The Sales Pitch Proves the Point

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Something about our federal deficit crisis and the austerity solution seems familiar. Maybe it's the thin factual arguments used to identify the problem and formulate a solution. Maybe it's the advertising. The whole thing reminds me of the sales pitch and media frenzy that led us to invade Iraq.

War Was for Sale and It Made Sense, So We Shopped
The Iraq invasion was sold to Americans in the wake of a disaster. It began almost immediately after 9/11. Americans were bombarded with images of the 9/11 attacks interlaced with American flags. A PSA appeared on television just days after the attacks showing a row of houses flying American flags with the tagline "everything changed." We were reminded that "freedom is not free," and they even sold jewelry that says so [2]. They also sold lots of American flags and those plastic magnetic yellow ribbons for our cars. Then they sold us Iraq.

The country's mood for knee jerk security and patriotic shopping was a good thing for President Bush and his advisors because they had a problem. They wanted to invade Iraq, but the 9/11 villains didn't live in Iraq. The problem was easily solved by making  it up. So, they cherry-picked facts that fit and created a simple logic. The 9/11 culprits bent on destroying us were Muslim. Iraq has Muslims. Iraq was caught with some weapons after the First Gulf War, and was resisting ongoing inspections. Iraq's leader liked to brag about his strength and hide his weaknesses. So, as the logic went, Iraq  must have weapons of mass destruction and is bent on destroying us.

Problem Facts and The Media Blitz Fix 
An analysis [3] by researchers with the Fund for Independence in Journalism for the Center for Public Integrity tracked the comments of eight top U.S. officials including President George W. Bush, Vice President Dick Cheney and Secretary of State Colin Powell from September 11, 2001 to September 11, 2003 and found 935 false statements used to sell the Iraq War to the American people. Many of the false statements involved charges that Iraq had a stock and continuing to make weapons of mass destruction, the famous WMD.

False claims that Iraq had WMD and the ability to use them were repeated and amplified by Bush Administration officials on the Sunday talk shows,  lower level officials in their districts and home towns, the television networks and the 24/7 cable news system until we were in a media frenzy of mushroom clouds [4], fake vials of anthrax [5], and portable and/or underground weapons facilities. The sales pitch worked too. Our 9/11 enemies became our Iraqi enemies and we invaded Iraq. Even when WMD were not found in Iraq, there were few recriminations and no consequences for the war salesmen. We were already in Iraq, so the solution fixed the facts.

Another Disaster
In 2008, we had a crisis of a different sort. It was a financial crisis brought on by the big Wall Street financial houses, hedge funds and insurance companies betting both for and against residential mortgage borrowers. Those borrowers had been sold inappropriate loans on dishonest terms by mortgage bankers and mortgage brokers,. The bankers and brokers made bonuses and yield spread fees for putting people in risky and complex teaser rate, adjustable loans, often sub-prime when the borrower qualified for prime. The homes were overbuilt and overpriced causing neighboring homes to be overbuilt and overpriced. Inflated values encouraged second and third mortgages to support the level of spending that had been encouraged after 9/11.

Added to the mix of too much debt and overinflated home values were massive layoffs from the ailing financial sector unsupported by any significant manufacturing sector, and a health care crisis that increased medical debt, both fueling the mortgage defaults and foreclosures that collapsed the investments threatening the very existence of Wall Street.

Everything came to a head in 2008 when the big investment houses started to go down, the companies that insured them started to go down, and the number of foreclosures on Main Street became noticeable to the average American. It was a crisis, but that didn't end up being the real problem for our nation's leaders. The TARP bailout passed quickly with barely a peep of dissent. Big banks were forced to purchase failed banks and investment houses and they started to pay off the TARP debt to avoid regulation of their operations.

Who to Blame?
The real problem came later when people, still suffering from their own versions of the crisis, looked for someone to blame. When people saw Wall Street bailed out without a similar bailout for them, they began to brew tea and ask questions. Americans knew that investment managers, hedge funders, insurers, mortgage bankers and brokers were a large part of the problem. There was initial talk of capping fatted compensation packages and regulate mortgage and financial products. That lead to a backlash largely funded by corporate campaign donations. These stronger voices told us that the regulations people were demanding in reaction to the economic crisis would stifle innovation, kill jobs.

A More Acceptable Villain
The financial sector needed to deflect blame and consequences. What better villain than an old one? The federal deficit. The federal deficit had been on the national radar since Clinton reversed the one created by Reagan and H.W.Bush. It was reintroduced as villain during the 2008 presidential campaign with Obama blaming Bush for mortgaging our children's future and John McCain promising to cut the deficit like Reagan did, but really didn't.

There's Always Some Truth and a Little Fuzzy Logic in a Good Lie
Sure, there's a huge federal deficit. It was created during the Bush Administration by unchecked war and military contractor spending, earmarks, corporate welfare [6] and tax cuts. Few not in the anti-war movement made a peep during the almost decade long run-up.

The logic for claiming the deficit is the root of all our problems and spending cuts are the only solution is simple and intuitive. If individuals have to tighten their belts to avoid personal bankruptcy, foreclosure and bill collectors, the U.S. government must have to tighten it's belt to avoid new taxes and Chinese bill collectors.

