Thursday, March 28, 2013

The People's Budget

To those who get most of their news and analysis via the mainstream media, it seems as if the nation has only two budget choices--the one clearly absurd and catastrophic, the other not quite that bad, but still pretty awful. The first one, of course, is "the fantasy budget" of Paul Ryan, which is even worse than the 2012 version that the electorate decisively repudiated last November. [Remember? There was an election and Ryan and his running mate lost.] The 2013 version would reduce federal spending by $4.6 trillion over the next decade, repeal the Affordable Care Act [which the voters and even the Supreme Court accepted], reprise his effort to turn Medicare into a voucher program, cut $757 billion from Medicaid over the next decade, cut most safety net programs for the working poor, while keeping January's tax "increases," and proposing an overhaul of the tax structure that would generously benefit the Super Rich and gigantic corporations. Specifically, it would reduce the number of income tax brackets from six to two, lower the maximum rate from 39% to 25%, and transform the corporate tax code to an "international" system. The Center for American Progress has estimated these Tax Cuts for the Super Rich would cost the nation $7 billion in revenue, which Ryan promises will be magically covered by closing mysterious, as yet unspecified "loopholes." As Charles Pierce has charged, in a recent article in Esquire, Ryan's latest budget is   "constructed in the same magical thinking, the same conjuring words, the same elusive asterisks, and the same obvious obfuscations of its actual intent." Even Ryan himself admitted to Chris Wallace on Fox News that his projections, assumed the repeal of "Obamacare." When Wallace objected that repeal "was not going to happen," Ryan insisted that "we believe that it should." Incredibly, he also factors in the much-maligned cuts in payment to Medicare providers that would only occur if the ACA stays in effect. Ryan and his cronies also insist on raising the eligibility age for Medicare and cutting federal costs for Medicaid. [I can't help but thinking of the tale ascribed to Abraham Lincoln about the man who planned to build a new cabin out of the materials from the existing one, but was going to live in the existing one until the new one was completed.] Just to show that there are degrees of delusion and craziness even among the Tea Party Republicans, the New  York Times of March 19th published an Op-Ed rant by Georgia Republican Congressman Paul C. Brown, proclaiming that "Paul Ryan's Ax Isn't Sharp Enough" because his plan would take ten years to balance the budget, which Brown insisted could be done in a single year.        

The supposed alternative to the Ryan budget is the administration-backed Budget Control Act of 2011, reinforced by the recommendations of the Bowles-Simpson commission and the budget that just barely passed the Senate on March 22. Although it is slightly less drastic in spending cuts and slightly more aggressive in raising taxes, especially on the Super Rich, it still suffers from two major problems: First of all, it smacks too much of the president's "negotiating strategy," which often seems to be conceding "quids," without demanding some corresponding "quos." It is difficult, if not impossible, to negotiate with people who have shown--over and over again--that they are not willing to compromise. [Case in point: The House passing the Ryan Budget and repeal of the Affordable Care Act even though the voters resoundingly repudiated the one and endorsed the other. How can we claim to have representative government and democracy when election results have no effect on public policy?] Secondly, the administration budget seems to concur that reducing the national debt is more important than easing unemployment and jump-starting the economy. President Obama has stated that "the deals I have put forward, the balanced approach of spending cuts and entitlement reform and tax reform...are still on the table. I've offered sensible reforms to Medicare and other entitlements, and my health care proposals achieve the same amoungt of savings by the beginning of the next decade as the reforms that have been proposed by the bipartisan Simpson-Bowles fiscal commission. [emphasis mine]. Under what Cole Stangler of In These Times refers to as "the technocratic neoliberal budgets of the Obama administration,", domestic spending will be cut by $740 billion in 2013, with more certain to come later. Nor does the other side of the deal--taxes on the richest one percent--come anywhere near offsetting the cuts in domestic services. Specifically, as Robert Kuttner convincingly demonstrates in an article in The American Prospect (24 [Mar/Apr 2013] pp. 58-62), it accepts the absurd notion that economic recovery "requires us to achieve a particular ratio of public debt to to gross domestic product. It steadily rachets down government outlay over a decade. Domestic discretionary spending will be cut from about 7% of GDP to less than 4% this year, to 2.3% by 2023, the lowest since the 1950s. "The economic assumptions behind this logic are backward," according to Kuttner and such progressive economists as Paul Krugman, Joseph Stieglitz, James Galbraith, and Dean Baker. The future debt ratio, Kuttner argues, "reflects not just the consequence of budget deficits but also the rate of economic growth. In a weak economy, too much deficit cutting raises the the ratio of debt to GDP--because it reduces GDP." Cutting the debt ratio is the wrong target, Kuttner insists, "the right one is getting growth back on track."  After calling for budget cuts of $4 trillion over the course of a decade, Obama projects that we now only need another $1.5 trillion. That, according to Kuttner, amounts to budget cutting of some 50% larger than that mandated by the infamous "sequester." What is even more scary is the fact that, whatever happens in 2013  the Republicans will press for more in 2014 and beyond. "What we face," he warns, is not a single decisive showdown but ongoing retrench warfare." Their real purpose, after all, has little or nothing to do with national debt, but with gutting the regulatory powers of the federal government over the economy and the environment, while obliterating what is left of the safety net.    
If either the House Budget or the administration's counter proposal become the law of the land, the results will be nothing short of disastrous. The best chance of preventing that melt-down lies in The People's Budget proposed by the Congressional Progressive Caucus, with the technical assistance of Economic Policy Institute. Founded in the early 1990s by Bernie Sanders and like-minded Democratic members, it is the largest single caucus of minority members in the House, currently 72. [Although Sanders is officially listed as an Independent, he still caucuses with the Democrats.] According to co-chair Keith Ellison, the CPC "might not be the center of the Congress, but it is the center of America." It spearheads Democratic opposition to cuts in Social Security, Medicare, and Medicaid, a more rapid end to the war in Afghanistan, advocates a transactions tax on Wall Street traders, and is committed   to achieve full employment, and a Constitutional amendment declaring that corporations are not people. It also adamantly opposed to "balancing the budget on the backs of those most in need." It is best known for its espousal   of the People's Budget of FY 2012 and the Budget for All for FY 2013. Their general outlines have been endorsed by former President Bill Clinton, Paul Krugman. Dean Baker, Robert Reich, Jeffrey Sachs, Rachel Maddow, The Economist, The New Republic, the Washington Post,The Guardian, The Nation, the Center for American Progress, the Economic Policy Institute, Rolling Stone, and even Forbes. Although its specifics are too long and complex to rehearse here, the crux of the matter is that it "makes no cuts to Medicare, Medicaid, and Social Security benefits, and asks those who have benefited most from our economy to pay a sensible share." It attacks unemployment with more $2.9 trillion in job creating investments and "utilizes every tool at the government's disposal to get our economy moving again". That includes, among others, a School Improvement Corps, a Park Improvement Corps, and a Student Job Corps, tax incentives to spur clean energy, manufacturing, and cutting-edge technological investments in the private sector, and widespread domestic investments, including an infrastructure bank,a $556 billion surface transportation bill, and more than $2 trillion in widespread domestic investment. It achieves $6.8 trillion in deficit reduction, hits the same debt to GNP ratio as the Republican budget, and has lower deficits in the last five years. It does so by focusing on "the drivers of our debt--unsustainable tax policies, the wars overseas, and policies that helped cause the recent recession--rather than putting the middle class's social safety net on the chopping block." To create a "fairer America," it ends tax cuts for the top 2%, extends tax relief for middle class households and the vast majority of Americans, ends the code's preferential treatment of capital gains and dividends, creates new tax brackets for for millionaires and billionaires, abolishes corporate welfare for oil, gas, and coal companies, eliminates loopholes that allow businesses to dodge their true tax liability,calls for the adoption of the "Buffet Rule,"  and creates a publicly funded election system that gets corporate money out of politics for good. It "responsibly and expeditiously ends our military presence in Iraq and Afghanistan and modernizes our military to address 21st    century threats and stop contributing to our deficit problems." Finally, it seeks to protect American families by providing a "Making Work Pay tax credit" for families struggling with high gas and food prices, extending the Earned Income Tax Credit, and creating a "Child and Dependent Care Credit," and investing in programs to stave off further foreclosures to keep families in their homes, and to increase investments in and social services. In short, the CPC's budgets would not only restore "the Promise of American Life," for tens of millions of our fellow countrymen, but would make the U.S. comparable and competitive with most other nations in the modernized world. Every progressive ought to familiarize herself or himself with its tenets, and urge every one we know to do the same.

