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Economist Dean Baker Predicts A “Really Bad Deal or No Deal” from Deficit “Super Committee”

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President Barack Obama welcomed the deficit deal as “an important first step” and urged both parties to work together on a larger plan to cut the deficit. The deal includes no new tax revenue from wealthy Americans and no additional stimulus for the lagging economy. It has a provision to create a joint committee of 12 legislators charged with finding $1.5 trillion in deficit cuts. The committee must hold its first meeting in 45 days and is expected to set in motion a lobbying frenzy. For more, we speak with Democratic Rep. Donna Edwards of Maryland, who voted against the plan, and economist Dean Baker, co-director of the Center for Economic and Policy Research. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: We continue to talk about the economic state of the United States of America. Dean Baker with us, economist, co-director of the Center for Economic and Policy Research, and Donna Edwards, Democratic Congress member from Maryland. Dean Edwards, this “Super Congress,” they’re calling it, a “super committee,” where will the—Dean Baker, where will the transparency be? Who chooses these members, and what kind of oversight will Congress have?

DEAN BAKER: Well, the leadership of Congress are going to pick the members. And we don’t know—I mean, actually, Representative Boehner and Mitch McConnell made it clear they’re only going to pick people who refuse, under any circumstances, to raise taxes, so we know where that goes. If tradition follows, we’ll probably see the most conservative Democrats picked to the committee, so we’ll either get a really bad deal or no deal. And if we get no deal, then the most likely story then is you get this sequestration process, which will take very large cuts out of the domestic discretionary portion of the budget. So these cuts, overall, are not that large a share of the budget, but of the share of the budget that’s got most education spending, infrastructure spending, student aid, a number of other important programs. We might see cuts on the order of 25-30 percent, and that doesn’t look like a really good picture to me.

AMY GOODMAN: What’s your overall reaction to the debt agreement?

DEAN BAKER: Well, I mean, what’s really infuriating is this is unbelievable nonsense. I mean, we had a collapse of epic proportions when the housing bubble burst. We’re sitting here with 25 million people unemployed, underemployed or out of the workforce altogether, and that’s what caused the budget deficit. That’s what’s astounding. It’s amazing President Obama doesn’t just get up there and say that. In fact, he deliberately misrepresented the story to the nation a week ago Monday, when he said that we had a deficit of over a trillion dollars, then the economy collapsed. No, that’s not true, and he knows that. The deficit was relatively small until the economy collapsed. So we’re looking at the wrong problem. So, it’s very hard to be very happy about this, because we have an enormous problem that people in Washington aren’t paying any attention to, and instead we’re focusing on a problem that isn’t there and making things worse.

AMY GOODMAN: What would have happened if the U.S. had defaulted, Dean?

DEAN BAKER: Well, it’s a very good question. I mean, we’re in uncharted territory. And I actually saw very little threat here, because the people on the front line were the Wall Street banks. If it were actually the case that U.S. debt was, you know, somehow trading at less than a hundred cents on the dollar, JPMorgan, Goldman Sachs and the rest almost certainly would be insolvent very, very quickly, which is why they would never let it happen. And, you know, if President Obama says, “OK, I’m always going to back down,” and the Republicans say, “We’ll go to the wall,” well, guess who wins there? So, this was just amazing. Basically, the banks had a gun to their head, and they said, “If you don’t give us everything we want, we’re going to pull the trigger.”

AMY GOODMAN: So, in terms of the mainstream media coverage, I mean, we know what President Obama said, but what do you think of the media coverage?

DEAN BAKER: Oh, it’s been absolutely abysmal. I mean, I read the Washington Post. We call them “Fox on 15th” here, “Fox on 15th Street.” They basically editorialized throughout the paper. I mean, you understand they have their editorial section, their opinion section. But they always have editorials about the exploding debt. They talk to the Pete Peterson-funded groups constantly. They never give what’s just simple, balanced picture. If you just look at the Congressional Budget Office projection, you see we didn’t have very high deficits; they weren’t projected until the economy collapsed. That’s as clear as day. The longer-term picture is a story of a broken healthcare system, again as clear as day. You could take that right from the Congressional Budget Office numbers. But instead, they keep harping on this idea of this exploding deficit.

