Creating Jobs, Trimming Deficits: Progressive Budget Plans Challenge Dems

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Creating Jobs, Trimming Deficits: Progressive Budget Plans Challenge Dems

by
David Moberg

On their deadline—Wednesday, Dec. 1—the co-chairs of President
Obama’s Fiscal Commission promise to present a plan to reduce annual
federal budget deficits and accumulated debt, even though they are
delaying a vote of the 18-member, bipartisan, fiscally conservative body
until Friday.

But the nation would be better served if Erskine Bowles, former chief
of staff to Bill Clinton, and former Wyoming Republican Sen. Alan
Simpson shredded their proposal. Then they should submit instead either
one of the two proposals from progressive groups that were unveiled on
Monday and Tuesday (or the earlier, less fleshed-out proposal from Rep.
Jan Schakowsky, a Commission member).

The progressive proposals—from Schakowsky; from a “Citizens’ Commission on Jobs, Deficits and America’s Economic Future” (convened by the Institute for America’s Future); and “Investing in America’s Economy” from
Our Fiscal Security (a partnership of three leading think tanks—the
Economic Policy Institute, Demos, and the Century Foundation)—all forge a
similar path, and all head in a direction different from Bowles and
Simpson.

It’s the direction most unions want to take. AFL-CIO president
Richard Trumka strongly endorsed Our Fiscal Security, and two labor
union presidents—Larry Cohen of the Communications Workers and Mary Kay
Henry of the Service Employees—served on the Citizens’ Commission.

All of these progressive proposals advance a plan for a recovery
that aims, first, for economic growth and job creation through public
investment, aid to state and local governments, and aid to the
unemployed, financed by short-term, stimulative deficits. Then by 2015,
or when unemployment drops sufficiently (say to 5.5 percent), the plans
would reduce federal deficits (achieving primary balance, not counting
interest, by 2018-2020) during the economic recovery by relying in
varying fashions on

  • faster growth than would otherwise be expected; 
  • control of healthcare costs, the main driver of long-term budget
    problems, through a strong public option, bargaining with drug
    companies, and other reforms;
  • higher revenues (mainly from higher taxes on the very wealthy, on
    financial speculation, on carbon [or through cap and trade or fuel
    taxes], and on eliminating many corporate and individual tax
    expenditures,
  • cuts in defense, plus cuts in some farm and corporate subsidies;
  • improved social safety nets and income security, including support for
  • low-income workers, to reduce inequality and broaden consumer demand;
  • long-term commitments to public investment in infrastructure,
    education (including in early childhood), green jobs, public transit
    and other needs that generate faster, more prolonged growth of the
    real, non-bubble economy.

The alternative, pushed by Bowles and Simpson and much of the
Washington elite, is austerity. Cut budget deficits now. Cut social
programs (even Social Security, which has no effect on deficits). Cut
tax rates for everyone (while ending tax expenditures, which are skewed
to the rich but include many helping the middle class). Cut government
down to a smaller size, rather than invest. 

Cut, cut, cut. It is all too reminiscent of banker Andrew Mellon’s
advice to President Hoover at the start of the Great Depression:
''Liquidate labor, liquidate stocks, liquidate the farmers, liquidate
real estate . . . purge the rottenness out of the system.'' Or, more
precisely, the advice FDR mistakenly followed in 1937, after New Deal
programs had helped stimulate job creation. Under pressure from
conservatives, he began balancing the budget—only to lead to a new
downturn.

The Citizens’ Commission report gives a good account of the 1937
mistakes and also provides an excellent historical, empirical and
theoretical critique of austerity economics, just as “Investing in
America’s Economy” offers useful reviews on health care savings,
retirement security and public investment and growth.

These proposals demonstrate how it is possible to balance the budget
with rising government investment, faster growth, more jobs, and
creation of the basis for a new, more sustainable economy. Most working
and middle class Americans retain the programs they need while most of
the tax responsibility shifts to those most able to pay.  Austerity is
not needed; it will only make life worse.

There’s one hitch: even though these progressive plans fit well with
popular opinion, they have virtually no chance of passage in their
entirety, especially when John Boehner takes the House gavel next year
from Nancy Pelosi. But probably none of the austerity plans could win
outright either. Yet the progressive plans could help frame the debate
for the next two years and the following election, if it “can put some
spine in some of our Democratic friends,” according to Demos fellow and
Citizens’ Commission member Robert Kuttner. 

That spine is needed first and foremost by the man who got off to a
bad start in directing the deficit dialogue on Monday, when he ordered a
federal worker wage freeze for two years—President Obama himself.

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