Blog

By Richard (RJ) Eskow
Senior Fellow, Campaign for America’s Future

The pro-corporate, anti-majority political class is sustaining itself with a lot of self-serving myths these days. Guess you need to do that when you’re dismantling the social contract. In the closed society that is Insider Washington, rites and mythologies are used to promote the otherwise-indefensible: the cruel irrationality of Austerity Economics.

Dean Baker, for example, points out that Democrats must “prove their manhood” by cutting a treasured and valuable program like Social Security. (Funny: Republicans are never asked to do the same.) This initiatory rite is something like a Mafioso’s “earning his bones” as a “made man” by “whacking” somebody — in this case, his own grandmother.

Here’s another myth: Government must “act more like a business” through spending cuts. Is that really what a smart business person would do? What savvy executive would tell his managers to cut spending by a certain percentage over the next ten years when she or he doesn’t even know what the sales figures will look like?

From investment to “thinking outside the box,” here are six ways Washington’s austerity madness is un-businesslike:

1.  Smart executives invest.

The first error our leaders make is in thinking about government spending in a zero-sum way. In their minds, money goes out and is lost forever. The concept they’re missing is investment.  Business leaders, on the other hand, know all about investment. They know that sometimes you have to spend a dollar to get back two. They reject wasteful spending, but they embrace investment.

A government’s smartest investment is its people. Investment in education pays off: A more educated workforce earns more money, which means more revenue for our government “business.” And a well-paid middle class buys more goods and services, which means more jobs.

Government spending can also be an investment in jobs, especially in times like these. And since money spent on construction projects or education will create more jobs per dollar than money spent on defense, business-like political leaders would promote that kind of spending.

When it comes to borrowing, business executives are rarely in the prized position our government now enjoys: Investors are essentially paying the US government to let them lend it money, because it seems like the safest place to put it these days. If our government was really run like a business, it would be borrowing and investing in future economic growth. The returns would be excellent, and it would even make money on the loans.

2. Smart executives don’t cheat their customers.

Both sides of the negotiating table are offering the “chained CPI” as a technique for cutting Social Security. This would reduce benefits for people who have paid into the Social Security system their entire lives.

Successful businesses don’t cheat their customers like that. It’s a strategy that may lead to short-term gain, but it will pollute the brand so badly that the enterprise will soon go out of business.

Now, most today’s extremist Republicans have essentially joined government in order to destroy it, so this is presumably fine with them. But why would a Democrat like the President insist on proposing these cuts? It pollutes Brand Democrat as well as Brand Government.

The lack of stronger pushback from his own party is equally baffling.  No business executive would stand for it. (more…)

Last week, President Obama described the sequestration situation in simple, stark terms: keep it in place and punch the middle class in the gut. Or, he suggested, soften the blow substantially by ending special tax breaks for the rich.

Here’s what he said:

“Republicans in Congress face a simple choice. Are they willing to compromise to protect vital investments in education and healthcare and national security and all the jobs that depend on them? Or would they rather put hundreds of thousands of jobs and our entire economy at risk just to protect a few special interest tax loopholes that benefit only the wealthiest Americans and biggest corporations?”

President Obama is recommending reducing the pain of sequestration by raising revenue. This could be accomplished by eliminating cushy deals that the rich and corporations have bought for themselves over the years with lobbyist dough.

It breaks down like this, specifically:

• Do Republicans want to evict 70,000 low income children from Head Start to ensure that the nation’s largest corporation, GE, which is massively profitable, continues to pay no taxes, in fact, demands rebates from the American people?
• Do Republicans want to furlough 750,000 civilians employed by the Army to ensure that one of the richest men in the world, Warren Buffett, can continue paying a lower tax rate than his secretary, a situation that Buffett has described as unconscionable?

(more…)

By Dean Baker
Co-Director, Center for Economic and Policy Research, Author

At this point everyone knows about Fix the Debt. It is a collection of corporate CEOs put together by Peter Peterson, the Wall Street private equity mogul. Ostensibly they want to reduce budget deficits and the national debt, but for some reason their attention always seems focused on cutting Social Security and Medicare. While some in this group will allow for minor tax increases, budget cuts are explicitly a priority, with these two programs firmly in their crosshairs.

Given that the stated goal of this group is to reduce budget deficits, it is worth asking why taxes don’t figure more prominently on their agenda. After all, the United States ranks near the bottom of wealthy countries in its tax take as a share of GDP. It is also worth asking why one tax in particular, a financial transactions tax, never seems to get mentioned in anything the group or its members do.