They were actually, by the way — Washington Post was cheering on the Tea Party. So it wasn’t just right-wing extremists. There were people considered very respectable. They were saying, “Damn right, hold them hostage. Make them give up Social Security and Medicare,” which are the big targets for the Peterson group and the Washington Post. So you’ve seen a media — and I’ll throw in National Public Radio, a lesser extent, New York Times — basically have abandoned objectivity, because they have an agenda to go after Social Security and Medicare, which are hugely popular programs, even among the Tea Party. So, you have a small minority, but it’s actually not the Tea Party, it’s kind of an elite media of Wall Street minority.

AMY GOODMAN: You’ve mentioned Pete Peterson several times. Who is he?

DEAN BAKER: Pete Peterson is a Wall Street investment banker who quite openly has committed himself to going after Social Security and Medicare. He’s funded a foundation with over a billion dollars of his money that has this as its goals. And they fund a number of groups, think tanks around town. They created this fake news service, the Fiscal News Service Fiscal Times, I believe they call it. They have youth groups. A billion dollars goes a long way in Washington, and a lot of people are happy to take his money.

AMY GOODMAN: I wanted to bring Congress Member Donna Edwards back into this conversation. You know, the largest caucus in the House is actually not the Tea Party, it’s the Congressional—it’s the Progressive Caucus. Why can’t the Progressive Caucus set the agenda the way the Tea Party Congress members have?

REP. DONNA EDWARDS: Well, I mean, I do think, for example, if you look at the vote that took place on the debt ceiling, with a split of 95 Democrats voting for it and 95 against it, what you will see in the 95 of us who voted against that really bad deal were a large swath of the Progressive Caucus and a large swath of the Black Caucus and Hispanic Caucus. And so, I think the progressive members, for the most part, actually stuck together in opposing this deal.

What I will say to you is that one of the things that did come out of this, although not safe from the sequestration process outlined after this joint committee gets to work or not, is that we were able to successfully push back at the President, when he first put on the table Social Security, Medicare and Medicaid. Now, we spoke out very strongly. In fact, I led 70 of us in sending a letter to the President saying, “Keep that out of this discussion about the debt ceiling.” And there was so much pushback from us and from the American public that, indeed, those conversations were pulled out of this debt deal, although obviously we can see not permanently, when you get to this secondary process that’s been outlined here. And I think that we have to rev it up even more, because I think, as Dean said, these are programs that the American public really cares about. They’re programs that really benefit the middle class. And, you know, Dean and I have had this discussion. If we’re going to have any conversation about Social Security, it needs to be about how you raise the income threshold, instead of raising retirement age and cutting back on benefits.

And my fear is that this joint committee that is chosen, Republicans and Democrats, that you will have the Democratic leadership saying, you know, we need to choose a group of people who are going to consider everything, as has been outlined, and the Republicans will choose the hard-liners, and that sounds like a deal, to me, that we cannot win. And so—and the other thing is, I don’t know that I put that much stake in a process of six Republicans and six Democrats on a joint super committee, that—you know, really, when you have people who want to tear down government, they would love nothing better than to go to that sequestration process, because that’s exactly what will happen.

AMY GOODMAN: Well, what about this? What kind of power do you have with this little Super Congress in place? Will it be open? Will we hear, watch these hearings, their reports? And Dean Baker, you just said that it’s been agreed that both the Democrats and the Republicans, none of them will be for increasing taxes on any sector? Is that what you just said?

DEAN BAKER: Well, the Republican leadership has said that it’s going to be a condition. That’s what they’re promising their right wing, that a condition of being appointed to the committee is that you will not—you will not support any tax increase. The Democrats haven’t said that. I’m just saying the precedent has been that the Democratic leadership tends to appoint the most conservative or moderate members, I should say. I’d love to see Donna there. I don’t think she will be, you know.

One other thing I just wanted to point out. We were talking before about the media. The Progressive Caucus, of course, had its own budget. And that—I didn’t see that covered once in the Washington Post, New York Times, National Public Radio. So here you had a budget that was endorsed, 70-80 members of Congress—that’s a lot of members of Congress—never even gets mentioned. I mean, maybe you don’t like it; that’s fine. But, you know, it at least should be on the table, something that people could hear about. And, you know, I know members of the Progressive Caucus; that’s how I know about it. But you didn’t get it from the news media.

AMY GOODMAN: Well, we’re going to leave it there. I want to thank you both very much for being with us, Dean Baker, economist and co-director of the Center for Economic and Policy Research, and Donna Edwards, Democratic Congress member from Maryland, one of the members of the Congressional Black Caucus and the Progressive Caucus who voted against the deficit deal.

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