As we mark the fifth anniversary since the beginning of one of the worst financial crises in American history, the nation has yet to recover. Over 21 million people are in need of full-time work. Wages are stagnant. The too-big-to-fail banks are bigger and more concentrated than ever. The wealthiest Americans have captured virtually all of the rewards of growth, while most Americans have yet to experience any recovery.
Now the Republican Party in the Congress is concocting another manufactured budget crisis. The Congress has only a handful of days in session to pass a budget or continuing resolution to keep the government open after September 30. Then, by mid-October or so, it will have to vote to lift the debt ceiling or trigger a global financial mess if the U.S. defaults on its debts.
The Tea-Party right of the Republican Party has blocked all measures to date, hoping to hold the economy hostage to gain concessions. The zealots, led by freshman Senator Ted Cruz of Texas, argue they will refuse to fund the government unless Obamacare is repealed. The House Republican leaders demand more deep cuts in spending as the price of going forward.
The president has wisely stated that he will not negotiate on lifting the debt ceiling, which is simply Congress agreeing to pay the debts that they have already run up. He also wants to get rid of the inane, across-the-board “sequestration” cuts that were designed to be abhorrent, in return for a longer-term more balanced mix of tax hikes and spending cuts.
As the partisan posturing, the blizzard of charges and countercharges, the arcane terms, budget gimmickry, and Perils of Pauline last-minute melodrama revs up, here is a common-sense field guide to the ersatz crisis.
The Real Crisis is Jobs
While the entire debate will focus around how much, what and when to cut spending, the real crisis the U.S. faces is the shortage of good jobs. Over 21 million people are in need of full-time work. Nearly 40 percent of the unemployed have been out of work for about seven months or more, losing skills and hope. Adult participation in the labor force is at lows not seen since 1978. Workers have little leverage to gain pay raises. Median household income has declined in the so-called recovery. From 2009 to 2012, 95 percent of the gains of growth have been pocketed by the top 1 percent. The majority of us have been falling behind.
In a less ideologically addled world, there would be bipartisan debate around a jobs program. Democrats would push for spending on infrastructure, on putting teachers and firefighters and police back to work, on green and urban corps to employ the young. We have work that must be done and workers who need the work. Republicans would inevitably push for tax cuts. A compromise package of the two would help generate jobs and demand, and lift the economy.
Instead the debate focuses only on austerity, as if the debt were our biggest problem. But U.S. deficits have been cut, as proportion of the economy, by more than 50 percent in the past three years. They are coming down faster than any prudent speed limit, faster than any time since the demobilization after World War II. If the economy continues to grow, the deficit is projected to be 2.2 percent GDP by 2016, down nearly 80 percent from 2009. Investors continue to allow the U.S. to borrow at very low interest rates.
The reality is that we are spending too little, not too much. Businesses are looking for customers before they expand. But consumer demand is weak because of high unemployment and stagnant wages and families still struggling to pay down debts. With Europe barely growing and China slowing, exports offer little hope for significant growth. That leaves only an increase in government spending to put people back to work.
2. Our most dangerous long-term deficit is the absence of a clear strategy for growth and good jobs.
The budget “crisis” is a self-inflicted wound, congressional dysfunction lacerating the economy. We do have real economic problems however. We have been living off an economy built on bubbles and debt. Incomes for working Americans haven’t been rising in decades. While productivity has gone up, workers have not shared in the benefits. The wealthiest Americans have rigged the rules so that they collect more and more of the rewards of growth. The top 10 percent now captures more than one-half of America’s income. The middle class is disappearing. The richest 1 percent Americans have more wealth than 90 percent of Americans.
What we need is a new foundation for growth. We need to expand the investments vital to our economic future. That would include renovating our costly, dangerous and decrepit public infrastructure – from roads and bridges to mass transit, modern sewers and electric grid, fast broadband and more. We have to invest so that every child has access to good public education from pre-K to affordable college.
A new foundation must include a coherent manufacturing strategy. We should commit to balancing our trade over the next five years, putting multinationals on notice that if they want to sell in America, they have to make more things in America. We need to expand rather than cut investments in research and development to seed the inventions of the future. We need to devise a concerted effort to capture the lead in the green industrial revolution that is already transforming markets across the world.