This omission is striking because so many others in budget debates in the United States and around the world regularly suggest such a tax. There is a long list of highly respected economists who have advocated such taxes, starting with John Maynard Keynes. The list includes many Nobel Prize winners, most notably James Tobin, who wrote several papers arguing for such a tax as a way to both raise revenue and slow speculative trading.

Financial transactions taxes are hardly new. The United Kingdom has had a tax on stock trades in place since 1694. It still imposes a tax of 0.5 percent on trades. Relative to the size of its economy the tax raises the equivalent of $30-40 billion a year in the United States. Many other countries, including India and China, have financial transactions taxes. The United States used to have a tax of 0.04 percent on stock trades until 1966 and still has a very small tax which is used to finance the Securities and Exchange Commission.

In the wake of the financial crisis there has been renewed interest in a financial speculation tax. The European Union recently decided to move ahead with implementing a tax which will first be imposed in 2015 or 2016. There is also considerable interest in the United States. While financial speculation taxes have been included as a funding mechanism in many bills there were two standalone bills introduced in Congress last year. (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Can we just keep things in perspective? On Tuesday, the President asked Republicans to join him in finding more spending cuts and revenues before the next fiscal cliff whacks the economy at the end of the month.

Yet that same day, the Congressional Budget Office projected that the federal budget deficit will drop to 5.3 percent of the nation’s total output by the end of this year.

This is roughly half what the deficit was relative to the size of the economy in 2009. It’s about the same share of the economy as it was when Bill Clinton became president in 1992. The deficit wasn’t a problem then, and it’s not an immediate problem now.

Yes, the deficit becomes larger later in the decade. But that’s mainly due to the last-ditch fiscal cliff deal in December.

By extending the Bush tax cuts for all but the top 2 percent of Americans and repealing the alternative minimum tax, that deal increased budget deficits by about $3 trillion above what the budget office projected last August.

The real deficit problem comes after that — when rising health care costs combined with 76 million decaying boomers will cost us all a fortune.

The answer is to move from fee-for-service health care to pay-for-healthy-outcomes, including lots of preventive care. This will almost certainly require a single payer instead of our balkanized health care system drowning in paperwork as each part of it bills and tries to collect from every other part.

Right now the central challenge is to reignite the economy — getting jobs back, improving wages, and restoring growth.

Deficit reduction moves us in the opposite direction. That’s because most consumers (whose spending is 70 percent of economic activity) are still losing ground, and businesses won’t expand and hire without more consumers. (more…)

By Jared Bernstein
Senior Fellow, Center on Budget and Policy Priorities

If you wanted to be (overly) generous in your interpretation of the CBO data out yesterday, you might say that we’re sacrificing the near term for the longer term. That is, we’re accepting lower economic growth rates and higher unemployment now in exchange for lower-budget deficits which will, according to CBO, be better for growth in the future.

Here’s how they frame the issue:

…less fiscal tightening this year would lead to stronger growth in 2013 but, if not accompanied by sufficient additional tightening in later years, would also restrain real output and income in the middle of the decade and beyond owing to higher federal debt.

I must say, though, that I find this all a bit of a muddle. In 2013, according to the budget office, fiscal cuts — both tax increases like the end of the payroll tax break and spending cuts like the sequester (CBO assumes it will be implemented to the tune of $85 billion in cuts starting next month) — are cutting the economy’s growth rate pretty much in half, from a bit below 3 percent to 1.4 percent.

For what? Can anyone point to anything good that’s come of that? I’d like to say that D.C.’s deficit hawk community is favorably impressed, but they’re not. The usual suspects are not assuaged and just keep complaining that we’re not doing enough to make the “hard choices” and “real sacrifices.”

The usual argument here — the thinking embedded in the CBO quote above — has to do with public borrowing crowding out private borrowing and thus leading to higher interest rates for scarce investment capital. It’s actually hard to find convincing evidence for that relationship even in good times, but it’s impossible to find it right now, for obvious reasons. In recessions, deficit spending goes up while weak demand and Fed Reserve actions push interest rates down.

Instead, it’s quite clear that the growth pickle we’re stuck in is not due to thoughtful policy makers making considered economic tradeoffs. The R’s just want to hammer away at safety net programs (while protecting the wealthy from tax increases) and social insurance and the D’s — they want to “balance” spending cuts with tax increases. (more…)

Bill Scher
Online Editor, Campaign for America's Future

To get House conservatives to capitulate on temporarily suspending the debt limit without securing any spending cuts, Boehner made a stunning pledge: the upcoming House budget would eliminate the deficit in 10 years.

