This piece from Michael Hoexter, “Loathsome Wall Street Deficit Hysterics: ‘Blame the Old and Sick, Not Us,’” is rather thick but contains some real insight:
Deficit Hysteria as a Diversion from Wall Street Culpability and Fallibility
The timing of the deficit hysteria campaign is not well explained by the pecuniary benefits that Wall Street hopes to gain from a privatized Social Security or other financial “private-public partnerships” that will arise from austerity. The potential for these benefits have been there for decades, while the deficit hysteric campaign swelled from a preoccupation of a few Washington insiders to the hegemonic position in the Washington elite within a matter of a year (2009-2010). Peterson and Rubin had already been campaigning for more than 15 years to gut the welfare state in the guise of “entitlement reform” and “fiscal responsibility”.
Rather than the prospective gains that Wall Street hopes to harvest from a Grand Bargain, we need to look to those factors that were present in the period 2007-2010 to understand the campaign’s timing and intensification. The proximal causes or precipitating events for the deficit hysteria campaign can be summarized as follows :
1) The Global Financial Crisis of 2007-2008 and immediately following, for Wall Street and some investors, the receding into the past in early 2009 of the “sky is falling” period of late 2008.
2) Growth of a quasi-libertarian anti “bailout” discourse on Wall Street, just as Wall Street had been conveniently bailed out after the “sky is falling” period had ended.
3) The rise in government budget deficits and government spending as the economy tanked, tax receipts plummeted, automatic stabilizers like unemployment insurance kicked in, a stimulus package was implemented, and, in the US, a new Democratic Administration took office.
4) After the election of a superficially left-of-center (in reality right-of-center) African American President, the old reactionary anti-Keynesian, racist, and crypto-racist Right rolled out an anti-Democrat and anti-Obama campaign of slander and exaggeration.
5) Pete Peterson’s sale of the Blackstone Group and increase in his already considerable wealth, after which he promised to spend a good portion of it on his decades long anti-welfare state campaign
6) With the Citizen’s United decision and a Supreme Court favorable to corporate and plutocratic power, a political atmosphere and legal environment of growing permissiveness for elites to manipulate elections and policy debates.
7) President Obama’s shift or reversion to an anti-Keynesian, anti-stimulative economic policy soon after the implementation of the 2009 stimulus package.
Of these seven precipitating events, President Obama has played a pivotal role in providing intellectual and political support for the deficit hysteric campaign by applying his assumed but unjustified reputation as a liberal, as well as the powers of the office of the US President, to an intent focus on federal deficits. President Obama had a critical role in the transition from a reluctant “Keynesian” stimulative approach to the economy of early 2009 to fiscal austerity thereafter. Obama should be held accountable, at least in his reputation and legacy, for his abandonment of an expansionary fiscal policy targeting unemployment and boosting the real economy for policies tailor-made by and for Wall Street deficit hysterics over the last three years. What would have been a line-up mostly of Wall Street and the far Right was made to seem a leadership “consensus” position via Obama’s measuring his economic performance by reference to reducing budget deficits and sponsorship, among other things, of a conclave of deficit hysterics in the form of his budget deficit commission.
While Obama’s role has been critically important, the primary constituency for his turn towards austerity was Wall Street and not the American people at large. Wall Street’s sudden concern about governments’ “fiscal responsibility” in 2009 and beyond can be best understood as a combination scapegoating of government for Wall Street’s failings and misdeeds and an attempt to create a “balance of terror” at a very vulnerable time for Wall Street and its business model.
Wall Street had just crashed the world economy in a decade-long orgy of financial irresponsibility, systematic fraud, and predatory financial practices. Wall Street had helped inflate a huge asset bubble and sold fraudulent financial instruments based on the notion, among others, that asset prices would continue their upward assent indefinitely. Wall Street had used (private) debt, a.k.a. leverage, to take maximum advantage of the bubble that formed. As the bubble burst, prominent Wall Street firms had become insolvent and more would have gone bankrupt if the financial system had not been bailed out by the Bush and Obama Administrations.
Via the false deficit hysteric narrative of government’s fallibility, liability, and potential insolvency, Wall Streeters and those who identify with them attempt to distance themselves from the bubble-prone, leverage-dependent nature of their business and exonerate the Wall Street perpetrators of financial mayhem and distract from the systematic fraud at the heart of the Global Financial Crisis of 2007-2008. While there were and are calls for holding Wall Street accountable and restructuring the private securities business along the lines of the Glass Steagall Act of 1933, the deficit hysteria campaign has been counter-propaganda aimed at the would-be prosecutor and regulator of Wall Street, the US federal government. The moral and political outrage that should have been directed largely at Wall Street and its enablers in government, was instead diverted or countered by the falsely-premised, “fiscal responsibility” discourse.
The deficit hysteria campaign then becomes compellingly attractive for Wall Street’s representatives when it is employed as a ruse to escape their own culpability and to deny the fallibility of the financial markets upon which they base their living. Some of them have then poured their money into what is meant to seem a high moral calling but is in fact an elaborate and destructive excuse for their own largely vaporous and toxic contribution to the economy, and, in many instances, to society as a whole.
Deficit Hysterics’ Total Moral Bankruptcy: Misdirecting the Frustrations of Youth onto the Welfare State and the Elderly
But there is still one rung of moral turpitude below the irresponsibility and opportunism of the deficit hysteria campaign as an evasion of responsibility for the global financial meltdown. We have seen more recently Pete Peterson’s group “Fix the Debt” and now the Wall Street tycoon Stanley Druckenmiller call for a form of intergenerational warfare in favor of cutting Social Security. Starting from the premise that there is a fixed amount of money which is then divided between generations, payments to the the old and aging are targeted as the main fiscal and social problem by the likes of Fix the Debt and its front youth group “The Can Kicks Back”. As with many of the supposedly “popular” initiatives of Fix the Debt and Peterson front groups, the amount of spontaneous interest by the “people” or “youth” is often outweighed by reports of an orchestrated campaign by paid staff.
In a now fairly well publicized and widely condemned speech to Bowdoin undergraduates, Wall Street tycoon and Bowdoin graduate Stanley Druckenmiller, a long-time deficit hysteric and someone who profited handsomely from the subprime meltdown (as a contrarian), decried Social Security as “generational theft”. Druckenmiller, treated by some in the media as a daring truth teller because he included himself as one of the Baby Boomers who was stealing (via Social Security) from youth, omitted to mention to his audience that the dire outlook for the young has much to do with how he specifically made his billions. Yves Smith has documented Druckenmiller’s financial career and how he is implicated in severity of the Global Financial Crisis which influences the employment outlook and earning potential of a majority of young people, far more than any payments made by government to the elderly.
The misdirection and moral perversions of Peterson’s and Druckenmiller’s generational warfare campaigns is, in addition, a dangerous travesty of the very real accusations that the current generations of younger people might have against older generations be they of Gen X, the Baby Boom or before. The young should be angry that older generations have, for one, supported or acquiesced to the neoliberal ideology that has given morally and intellectually bankrupt rich people like Druckenmiller an honored and largely uncontested platform from which to speak to them. The neoliberal ideology of which deficit hysteria is the latest outcropping, has ideologically elevated and promoted the socially destructive activities of the financial sector, i.e. people like Druckenmiller, Rubin, and Peterson. In equal measure, policymakers inspired by neoliberalism have helped hollow out the economy of well-paying jobs and downgraded productive work, dispersing that productive work throughout the world to lower wage countries. Furthermore that ideology, despite heaping lavish praise on innovation and entrepreneurship, has gutted governments’ critical supports for small businesses and funding for innovation more generally.