Wednesday, June 24, 2015

Neoliberalism Unbowed: Obama Gets Fast Track and Tsipras Accepts Austerity

Two big dollops of bad news to process. First, Obama was able, with the assistance of senate GOP majority leader Mitch McConnell and 13 Democrats, to push through a critical vote on trade promotion authority, a.k.a., fast track (Jonathan Weisman, "Trade Accord, Once Blocked, Nears Passage"). Even The New York Times editorial board, always a staunch supporter of anything having to do with free trade, sounds a note of trepidation ("President Obama Must Use Trade Authority to Reach Better Agreements"):
To secure broad and bipartisan support for trade agreements, the administration needs to reach deals that address the legitimate concerns raised by many Democrats. The deals must contain strong and enforceable provisions on workers’ rights and the environment. They should bar, or at least strongly discourage, countries from manipulating their currencies to bolster exports at the expense of businesses in other countries. And the deals must not contain overreaching investor protection clauses that allow foreign businesses to file frivolous and abusive arbitration claims against governments by contending they were hurt by laws and regulations. Philip Morris Asia, for example, has used investor provisions in other treaties to challenge tobacco policies in Australia.
This is all whistling pass the graveyard. As I opined previously, the Democrats are in serious trouble if the Trans-Pacific Partnership passes, something which seems a done deal now that Obama is about to get fast track. Democrats are looking at shrunken numbers in Congress. So far unions are standing by a pledge to block donations to any member of Congress who votes for trade promotion/TPP. I am not confident that this pledge will hold up into next year when some lukewarm friends of labor like senator Maria Cantwell are in tough reelection fights. Nonetheless progressive rank-and-file support for Obama, the Democratic Party, and, by association, the S.S. Clinton will be hard to come by.

But the second item of bad news, a truly depressing development that surfaced on Monday, is that Greek leader Alexis Tsipras capitulated to the troika and proffered an austerity package of increased taxes and pension cuts. Yves Smith summarized on Monday in "Short Greece Proposal Update: Greece Folds":
Note contrary to earlier media reports, it technically does not lower pensions payments but does reduce pension spending by requiring higher contributions, including payments from retirees themselves. As the Guardian’s Athens reporter, Helen Smith, notes: 
……there’s a hefty increase in revenues from VAT over the next 18 months.
Greece has also accepted that pension must be reformed, and is planning a hike in pension contributions and an increase in health contributions from retirees. However, it appears that actual pension rates won’t be cut, allowing Athens to argue it has kept to its red line.
Another quick verdict is that “pensions are almost spared“. And while European leaders are urging their peers to consummate a deal, it’s not clear these pension moves will be enough to satisfy countries like Slovaka, which have said they can’t stomach financing Greece’s more generous pensions. One rebellious country could probably be shamed into line, but we have yet to hear of the reactions from the real hardliners like Finland and Spain, since the summit has just begun.
The Tsipras capitulation is very Obamaesque in that on the surface it does not reduce pension payments, but on the back end there are an increase in fees, such as the requirement that pensioners shoulder more responsibility for healthcare costs. Similarly, while Obamacare has increased Medicaid enrollment, it has all but wiped out the full maintenance of benefit healthcare plan that used to be the default blue-chip industry standard. Now 70/30 or 80/20 co-insurance is the new normal. You might not have a premium share but it amounts to the same thing if you go to the doctor.

Smith wrote yesterday ("Deal With Greece Still Looks Wobbly") that the Tsipras capitulation in no way guarantees that the debt deal with the troika is home free. Apparently German Finance Minister Wolfgang Schäuble is calling for even more Greek flesh. And Jim Yardley reports today ("Greek Debt Blueprint Gets a Cold Reception in Athens") that Tsipras faces a revolt from Syriza members in parliament:
“This makes life worse for ordinary citizens,” said Despoina Charalampidou, a Syriza lawmaker who is now a deputy speaker of Parliament. “The measures constitute austerity.” 
Sitting in her office in Parliament, Ms. Charalampidou stressed that the negotiations were continuing. She did not rule out supporting a final deal, especially if it included concrete European promises to reduce Greece’s public debt, estimated at around 320 billion euros, and provided structural funds to stimulate economic growth. 
“Otherwise, I don’t think it will pass,” she added. She said the prime minister was facing a “very complex, even insurmountable task.” She blamed European creditors for using negotiations to send a stern political message about challenging austerity, saying that they “want to humiliate the Greeks for the choice they made on Jan. 25,” a reference to Election Day. 
Harry Papasotiriou, a political analyst in Athens, predicted that most Syriza members would ultimately toe the line and support any deal endorsed by Mr. Tsipras. “He’ll survive politically, but down the road, he could suffer,” Mr. Papasotiriou said. 
Adonis Georgiadis, a member of the New Democracy party, which is now in political opposition after being voted out of the government in January, pounced at the chance to affix Syriza with the stain of austerity. “If this is not an austerity measure, can you explain what austerity is?” he asked. 
In the eyes of many Syriza leftists, any compromise that constitutes a major departure from their election mandate to roll back austerity is considered politically risky. 
Even though the negotiations have been ugly, Syriza remains popular, especially Mr. Tsipras, as many ordinary Greeks have relished the confrontation with Europe. But that has also placed Syriza in a tough political spot, since most analysts say compromise is inevitable if Greece wants to remain in the eurozone. 
“These measures cannot be voted for,” Alexis Mitropoulos, another Syriza lawmaker, told the Greek media on Tuesday. “This package that you have in your hands cannot be the one to be presented in Parliament.”
At this point I am inclined to think that Syriza members in the parliament are not as corrupt as the Democrats in the senate and that Tsipras will not being able to win approval for his capitulation to the troika. My thinking here is guided by the Sunday New York Times Magazine feature on Yanis Varoufakis that appeared in May. In that article finance minister Varoufakis was categorical: There would be no cuts to pensions; and if there were, he would resign from the government.

So we are at the point that either Syriza revolts and maintains its legitimacy as a standard bearer for a left alternative to neoliberal austerity, or it goes along with the Tsipras capitulation and another promising popular progressive movement is subverted.

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