Problem Logic. Problem Facts and the Media Blitz Fix Part II
There's a problem with the logic and there's a problem with the facts. Let's talk about the logic first.

As the logic goes, just as your kids have to spend less on their cell phones, MP3 players and computer games because you're on a salary freeze, public benefits provided through the federal government must be cut. The argument, however, requires us to recognize no difference between a family of 6 and a country of over 300 million people. Micro economics is macro economics. That argument works so long as no one asks a real economist. The truth of the matter is that the effects of the federal deficit have nothing to do with the effects of personal spending [7].

Now, the facts. The story goes this way: The largest public benefits program we have, Social Security, is a huge part of the debt problem and must be cut, but there's a catch. The facts don't really work out. Social Security is not paid out of the general budget that's in deficit. By law, it's paid out of a trust fund created by the specific social security payroll taxes. The Trust Fund is not broke [8] and it's not just full of IOUs [9]. The Trust Fund is invested in Treasuries just like other investments held by fiduciaries (people or entities with special duties to the people for whom they hold funds). If the Wall Street financial houses sold bundled treasuries rather than bundled sub-prime mortgages, there would have been no crisis.

So, what do American leaders do when the solution doesn't fit the crisis? They do what they did when al Qaeda and WMD had to be placed in Iraq, they blitz the media.

This year, deficit talk exploded. Suddenly, there were a flurry news stories [10] on the deficit and candidates debated its causes and solutions in their campaigns. Here in Illinois, Mark Kirk who voted for every Bush deficit budget suddenly became a fiscal hawk. Even many of our Democratic candidates were talking deficit. It fit well with the talking points about Bush's runaway spending which makes it easy to use progressive arguments against progressivism.

Now, we're on notice that we have a huge federal deficit, our children are going to have to pay it back, and at the same time, we're going to have to borrow to pay it back because our Chinese debtors want to be paid back now. In fact, things are so bad that we're going to have to borrow more from China to pay back China even though that doesn't really make any sense.

Enter the Fiscal Responsibility Commission and Long Time Austerity Advocate, Pete Peterson
By executive order [11], President Obama established a bi-partisan National Commission of Fiscal Responsibility and Reform [12], sometimes referred to as the Deficit Reduction Commission and other times referred to as the Fiscal Commission, or even the cat food commission [13] by some. The Commission has been haunted by problems and skepticism from the beginning. It was created by executive order when a gridlocked Congress was unable to legislate its existence [14]. Controversy continued when it was learned that working group meetings would not be opened to the public and that many of its members [15] had already concluded [16] that government programs, including Social Security, would be changed or cut, even before investigation and discussions had even begun.

Another criticism of  the Commission is that multi-billionaire hedge funder Pete Peterson [17] had somehow insinuated himself into the action by providing the underfunded Commission with staff [18]. Peterson is now promoting the effort (or his version thereof) with a $20 million dollar advertising campaign [19]. The campaign is called OweNo.com [20] and boils down the looming debt crisis and spending cut solution to sound bytes. The introduction of the campaign was timed just one day before release of the Commission's Co-Chairs proposal [21] or was the odd timing the other way around [22].

Oweno.com [20] tells its story through a fictional politician named Hugh Jidette (huge debt) who is supposed to mock the conservative arch villain, the tax and spend Democrat.  Jidette's message is that we've (mysteriously) run up a deficit that amounts to about $13.6 trillion. We have to borrow to pay our debt. Borrowing (like freedom) is not free. The deficit will harm the U.S. economy and future generations will inherit the problem. The campaign provides no details, no calculations, no charts, no projections. It's all mushroom cloud and no WMD. Peterson isn't selling any jewelry, yet, but he does have ecards [23] you can send to friends and family.

The message uses several already well-known progressive arguments for improvements to government programs, but twists them around. Oweno.com acknowledges that we pay too much for health care, but insinuates that it's the federal government paying twice what the rest of the world pays and not individuals like you and I. The site uses all the verbiage and imagery of the mortgage and financial crisis applying the same logic to federal debt and spending as if Medicare, Medicaid and Social Security are the same thing as your or I buying a house we cannot afford with a sub-prime loan on bad terms. Peterson himself talks about "rising above partisanship", but fails to acknowledge that his claims are  no different than than conservative talking points refusing to acknowledge that Social Security has its own trust fund and that it has not been depleted.

On Wednesday, the Commissions Co-Chair's introduced their proposal to the American public in a press conference. Co-Chair Erskine Bowles started by calling the deficit "a cancer". "We are on the most predictable path to an economic crisis that I can imagine [24]," he added. Then, they rolled out the cuts. Social Security, not part of the federal budget and not in crisis, is cut by increasing the retirement age, indexing to a lower inflation rate, means testing and increasing the contribution ceiling [25]. Other recommended cuts include cuts to Medicare and Medicaid while our health care remains in crisis, eliminating student loans while education is in crisis and ending the mortgage interest deduction while homeowners are in crisis.

It doesn't matter whether the deficit is the problem or the proposed cuts the solution. The cuts have been set down on paper and released to the press. A huge advertising campaign supports the whole thing. The problem is proved by the solution and the solution is proved by the sales pitch.