Dems must fight any 'grand bargain' (aka austerity)

As Bill Black notes, it can only be Obama's "vanity" making him promise a "grand bargain" on spending and tax cuts if he is re-elected.  In fact, we are now in a classic period of debt-deflation, the only answer to which is more public spending.

Sadly, it sounds like Obama has swallowed the Republican Kool-Aid that we're facing a fiscal "crisis," and that something must be done now to dismantle or privatize Social Security, Medicare, SNAP and a host of federal agencies, or else somebody's grandchildren will have to pay higher taxes.  

(In fact, the CBO estimates that the Budget Control Act that the Right so desperately wanted will turn about 4.4 percent projected GDP growth in 2013 into a recession in 1H 2013 with measly 0.5 percent GDP growth for the year. Much like what is happening in Europe: see below).  

In other words, Obama seems to have embraced austerity, even though the U.S., which partially embraced fiscal stimulus, has been growing consistently since July 2009 (albeit slowly), and partly because of the stimulus and not despite it.  By contrast, the EU is sadly realizing that austerity has been self-defeating: in the EU, debt-to-GDP ratios are growing; GDP is shrinking; and unemployment is growing.

If you still don't understand how that could be so, read this:

Why is [the EU's] fiscal consolidation so much more damaging now? Under normal circumstances a tightening in fiscal policy would also lead to a relaxation in monetary policy. However, with interest rates already at exceptionally low levels, this is unlikely or infeasible. Moreover, during a downturn, when unemployment is high and job security low, a greater percentage of households and firms are likely to find themselves liquidity constrained. Finally, with all countries consolidating simultaneously, output in each country is reduced not just by fiscal consolidation domestically, but by that in other countries, because of trade. In the EU, such spillover effects are likely to be large.

[...] The result of coordinated fiscal consolidation is a rise in the debt-GDP ratio of approximately five percentage points.  

P.S. - This makes 2001 posts to my blog, all-time, not counting the shit I deleted. So cue Strauss's Sunrise!:  "Buuum-buuum-buuuuuuuuuuum BUM-BUM! Boom-boom boom-boom boom-boom boom-boom boom-boom boom-boom boom!"