Finally we need major reforms to ensure that the rewards of growth are widely shared. To rebuild the middle class, we need to ensure workers can gain a fair share of the profits and productivity that they help to produce. An increase in the minimum wage, continued progress on affordable health care, affordable day care, mandated paid family leave and vacations put a floor under families. Empowering workers to organize and bargain collectively will help them share in the rewards of growth. Cubing the perverse executive compensation policies that give CEOs multi-million dollar incentives to plunder their own companies for short-term rewards will help balance the scales.
President Obama has proposed elements of this agenda – a small investment agenda, an infrastructure bank, an increase in the minimum wage, manufacturing centers. But Republicans have never allowed any of these measures to even come to a vote, and the argument has never been joined. Instead Americans are befuddled by one manufactured crisis after another.
3. Our problem isn’t out of control spending; it is out of control corporate looting
Spending, despite all claims to the contrary, is not out of control. Federal outlays have been coming down, not going up. Non-defense discretionary spending – everything the Federal government spends outside of the military, entitlements like Social Security and interest on the national debt – is headed down to levels in relation to the economy not seen since the 1950s.
Republicans decry the “47%” they term freeloaders. But it is big money, not vulnerable people, that has the biggest voice in Washington. The real budget problem is not the power of a poverty lobby, but the power of the wealthy and corporate special interests that pocket billions from unnecessary subsidies and tax loopholes. They spend millions financing campaigns, deploy armies of lobbyists, fund the revolving door for former legislators and executive officials and earn billions in return on their political investments. They rig the rules, keeping the nation from making the investments we need. The Republican majority in the House passed a farm bill that provided over a hundred billion in subsidies to agribusiness while zeroing out food stamps for the impoverished. Multinationals stash literally trillions in tax havens and dodges abroad. The big banks spend over one billion on lobbying and political contributions in an election year to weaken efforts to curb their excesses.
4. We are not broke
This is a wealthy nation. We can easily afford the essentials for a competitive, civilized society: a first class public education for every child, decent wages and benefits for workers, decent housing, a secure retirement, affordable health care.
Budget deficits do not force severe emergency cuts. Rather budget crises are manufactured to distract from the reality that the rules are rigged to serve the powerful. It is a question of priorities and power. If we made the rich and corporations pay their fair share, closed the tax dodges, ended the insider subsidies, and focused on rebuilding America, we would have more than enough money to make the investments we need and still keep our books in order.
5. Common Sense for the Coming Showdown
These basic truths provide clear guidelines for the coming showdown over the budget and debt ceiling. In brief
Repeal Job-Killing Sequestration Cuts
Across-the-board budget cuts – called “sequestration” – that began in March of this year are making the jobs crisis worse and holding back economic growth. According to the Congressional Budget Office, simply repealing sequestration would save 900,000 jobs. Congress should repeal the sequester – period – not replace those cuts with others than would also hamper economic growth.
Pay our Debts
Congress should lift the debt ceiling without conditions and without holding Americans hostage. The full faith and credit of the United States government is not and should not be negotiable. Investors in U.S. bonds should know that we will pay the debts that we owe.
Protect Medicare, Medicaid, and Social Security from Benefit Cuts
Conservatives in both parties seek to use the manufactured crisis to force cuts in basic security programs that would otherwise be unacceptable. These would hurt the most vulnerable, violate the promises we make to one another, and are neither necessary nor wise. Any cuts in benefits from Social Security, Medicaid and Medicare should be opposed. We should be improving retirement security and health care, not cutting them back.
Eliminate All Tax Incentives for Sending Jobs Overseas
To pay for the investments we need while getting our books in order, we must curb the predatory special interests that feed on federal taxpayers. A first step would be to eliminate all tax incentives that encourage companies to ship jobs abroad. Ending these tax subsidies would—by itself—increase investment and employment in the U.S. At the same time, repeal would generate billions that could be used to rebuild our economy without increasing the deficit.
Shared sacrifice makes no sense when the rewards are not shared. Corporate profits are at record levels as a percentage of the economy; worker wages near record lows. The wealthiest 1 percent has pocketed nearly all the rewards of growth coming out of the Great Recession. They now make more income that 50 percent of Americans. The rich and the corporations should pay their fair share rather than hit seniors with Social Security cuts or veterans with health care cuts.