As an historian, I can't help thinking about the original People's Budget, which led to one of the greatest triumphs of progressivism in the history of the United Kingdom. In 1909, the Liberal government of Prime Minister H.H. Asquith, prodded by Chancellor of the Exchequer David Lloyd George and President of the Board of Trade Winston Churchill, introduced a budget including several unprecedented taxes on the nation's wealthy, as well as a number of "radical" social welfare programs. Lloyd George and Churchill were derisively called the "Terrible Twins" by their opponents, while the latter's biographer,William Manchester, dubs their program a "revolutionary concept,"  because it was the first budget in British history with the expressed intent of redistributing wealth among the public through graduated income and inheritance taxes.  It also called for a complete land valuation and a 20% tax on increases in value when land changed hands, based in part on the theory of the "general tax" espoused by American reformer Henry George.. As such, it was bitterly opposed by the House of Lords and most members of the Conservative Party. The resultant controversy sparked two general elections in 1910 and the eventual enactment of the Parliament Act of 1911. In introducing the budget on 29 April 1909, Lloyd George proclaimed that it would eliminate poverty:
          This is a war budget. It is for raising implacable warfare against poverty and squalidness. I cannot
          help hoping and believing that before this generation has passed away, we shall have advanced a
          great step towards that good time, when povery, and the wretchedness and human degradation that always
          follows in its camp , will be as remote to the people of this country as the wolves that once infested its 
 Its opponents derided it as the "thin end of a socialist wedge," and proposed instead a tariff increase that would have raised the cost of most foodstuffs and  and benefit agricultural landowners. In a July speech at Limehouse, Lloyd George, who also favored strengthening the navy, argued that "a fully equipped duke cost as much to  keep up as two dreadnaughts," but was "much less easy to scrap."  Despite King George IV's private entreaties to pass the budget to avoid a crisis, the Lord's vetoed the budget bill. They did, however, agree to accept it as soon as the Liberals could obtain an electoral mandate. The Liberals responded by making the right to reduce the power of the upper house the focus of the general election held in January, 1910. Both that election and another in December, 1910 resulted in hung parliaments,but the Lords finally accepted the budget, after a tenuous coalition of Liberals,     Labour, Unionists and Irish party members agreed to drop the land tax proposal. The Lords finally passed the Parliament Act of 1911, after the new king, George V, reluctantly threatened to flood the House of Lords with hundreds of new Liberal peers nominated by Asquith, Lloyd George, and Churchill. Shades of FDR and the "Court Packing Proposal" of 1937, which failed of adoption but persuaded the Supreme Court to accept the measures of the Second New Deal. Where are Lloyd George and Churchill when we really need them.


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