As a talking point, that sounds great. As a budget, it is literally double the crazy of the last House Republican budget, written and personified by failed VP candidate Paul Ryan.

That budget immediately cost Republicans a House seat in a 2011 special election, branded the party as enemies of Medicare and twisted Mitt Romney in knots throughout the presidential campaign.

But while the previous Republican budget had steep spending cuts, much of was back-loaded. Combined with the plan’s massive tax breaks for the wealthy, the previous budget didn’t achieve a surplus until about 2040.

Now Boehner, and Ryan, are set on 2023. If they were using a crude meat ax before, now they will be using a nuclear bomb.

The old Republican budget cut $5 trillion in government spending over a decade. This one will have to cut $10 trillion, literally double the cuts of the last wildly unpopular Republican budget — assuming there aren’t more tax breaks for the wealthy, which would force the cuts to go even deeper.

If deeper would even be possible.

The Fiscal Times reports Medicare and Social Security would be mercilessly whacked:

To produce a surplus in 10 years, House Republicans would likely need to swing an axe at Social Security and Medicare, reducing benefits for the millions already supported by the programs … [Ryan] claimed at a Wednesday breakfast with reporters sponsored by The Wall Street Journal that today’s senior citizens would still be protected from any reductions … When budget experts examined the 10-year time frame, their basic conclusion was that the GOP will either need to break its pledge against taxes or its promises to seniors. (more…)

Rose Ann DeMoro
Executive Director, National Nurses United

With poverty rates spinning perilously out of control in the U.S., it’s time to send an unmistakable message to Congress and the White House as they prepare to resume the ongoing obsession with the deficit: End the silence on poverty, don’t make poverty worse by making cuts to Social Security or Medicare, and address a principle cause of poverty with a permanent fix to our dysfunctional healthcare system..

In a week in which a shocking new report on U.S. life expectancy rates was published, which has a disproportionate impact on the poor, and a high profile pre-inauguration forum on poverty is being held Thursday night in Washington, this is a good time to draw the links between income, healthcare, and Social Security and Medicare, perhaps the two most effective anti-poverty programs ever enacted in the U.S.

Census Bureau data puts the official poverty rate at 15 percent, 46 million people, and at 22 percent for children under 18.  Some have speculated the real number is two to three times that amount.

Not that you would notice listening to the debates inside the Beltway where too many politicians are focused on spending cuts, not addressing the daily shortages of  food, shelter, healthcare, and jobs faced by a large swath of our nation.

It’s one reason why nationally syndicated broadcaster Tavis Smiley is hosting a major forum, “Vision for a New America. A Future Without Poverty,” being broadcast on CSPAN Thursday night in Washington.

Nurses see the correlation of low incomes and deteriorating health status every day in hospitals and clinics across the U.S.

Consequences that are evident in a report last week by the National Research Council and Institute of Medicine which found the U.S. ranked last in life expectancies among 17 affluent countries. All the others have some form of a national healthcare system. No gold medals for us in this international competition, except in how much we spend and waste on health care as a result of our profit-focused private system.

Sadly, the Affordable Care Act has not eradicated the problem, especially when it comes to rising healthcare costs that contribute to two-thirds of personal bankruptcies and a myriad of the health woes nurses witness regularly.

Nurses see the effects in premature and low weight babies and other widespread nutrition problems from hunger and malnutrition that can lead to disease and even organ failure. They see children with high levels of stress and anxiety, heart attacks in younger and younger men, rampant unaddressed mental health problems and emotional disorders, and scores of patients who routinely skip needed medical care because of the cost until they end up in emergency rooms with major untreated diseases that may then be too late to heal.

Patients like the widowed woman in a Midwest state whose diabetes led to foot and leg wounds that became severe because she could not afford constant treatment. Finally admitted to a hospital, she faced the Sophie’s Choice of amputation or lengthy, more expensive long term care. She chose amputation because it was cheaper. No that’s not a story out of the Middle Ages or a Civil War battlefield, it’s modern day America. (more…)

By Jim Hightower
Author, Commentator, America’s Number One Populist

Look out – The “fixers” are coming.

Top corporate chieftains and Wall Street gamblers want to tell Washington how to fix our national debt, so they’ve created a front group called “Fix the Debt” to push their agenda. Unfortunately, they’re using “fix” in the same way your veterinarian uses it – their core demand is for Washington to spay Social Security, castrate Medicare, and geld Medicaid.

