Progressives Must Promote the Alternative to Austerity

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Subject: Progressives Must Promote the Alternative to Austerity

After Deficit Panel Deadlock, Progressives Must Promote


the Alternative to Austerity





By John Nichols


The Nation


December 3, 2010





http://www.thenation.com/blog/156831/after-deficit-panel-deadlock-progressives-must-promote-alternative-austerity





The National Commission on Fiscal Responsibility and


Reform [1] failed to produce a mandate for assaulting


Social Security, undermining Medicare and Medicaid and


generally balancing the budget on the backs of working


Americans.





But that hasn't stopped its co-chairmen from claiming a


sort of victory for their plan to make Main Street pay


for Wall Street's failures.





Their goal is obvious. Commission co-chairs Alan


Simpson and Erskine Bowles want to spin a win they did


not achieve in order to foster the false impression


that their ominously titled " Moment of Truth [1]"


proposal is the only real alternative to fiscal ruin.


That's not the case. There are better proposals-such as


the detailed alternative to austerity outlined by


commission member Jan Schakowsky [2]. But this is a


critical juncture, and progressives need to be


conscious that an effort will be made to narrow the


range of options and impose key elements of a bad plan


that failed to gain required support.





Let's start by getting a few things straight:





The commission was given a clear charge when President


Obama cobbled it together in February-after failing to


win congressional support for the formal launch of the


project.





The commission was to come up with a plan address


deficits, debts and the challenge of maintaining a


federal government at a point when revenues are not


sufficient to keep paying for every war, bailout and


boondoggle that comes along.





Proposals for what could be radical, and in many cases


painful, change had to attract broad support, so the


president said that at least fourteen of the eighteen


members of the commission would need to back an


initiative before he would promote it. Senate majority


leader Harry Reid and House speaker Nancy Pelosi


promised to hold votes this year vote a consensus could


be reached.





On Friday, the commission co-chairs failed to get to


fourteen [3]. Only eleven members of the commission


voted "yes," while seven voted "no." And the seven "no"


votes came from precisely the members whose votes were


most needed if this plan was to have legitimacy. Three


House conservatives-incoming Budget Committee chair


Paul Ryan, R-Wisconsin; incoming Ways and Means


Committee chair Dave Camp, R-Michigan; and incoming


Republicans Conference chair Jeb Henserling, R-


Texas-voted "no" because they did not think it went far


enough in calling for tax cuts and the gutting of


entitlement programs.





Two key House Democrats, Xavier Beccera, D-California,


and Jan Schakowsky, D-Illinois, voted "no" because, as


Schakowsky explained it, the proposed benefit cuts


would have meant that "those who have not joined the


prosperity party the last couple years are being asked


to pick up too much of the tab."





Senate Finance Committee chair Max Baucus, D-Montana,


also voted "no," as did former Service Employees


International Union president Andy Stern.





Opposition from the right and the left-including that


of the legislators who will chair the House Budget and


Senate Finance committees in the new Congress-is


significant, as is the opposition of the most clearly


identifiable representative of working Americans on the


panel.





But commission co-chairs Simpson and Bowles, who went


rogue last month and started promoting a proposal that


lacked broad backing, were going to claim a mandate no


matter what vote their got. Bowles declared victory,


claiming that the panel had opened an "adult


conversation" about cutting the deficit. Simpson, the


former Republican senator from Wyoming who was the


driving force on the commission, chirped: "I will walk


home proudly, with my head held high [4]."





Simpson is proud of his plan, and of the fact that he


and Bowles won some unexpected votes for


austerity-including that of the number-two Democrat in


the Senate, Illinois's Dick Durbin. But what they


aren't highlighting is the fact that Durbin announced


that he was voting for the plan in order to "to kick-


start an adult debate [5]," not because he thought it


was sound.





Pointing out that opposed many of the proposal's


provisions and would not necessarily have backed it if


it came to a Congressional vote, Durbin explained that:


"I want progressive voices at the table arguing that we


must protect the most vulnerable."





So what is the progressive alternative?





Stern offered a credible plan on Wednesday, calling for


substantially larger tax increases than Simpson and


Bowles proposed, along with a shift in government


spending toward infrastructure investment.





But the strongest alternative is a detailed plan


advanced by Schakowsky. [6]





The Congressional Progressive Caucus member and key


ally of outgoing House Speaker Nancy Pelosi-who has


dismissed the Simpson-Bowles approach as a non-


starter-has been the sanest voice in the commission's


debate about how to balance budgets, reduce debt and


grow the economy.





