Budget Proposals-- A Choice Between Failed European Austerity Gimmicks Or Economic Growth
Overall, the Back to Work budget increases spending by more than $2.2 trillion over the next ten years. This includes more than $156 billion for clean energy efforts, over $230 billion for education, training and social services, $312 billion for income security programs like the Supplemental Nutritional Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), another $156 billion for health care programs, and $1 trillion in new infrastructure spending, meant to repair old structures (roads, pipes, bridges) and build new ones.
To pay for this, House Progressives propose a full overhaul of the federal tax code, with a new set of tax increases on the wealthiest Americans. For income over $250,000, taxes would revert to Bush-era rates (the Progressive Caucus maintains Bush rates for the remaining 98 percent of taxpayers).
From there, they call for several “millionaire and billionaire” tax rates: At $10 million, the marginal rate will increase to 45 percent, at $20 million, it increases to 46 percent, at $100 million it moves to 47 percent, from $100 million to $1 billion it goes to 48 percent, and for all income over $1 billion, it’s 49 percent. In addition, this budget caps itemized deductions, lowers the exemption for the estate tax (and raises the rate), closes loopholes in the corporate tax code, and institutes a “financial transactions tax” designed to discourage high-volume, high-speed trading.
To raise further revenue for these spending programs, the Back to Work budget institutes a cap and trade regime, and reduces subsidies for agricultural and fossil fuel companies.
Insofar that there are major spending cuts, they’re on the defense side: An end to funding for the wars in Iraq and Afghanistan, base closures, and fewer modernization projects for older weapons systems. In total, the Back to Work budget achieves $897 billion in savings from adjusting the Pentagon budget, and $939 billion from ending all spending on the wars.
Other savings come from adjusting health care programs. Medicare is permitted to use its size to negotiate prescription drug prices-- saving $157 billion over ten years-- and a public option is added to the Affordable Care Act, saving an additional $104 billion.
On the whole, the Back to Work budget projects a short-term spike in deficits and debt-- reflecting new spending-- but then public debt is expected to reach 68.7 percent of GDP by 2023, nine points lower than what it would be under current law, and significantly lower than what it would be under Paul Ryan’s plan. And as for long-term health care costs, the Back to Work budget allows Obamacare to run its course, and adjusts Medicare so that it can use its size and clout to negotiate cheaper prices.
...[U]nlike the Ryan plan-- and more so than the plan produced by Senate Democrats-- this plan deals with the real economic problems faced by millions of Americans. Unemployment under the Back to Work framework is projected to fall to 5 percent within three years-- a swift return to pre-recession levels. Moreover, it achieves $4.4 trillion in deficit reduction, reaching (and surpassing) the target set by Alan Simpson and Erksine Bowles. Which is to say that by Washington’s standards, this should be seen as a “serious” document when it comes to deficit reduction.
Robert Reich, not exactly an Obama apologist, claims the president sees this as well and told the House Republicans in their meeting Wednesday that the country's "biggest problems over the next ten years are not deficits." So why isn't Obama getting up on his bully pulpit and explaining that to the public-- and, perhaps even backing the Back to Work Budget? As that budget explains and Reich spells out, "[t]he biggest problems we face are unemployment, stagnant wages, slow growth, and widening inequality-- not deficits. The major goal must be to get jobs and wages back, not balance the budget."
...The government’s finances are not at all like a household’s. In fact, it’s when American families can’t spend enough to keep the economy going, because too many of them are unemployed or underemployed and have run out of money, that government has to step in as spender of last resort-- even if that means taking on more debt. If government doesn’t fill the spending gap, an economy can collapse into deeper recession or depression, pushing unemployment far higher. Look at what austerity economics has done to Europe.
In addition, it’s perfectly fine for government to borrow and continue to borrow in order to invest in new roads or other infrastructure, or education, or basic research-- when those investments pay off in higher rates of economic growth.
The notion that government spending “crowds out” private investment, keeping interest rates higher than otherwise, is obsolete in a global economy where capital sloshes across national borders, seeking the highest returns from anywhere.
...Republicans want Americans to believe government budgets are like family budgets that must be balanced because the analogy helps their ideological aim to “drown the government in a bathtub,” in the memorable words of their guru, Grover Norquist. As long as there’s a debt and balance is the goal, shrinkage is the only option-- if tax increases are ruled out.
Our old friend Rob Zerban hasn't announced that he's running against Paul Ryan again-- but if you're a careful reader of DWT you already know his what he'll probably do. This morning he told us that "the Ryan Budget will make things worse, not better. To see the effects, we only need to look at Wisconsin's First Congressional District. Janesville has such a surplus of workers begging for jobs that average wages fell by $7 per hour from 2007 to 2010. Racine has an unemployment rate of 11.9%. And, Kenosha County lost 30% of its manufacturing jobs since 2000. We need a responsible budget, and thats just not what the Ryan Budget does."
Soon enough we'll be asking for contributions on behalf of Rob's campaign. Meanwhile, please consider helping out Andy Hounshell and Nick Ruiz as they take on Boehner and Mica.
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