Kerry: Practicing Austerity Even Before Getting Elected

Robert B. Reich says that long-term interest rates have not risen despite the grand old Republican deficit, because bond traders expect the next Democratic President to practice severe fiscal austerity to clean up the mess:

If soaring deficits are such a big problem, why haven't long-term interest rates also risen?. . . .

. . . The more plausible explanation [than Dick Cheney's view that "deficits don't matter"] has more to do with politics than economics: the parties have reversed roles . . .The Democrats have become the eat-your-spinach party, preaching the virtues of fiscal restraint, while Republicans invite Americans to a free lunch. . . .

. . . Bill Clinton, and now John Kerry, have taught the bond traders on Wall Street an important and comforting lesson: no matter how big deficits grow under Republican presidents, eventually a Democratic president will come along to clean up the mess. That confidence is helping to keep long-term rates down, despite the current out-of-control deficits.

More than a decade ago, the federal deficit was more than $300 billion — about 5 percent of the economy. President Bill Clinton and Congressional Democrats reversed this profligate trend by slashing spending and raising taxes. The strategy was hard to swallow, and not at all popular — not a single Republican member of Congress voted for Mr. Clinton's 1993 budget. Some of us in the president's cabinet thought he had gone further than he needed to; there was too little money left for education, job training and health care.

But there is no disputing that the plan had the intended effect. Deficits that had ballooned under Ronald Reagan and George H. W. Bush were brought firmly under control. Bond traders breathed great sighs of relief. Wall Street beamed.

. . . If he [John Kerry] becomes president next January, he will inherit a budget mess not unlike that which Mr. Clinton inherited. And Mr. Kerry has already committed himself to following Mr. Clinton's lead and imposing fiscal restraint. . . .

You see, Democrats and Republicans are engaged in the economic equivalent of Nixon going to China: Republican presidents can get away with utterly irresponsible fiscal policies because there's no one to their right who will make too much trouble for them. Democratic presidents can get away with fiscal austerity because there's no one to their left who will make their life too difficult. (Robert B. Reich, "The Mixed-Up Politics of the Deficit," New York Times, May 11, 2004)

In this regard, Candidate Kerry appears to be far more committed to austerity than President Clinton was. Even before getting elected, Kerry is already putting his neoliberal economic principle into practice! By his failure to vote, Kerry doomed the extension of federal unemployment benefits:

The Senate by a single vote rejected an election-year effort Tuesday to extend federal unemployment benefits.

Democrats tried to attach the benefit to a corporate tax bill. On a 59-40 vote in the GOP-controlled Senate, they fell just shy of the 60 votes needed to overcome objections that extending the benefits violated last year's budget agreement.

Massachusetts Sen. John Kerry, the presumptive Democratic presidential nominee, was the only senator who missed the vote. Kerry was campaigning Tuesday in Kentucky.

The amendment would have offered emergency federal unemployment benefits for six months, temporarily giving 13 weeks of extra assistance to people who exhaust their state benefits -- typically 26 weeks. (The Associated Press, "Senate Rejects Extended Unemployment Benefits," New York Times, May 11, 2004)