"Lower- and middle-class Americans did not cause the


deficit. Just ten years ago the federal budget was


generating a surplus as far as the eye could see. That


surplus was turned into a deficit due to massive tax


cuts-mainly to wealthy Americans; two wars paid for by


borrowed money; and a major recession caused by the


recklessness of the big Wall Street banks. Over the


last decade the incomes of middle-class Americans have


actually shrunk, while those of the wealthiest 2


percent of the population have exploded," argues


Schakowsky, who says, "The middle class did not benefit


from the Republican economic policies that led to the


current deficit-they were the victims-they should not


be called upon to pick up the tab."





As such, Schakowsky has rejected the Simpson-Bowles


scheme, which would weaken Social Security, Medicare


and Medicaid while cutting taxes for multinational


corporations. "The president's Fiscal Commission has


been given a concrete goal: to achieve primary budget


balance in 2015, ensuring that all spending is paid for


except for interest on the national debt," she


explained after the co-chairs laid out their plan.


"Their proposal," she explained, "would have serious


consequences for lower- and middle-class Americans, and


that is why I cannot support it."





But Schakowsky did not just say "no."





She presented an alternative plan to reduce the deficit


by $427 billion over the next five years, far


surpassing the target proposed by President Obama, and


she would do it with an eye toward protecting the poor


and the middle class and strengthening the economy.





"Fixing the federal deficit is not an end in itself.


The goal of budget policy should be to assure long-


term, widely shared economic growth," explains


Schakowsky. "Economic growth is not just good for


businesses and families-it will reduce the deficit.


Sustained, long-term economic growth requires that we


end the trend of concentrating more and more wealth in


the hands of the rich and less and less in the hands of


a middle class that can then afford to buy the products


and services that will sustain economic growth."





Notably, Schakowsky preserves Social Security and other


programs that protect and serve working Americans.


Instead of undermining the program, she would assure


its long-term solvency by eliminating the wage cap on


the employer side and raising it to 90 percent on the


employee side, applying FICA to all wage income below


the cap and establishing a modest legacy tax on


wealthier Americans.





This is part of a broader plan from Schakowsky, which


has five key elements:





1. Increased economic stimulus to spur growth in the


immediate term





 Provide $200 billion to invest over the next two


years in measures to create jobs and spur economic


growth, including passing the Local Jobs for America


Act; and funding for education and law enforcement;


Unemployment Insurance, Federal Medical Assistance


Percentages (FMAP) and Supplemental Nutrition


Assistance Program extensions; and infrastructure.





 Adopt the president's proposals to eliminate overseas


tax havens and incentives for outsourcing





2. Smart, targeted spending cuts





 Non-defense discretionary-$7.55 billion in savings


through increased efficiency and cuts to programs that


benefit large corporations that don't need assistance.





 Defense discretionary-$110.7 billion in cuts from the


2015 defense budget, including efficiency savings,


reducing our troop levels, cutting weapons systems we


don't need and scaling back the wartime increases in


the size of the military.





3. Mandatory spending cuts





 Healthcare-at least $17.2 billion in savings by


implementing measures to bring down the cost of


healthcare to the federal government and lower


healthcare inflation overall.





 Other-$7.7 billion in savings by cutting agriculture


subsidies in half, and redistributing federal support


to offer greater benefits to small family farms and


reduce subsidies to large corporate agribusiness.





4. Reductions in tax expenditures





 Raise $132.2 billion by closing tax subsidies for


companies that ship American jobs overseas.





5. Increases in revenues





 Raise $144.6 billion in revenue through progressive


reforms to the estate tax, treating capital gains and


dividends as regular income, and enacting a cap-and-


trade proposal that includes protections for lower-


income people.





 Enact President Obama's budget proposal to let the


Bush tax cuts for the top two brackets expire and


return to 2009 estate tax levels.





 Nontax revenue-raise $7 billion by addressing places


where the private sector is currently underpaying.





The plan that Schakowsky has produced is not the final


word on how progressives ought to approach debates


about fiscal policy, debts and deficits. There needs to


be more consideration of the role that the trade


deficit plays in destabilizing the US economy and the


financial health of the federal government, as Ohio


Congressman Marcy Kaptur has noted. There should be


consideration of the proposals by Oregon Congressman


Peter DeFazio for taxes on speculation and financial


transactions. And there should be new approaches to how


the Federal Reserve manages bank funds, as economist


Robert Pollin has suggested.





But Schakowsky has provided the essential framework for


the coming debate.





Simpson and Bowles can claim their hollow "victory."





But when the real debate about deficits and debts gets


opens, progressives can say there is an alternative to


austerity [6]-an alternative, presented by Jan


Schakowsky, that balances budgets, reduces debt, serves


working families rather than Wall Street CEOs, protects


Social Security and expands the economy.