Sunday, December 05, 2010

Progressives Must Promote the Alternative to Austerity

There is a way to fund public education and other services!  Lisa N.

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

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


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


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


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.

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