Of course, a group of pampered, narcissistic billionaires would not make a credible sales team for this dirty work, so Fix the Debt has recruited a bipartisan gaggle of former Congress critters to give their self-serving political gambit a softer public image, a sheen of high public purpose. With a budget of some $40 million, these “elder statesman” are doing TV interviews, hosting breakfast sessions with members of Congress, making speeches about “mutual sacrifice,” and generally going all out to sell the financial elite’s snake oil.

But wait – being an elder does not automatically mean you’re a statesman. Let’s peek at the resumes of these so-called public-spirited fixers of the debt. Start with Jim McCrery, a former GOP lawmaker. While urging Congress to cut peoples’ programs, he’s also a top-paid lobbyist pushing Congress to give more tax subsidies to America’s richest people and biggest multinational corporations. (more…)

By Richard (RJ) Eskow
Senior Fellow, Campaign for America’s Future

That deficit problem we keep hearing about is gone. When it comes to spending cuts, it’s time to follow the advice a general offered when we were mired in Vietnam: Declare victory and get out.

We had a deficit problem, once, although it was never as urgent or as important as our jobs crisis. Nor was it as important as the wealth inequity that’s destroying the middle class, killing the hopes of a better life for lower-income Americans and stifling growth.  Wealth inequity hasn’t been this high since the Great Depression.

Our problem now is that we’re not spending enough.

Washington needs to spend more money now if we want a balanced budget tomorrow. That’s called investment, and we’ve needed more of it for the past four years. Instead President Obama and other Democrats bought into that right-wing narrative that said that “The Deficit” – something that’s described in static, singular, and slightly scary terms, like “The Blob” – was our biggest problem. Good thing it’s, as Paul Krugman says, “mostly solved.”

In fact, other cuts in this battered economy would make the economy worse – and would make deficits go up. Don’t take our word for it. The world’s leading institutional deficit hawk, the International Monetary Fund, reached the same conclusion.

To understand why reality’s so different from the Beltway’s fantasy we need to know how we got here.

The Big Score

Some Democrats don’t like hearing this, but the seemingly miraculous “Clinton economy,” including the government surplus we heard about when Bill Clinton left office, was primarily driven by a stock market bubble.

That bubble, and the one that followed it, were largely driven by irresponsible Wall Street deregulation – together with Republican collaborators like Sen Phil Gramm, got rich on Wall Street – and the bubble kept inflating.

We didn’t use that bubble money to rebuild our social safety net. We didn’t put it in the bank, either.  Instead the Bush Administration pushed through an irresponsible set of tax breaks for the wealthy, who were already being taxed at historically low rates. And despite the end of the Cold War, we went on a military spending spree that include two wars of choice, massive weapons purchases, and continued staffing and maintenance for the thousands of military installations that span the globe today.

The deficit soared as a result of these profligate moves. The long-term deficit outlook became grim, too, as our profit-driven healthcare system led to soaring medical cost inflation, a growing number of uninsured Americans and a rising wave of medically-caused bankruptcies for people with health insurance.  But that was off the table in the halls of corporate-funded political power. (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

A week before his inaugural, President Obama says he won’t negotiate with Republicans over raising the debt limit.

At an unexpected news conference Monday he said he won’t trade cuts in government spending in exchange for raising the borrowing limit.

“If the goal is to make sure that we are being responsible about our debt and our deficit – if that’s the conversation we’re having, I’m happy to have that conversation,” Obama said. “What I will not do is to have that negotiation with a gun at the head of the American people.”

Well and good. But what, exactly, is the President’s strategy when the debt ceiling has to be raised, if the GOP hasn’t relented?

He’s ruled out an end-run around the GOP.

The White House said over the weekend that the President won’t rely on the Fourteenth Amendment, which arguably gives him authority to raise the debt ceiling on his own.

And his Treasury Department has nixed the idea of issuing a $1 trillion platinum coin that could be deposited with the Fed, instantly creating more money to pay the nation’s bills.

In a pinch, the Treasury could issue IOUs to the nation’s creditors — guarantees they’ll be paid eventually. But there’s no indication that’s Obama’s game plan, either.

So it must be that he’s counting on public pressure — especially from the GOP’s patrons on Wall Street and big business — to force Republicans into submission.

That’s probably the reason for the unexpected news conference, coming at least a month before the nation is likely to have difficulty paying its bills.

The timing may be right. President is riding a wave of post-election popularity. Gallup shows him with a 56 percent approval rating, the highest in three years. (more…)