run it down.

Paul Jay – I remember the press conference when the progressive democratic caucus, like 40 or 50 of them came out on the Hill and said we’re not going to go for anything that doesn’t have a vigorous public option in health care and then when push came to shove they did vote for the health care reform without the public option.

The logic of political survival dictates that the “haves” get the nod over the “have nots”

Rob JohnsonI would say the logic of money in politics is very strong. And those people – that progressive caucus – represent I call the other human issues. But the logic of survival in Congress and strength of party means they often get rolled – they often get defeated to the detriment of a large portion of the population and to the benefit of a very small proportion that essentially is the wealthy.

Paul Jay – So let’s talk about the sort of underpinnings of the substance of the argument. Which is that the debt is getting too big, and because you have to fill this hole . . .

“The debt crisis is a fake”

Rob JohnsonGiven that we’re on The Real News Network, we should talk about the fake debt crisis first right. I don’t think that we have an acute problem with default any time within the next 15 to 20 years. I think the biggest danger to what I call public solvency of America is out-of-control, runaway medical costs coupled with the demographics of the baby boom. But, you can go two directions to cut that deficit. You can reduce the cost of medical services by eliminating the monopolies in pharmaceuticals, monopolies in insurance, monopolies in hospital costs and hospital systems. Or you can cut back the quality of services. Obama passed the health care bill, where he essentially codified all the monopoly practices, which was the bad thing, and the good thing is he brought about 47 million people who were uninsured on to the scrolls. These people are now covered. But that’s something that’s on the budget. That’s something that portends, as I mentioned, with the demographics of the baby boom, to be a real source of concern, a potential debt problem 20 – 30 years out.

— Jumping to the end of the interview —

Paul Jay – So when you look at the polling, it looks like the majority of polls show that American would rather tax the wealthy than make cuts to social programs, they would rather see much bigger cuts to the military. There’s a recent poll that came out – I think it was the University of Maryland – with a significant majority for taxing the wealthy, massive cuts on the military side. None of this is getting through into the politics.

Rob JohnsonPolitics of the United States in this crisis period does not represent the people. It represents a very narrow segment of the population who does the fundraising.

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This entry was posted on July 26, 2011 by in evidence based counterpower, political action and tagged , , , .
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