Fiscal Cliff? Obama Urged Not To Panic

Cliff, Shmiff: Obama Urged Not To Panic

WASHINGTON -- Republicans and deficit hawks are raising unnecessary alarm over the so-called "fiscal cliff" to pressure President Barack Obama into a "grand bargain" he shouldn't make, progressive economists and scholars said Tuesday at a symposium.

"My professional and personal message at this moment is: Don’t panic," said James Galbraith, a University of Texas economist who organized the event. "This is not a moment for high drama. This is a moment for no drama."

Automatic tax hikes and spending cuts that Congress previously agreed to -- some of them only because they were so extreme, the idea was they would force the two parties to find a better alternative -- are due to take effect starting in the new year.

The so-called bargain being discussed in Washington parlors would involve massive government spending cuts, including to social insurance programs, in return for modest tax increases.

Progressives are urging Obama to make a "mini deal" in the short term instead, and postpone serious bargaining until the massive tax hikes kick in and motivate Republicans to make concessions. They also want him to push for additional spending on infrastructure and other job-creating initiatives -- and leave safety net programs like Social Security out of the negotiations entirely.

"The first thing is, calm down on deficit and debt," said Chad Stone, chief economist at the Center on Budget and Policy Priorities. "What really matters is having a strong economy. Focus on that first."

The various elements of the so-called fiscal cliff are political in nature, not economic, the experts repeatedly noted Tuesday. Some speakers were more blunt than others about the path that brought the nation to this point and about who is to blame.

"One of our parties is nuts," said Bruce Bartlett, who served in senior policy roles in the Ronald Reagan and George H.W. Bush administrations.

The nation has a revenue problem, but Republicans "adamantly refused to raise taxes by as much as a penny, and this is what caused the crisis that we're now facing," he said.

But for some reason, Bartlett said, the Very Serious People -- an increasingly popular epithet for the political and media elite in Washington -- still take them seriously. "And Obama does not take them over his lap and spank them as they deserve."

He noted that Republican leaders were delighted when Obama succumbed to their debt-ceiling hostage-taking in the summer of 2011. "He just totally caved and they congratulated themselves," Bartlett said. "But now things are different."

Americans repudiated Republican economic policies in the election, he said -- and now, strategically, the tables are turned. "All Obama has to do is have the courage to wait," Bartlett said.

Come Jan. 1, taxes will go up so much on the middle class and rich alike that "anything that fixes the problem is per se a tax cut," he said.

Galbraith likened what Obama and the public are subjected to now to "a high-pressure sales job based on the exceedingly confident assertion of things that on further inspection you would find out are not true. "The right approach is to take a walk around the block, take a deep breath and have a cup of coffee," he said.

Michael Lind, author of Land of Promise: An Economic History of the United States, said he understood why conservatives are trying to put cuts to Social Security into the mix. "Their best chance is to create a completely artificial sense of urgency to bury the cuts in some grand comprehensive package," he said. "It's a brilliant political strategy. It's probably the only political strategy that can achieve what they want."

On the military side, unless action is taken before the end of the year, the Pentagon budget will be cut about $50 billion starting in 2013 -- bringing it roughly to 2006 levels, still well above the Cold War historical average in real dollars, the experts said.

Carl Conetta, co-director of the Project on Defense Alternatives, pointed out that the U.S. spends vastly more than any other country in the world on defense spending -- four times as much as China and Russia combined.

"What we should be hearing is this: If this is not enough so that we cannot afford a 13 percent cut, then we either have the wrong strategy or the wrong leadership or both," Conetta said.

After Bartlett's remarks, HuffPost asked him why he thinks the "Very Serious People" still take what they say seriously. He blamed the media. Citing "journalistic conventions," he said, reporters "refuse to say someone's a liar or bat-shit crazy."

He expressed some hope for change. "I know there's a lot of reporters who chafe at this," he said. "They may be a little less willing to kowtow to the Republicans [after the election]. But it seems to be deeply ingrained."

Watch C-SPAN video of the event.

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