Peterson Deficit Summit To Examine, Recommend Latest 'Soak The Poor' Policies

This just in, yesterday: the pro-aristocracy Peter G. Peterson foundation is holding a deficit summit in Washington, DC, to highlight the terrible dangers of the government spending money in a recession. Or, mostly, to provide cover for corporate-friendly politicians who want to help their friends in the finance industry and starve the government of the resources, both political and material, needed to end regulatory capture.

Regulatory capture [1] is a super-boring term (I did almost fall asleep just from typing it) for what happens when industries take over the relevant government agencies who are supposed to be keeping an eye on them, for totally boring reasons such as making sure they don't tyrannize, steal from, defraud, maim, kill, poison, or otherwise abuse an unsuspecting public. Regulatory capture is like when the inmates take over the asylum, or the chief of police answers to the local crime syndicate.

But it sounds so bad when you put it like that. Which is why you need a cover story, a distraction. An alibi, if you will. And you will.

That alibi is the neoliberal economic story about how government spending wrecks The Economy, government regulators prevent job growth, and business activities that aren't outright illegal should be judged only on the profits returned to investors.

As Robert Kuttner explained so well in his preview of the summit, our current deficits are caused by decreased tax revenues and increased spending obligations [2]. In short, so many people lost their jobs at once that Medicaid and unemployment spending had to go up while consumer spending dropped, so tax revenues went down along with the lowered incomes and decreased business revenues. Kuttner explains about the guest list, and here's where we best see the connection between regulatory capture and economists who are taken seriously:

... For starters, note the prominent role of Robert Rubin and Alan Greenspan. If any two Americans are responsible for the economic, financial and fiscal mess we're in, they are Rubin and Greenspan. Much of the rising deficit, after all, is the result of the financial collapse. The main reason for the big deficits is that tax revenues are down in a severe recession. The financial collapse also required the government to step in with increased public spending.

If the orgy of financial deregulation that led to the crash had two prime sponsors, the Democratic one was Rubin and the Republican one was Greenspan. Inviting these characters to a fiscal summit to devise a way out of the crisis is like inviting arsonists to design a seminar on fire prevention. ...

Government spending is the duct tape and bailing wire holding this economy together. The Peterson summit is going to be a series of polite diatribes on how, now that those two free wars are kind of winding down, the government should reconsider it's long-standing policy of providing Social Security pensions and helping people who either can't work anymore, or who can't find work because Wall Street blew up the country's job engine after the government decided to let the finance industry do whatever it wanted.

At the end of the crashes, at the end of an industry getting to trick the public, what happens is that the poor end up getting soaked for a lot of money and often finding themselves too poor to do anything about it. At the same time, the playing field tilts against the government acting to get it back for them, or helping them directly, or meaningfully alleviating their misery. This is all enormously profitable, and evidence suggests that this is the whole point.

Kuttner notes that former President Bill Clinton is going to be at the Peterson event, lending his name and credibility to the event, as well. It's both unfortunate and worrying.

When you talk about regulatory capture, the term 'revolving door' comes up a lot. This describes the way people transition back and forth from industries under regulation to the agencies that regulate them, sometimes to the judges that rule on their cases. It might sound like all you needed to do, all!, is get the government to hire different people.

Though I think the interesting question isn't whether people in government could hire different people, but why they evidently don't want to. I don't know, but I suspect that many of them have bought the alibi, and think that the rich getting richer by soaking the poor is simply an unfortunate side effect of a functioning economy rather than being the entire goal of cutting regulations and arguing against social spending.

We can't run an experiment to see if conservative economic activists would support other policies if, say, Halliburton could make billions off of getting government contracts to administer unemployment, so we'll have to speculate about what they'd tell politicians constituted a sound, sober policy under those conditions. Though we can look at another policy question: food.

Last year, at the Clinton Global Initiative, I got to ask President Clinton a question about the way seed patents hurt the poor all over the world [3]. He said, “If it were up to me, we’d do it all organically.” Without going into detail, the definition of organic agriculture excludes patented seeds, the promotion of which he supported during his time in office and which both his successors have also advocated for. He seemed to understand that there were problems with seed patents in agriculture, but still feels compelled to support them through CGI's work with various corporate entities.

Clinton also seems to recognize that forcing Haiti's markets open to subsidized American food exports [4] destroyed their farming economy and made the country both poorer and more hungry. It was profitable to do it, though, and I'm sure everyone told him while he was in office that selling Haiti subsidized food, just like peddling the US' patented seed products, was the thing that just had to be done. Even if the effects were sometimes unfortunate. Even if you knew it hurt people.

'If it were up to me ...,' they say, as if it isn't.

It's more acceptable to publicly proclaim that you don't believe in climate science than it is to say that you don't believe in these tired economic cover stories based on crazy premises such as the economic rationality of human beings, a self-correcting market and the ability of profits based on scarce resources to expand infinitely. Because regulatory capture is a small problem compared to the capture of people's minds by these tired, economic orthodoxies that were old when the public stopped believing in the Divine Right of Kings.

The current economic regime owns the minds of the policy elite. I think they really believe their hands are tied, that it isn't up to them, in spite of all the mounting evidence of damage and destruction done by untrammeled malefactors of great wealth. They have the ears of the kings, so we're probably going to be suffering this superstitious nonsense for some time to come.