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This article is from the November/December 2013 issue of Dollars & Sense magazine.

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Crooks, Liars, Idiots, and Plutocrats

BY MATÍAS VERNENGO | November/December 2013

Economic historian Carlo Cipolla famously noted that human beings fall into four basic categories: the martyr who takes an action and suffers a loss while producing a gain to others; the genius or prodigy who takes an action by which he/she makes a gain while yielding a gain also to society; the crook (and liar, too) who takes an action by which he/she makes a gain causing others a loss; and the stupid person who caused losses to others while deriving no personal gain and even possibly incurring losses. At first glance, the recent shutdown of the government and the narrowly averted debt-ceiling crisis seem to indicate that we are dealing with idiots, the likes of Michele Bachmann, Ted Cruz, Louie Gohmert, Steve King, and other Tea Party Republicans.

After all, there was no rational reason to shutdown the government to preclude what is essentially a Republican-designed health law (created by the Heritage Foundation and identical to “Romneycare” in Massachusetts), that would create the conditions for finally attaining universal health coverage in the United States, a goal that all the other advanced nations achieved decades ago. In particular, the alternative to “Obamacare” proposed by the GOP is nonexistent—except for leaving millions of Americans without proper medical care. On top of that, the shutdown, together with the previous sequestration and the overall contractionary fiscal stance, contributed to make the very slow recovery even slower, leaving an unnecessarily large portion of the labor force unemployed. The actual size of the negative impact of the shutdown might be debatable (some have estimated it in the billions of dollars), but there is little doubt among reasonable economists that it was clearly negative.

The Default Prevention Act of 2013, included in the continuing resolution, reinstated government funding at pre-shutdown levels through January 15, 2014, and authorized suspension of the debt limit through February 7, 2014, at which point we would be basically in the same situation we were in October. Under the agreement reached to end the shutdown and to avoid breaching the debt-ceiling limit, the House of Representatives and the Senate agreed to hold negotiations to reach an accord by December 13 on a plan for fiscal policy for the next ten years.

This is not very different from the previous debt-ceiling crisis in 2011, when the so-called “Super Committee” was charged with finding $1.5 trillion in savings over a ten-year period, but eventually failed to reach an agreement. That triggered, in early 2013, the infamous “sequestration,” cuts of discretionary spending totaling around $1.2 trillion over the same period. Note that, as for the Super Committee and the previous Bowles-Simpson National Commission on Fiscal Responsibility and Reform, the terms of any accord by the members of the Budget Panel led by Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI) (who were members of the Super Committee) would imply further “fiscal adjustment.” The main disagreements are that Democrats would like to see targeted spending cuts, and to increase revenue by closing tax loopholes for corporations and wealthy individuals, while Republicans would not want any tax increases, and demand cuts to entitlement spending.

The attempt at bipartisanship did not go all that well last time, and chances are that it will fail again. It must be emphasized that the actual net level of debt, once government holdings (by the Fed and other agencies and trusts) are discounted, is actually not high by historical standards (around 60% of GDP rather than 100%), and the rate of interest on it is at historical lows. So, actually, borrowing more to speed up the recovery would be the sensible thing to do.

It would, however, be a mistake to conclude that we have been dominated by a group of rogue and irrational idiots hell-bent on destroying Western Civilization in the name of Christian values and some crazy, ill-defined notion of freedom. It is important to note that, over the last two years, the radical elements within the GOP have actually achieved something. They have consolidated a contractionary fiscal stance, barring any possibility of the fiscal expansion that we need for a healthy recovery. In fact, real federal government spending has been contracting ever since the end of the 2009 fiscal package.

In other words, the inability to find a bipartisan agreement on fiscal issues is not merely a “mistake.” And the Tea Party actually does play an important role in the strategy of the conservative movement. They play in the United States the same role that the Troika (European Commission, European Central Bank, and International Monetary Fund) plays in Europe, and that the International Monetary Fund (IMF) has traditionally played in developing countries. And austerity is at the service not only of cutting expenses on services that affect the neediest in society, but also keeping wage demands in line, and so protecting the interests of corporations and the few that benefit from that. The persistent battle on the budget and the debt ceiling are part of the old “starve the beast” strategy, which allowed for tax cuts and increased spending, particularly on defense, in order to show that government is bloated and out of control, and that social spending has to be slashed.

So, while the public faces of the shutdown and debt-ceiling crisis were the Tea Partyites in Congress, with Ted Cruz and his filibuster as their poster child, it is important to remember that these groups have received the backing of foundations and shadow groups controlled by a few wealthy plutocrats like the Koch brothers. It is those wealthy at the top, who are not affected by the shutdown, that should be blamed for the current crisis. Class warfare, not stupidity, and the crooks, liars, and plutocrats at the top, not the “idiots” in the public spotlight, are the problem—and austerity, persistent unemployment, and worsening income distribution are the results.

is an associate professor of economics at the Universiy of Utah. He blogs at Naked Keynesianism.

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