By most economic measures, Washington’s preoccupation with shrinking deficits through budget austerity has failed to improve economic outcomes for anyone but the already well off. Most Americans would agree with this sentiment, unequivocally.
Strong majorities of Americans consider a flagging economy to be our top priority, and that the creation of an abundance of quality jobs is the most effective remedy to our economic malaise. And while Americans want government to reduce deficits, we reject the ideas that safety net programs like SNAP and unemployment insurance ought to be diminished, or that Social Security and Medicare benefits ought to be cut. Instead we endorse raising revenues through increases in taxes paid by high earners and profitable corporations.
These mainstream perspectives have a sound basis in economic research and are reflected in the Congressional Progressive Caucus’s Better Off Budget. While the media generally presents the progressive budget as a fringe alternative to the Ryan and Obama budgets, in actuality, the Better Off Budget is the only budget that reflects the mainstream priorities listed above.
It does so by aggressively spurring job creation to close the output gap, reach full employment, and set the stage for sustained broad based wage growth. EPI analyst Joshua Smith assessed the macroeconomic impact of the budget and determined that it would create 4.6 million jobs within one year of implementation.
The Better Off Budget reverses the harm caused by austerity by restoring some of the income security enhancements from the Recovery Act and by eliminating many of the cuts imposed by the sequester and Budget Control Act. As my colleague Josh Bivens explains, cutting public spending essentially explains why we haven’t reached a full recovery by now. If we had simply spent at the same levels we did in response to the recession of the early 1980s, public spending would be $800 billion higher than it is today.
The Better Off Budget spends what is necessary to have our economy reach its full potential and to improve the living standards for most Americans. Yet it is also fiscally sustainable and even has a lower debt-to-GDP ratio at the end of the budget window than the budget recently submitted by the president.
How does CPC budget manage to spend more yet produce lower debt? Though the Better Off Budget aims to finance large increases in funding for infrastructure investments and other job creation measures, these increases are realistic, not lavish; over the 10-year budget window, the CPC would only spend 1.1 percent more as a percentage of GDP than does current law. Moreover, there are also smart cuts and savings throughout the budget in areas like Pentagon and health care spending, and of course, there are increases in revenue. Because the revenue increases cumulatively total more than $6 trillion over 10 years, some will deride this as a “tax and spend” budget. Rhetoric aside, the tax increases in the Better Off Budget simply reverse what has been a massive decrease in tax revenue going on for quite some time.
Revenues, as a percentage of GDP, reach a high of 21.5 percent in the CPC budget—significantly above the oft-cited (but relatively meaningless) post war average of about 18.5 percent. However, if you use 2008 (the first full year of the recession) as your starting point, the yearly average of revenue as a percentage of GDP between that year and the end of the Better Off Budget’s window in 2024 would be 18.9 percent.
I would think that if there was a set of economic policies that identified the key driver of our weak recovery (insufficient demand), invested in the areas that will create jobs and expand opportunities, implemented a tax policy that Americans would deem more fair and was fiscally sustainable in the long run, then that would be huge news. The Congressional Progressive Caucus has done its part, now it’s time for the Better Off Budget to get the mainstream attention it deserves.