The following was originally published in Politico
‘America is broke.” “Government’s on a spending spree.” “Real deficit reduction requires taking on entitlements.” The delusions and distortions are so widespread the truth can’t catch up.
The other day, House Speaker John Boehner (R-Ohio) declared, “American people want government to remain open and spending to be cut.” If spending cuts cost jobs, well, “so be it,” says the speaker.
But that’s not where the American people are. In poll after poll, they are concerned most about jobs and the economy. Nothing else comes close.
Boehner is suggesting the public has no clue about how bad our problems are. But Americans exhibit far more common sense than the speaker shows in his agenda. When it comes to the budget, most Americans want Social Security, Medicare and Medicaid protected. They support higher taxes for millionaires, rolling back the Bush top-end cuts and a transactions tax on financial speculation.
They support investments vital to our future — such as education and research and development. To cut spending, they’d start with the Pentagon and subsidies of entrenched corporate interests.
We’d be better served if Congress stopped peddling distortions and started listening to the voters.
So before the backroom gang of six senators emerges to put a bipartisan stamp on the Beltway’s current misconceptions, let’s review why the voters are making the most sense.
The major cause of the current deficits is the recession, not a spending spree. Yes, the Bush administration squandered the Clinton surplus and ran up the debt with tax cuts, two unfunded wars and a prescription drug benefit written by drug companies. But the overwhelming cause of soaring deficits is the Great Recession and the mass unemployment that accompanied it — driving down tax revenues and driving up spending on everything from unemployment insurance to food stamps. President Barack Obama’s Recovery Act spending was only a small portion.
The major solution to the deficits is recovery, not spending cuts. The best deficit reduction program is putting 8 million people to work — making them consumers and taxpayers. The Congressional Budget Office projects that economic recovery alone will reduce the annual budget deficit from 10 percent of the gross domestic product this year to 3.1 percent in 2014. No other deficit measure comes close.
That is why economists from President George W. Bush’s former economic adviser (Federal Reserve Chairman Ben Bernanke) to Sen. John McCain’s adviser (Mark Zandi) to Nobel Prize winners like Paul Krugman and Joseph Stiglitz warn against cutting spending now. Cutting spending, contrary to conservative messaging, costs jobs. Goldman Sachs warns the cuts in the House bill could cut growth in half. Zandi warns they may cause up to 700,000 job losses. As in Britain, spending cuts could send the economy back into decline.
Health care costs drive long-term deficits, not entitlements. The blood-curdling projections of trillions in red ink are driven by soaring health care costs. If the U.S. paid what other industrial nations pay per capita for health care, we would have no long-term deficit problem. Social Security is separately funded and doesn’t contribute to the deficit.
Medicare and Medicaid aren’t the problem; they are just the budgetary expression of a broken system. Conservatives like Rep. Paul Ryan (R-Wis.) would cap spending on Medicare, turning it into a voucher, and force the most vulnerable members of society to bear the rising costs of health care.
Alternatively, we can build on the reforms in the Obama health care bill and take on the powerful corporate interests — drug companies, insurance companies, hospitals — that drive up U.S. health care costs per capita to twice the average of industrial nations. Real courage requires taking on the drug and insurance companies, not shafting seniors.
Defense spending is rising, not domestic spending. Since 2001, funding for security (including homeland security) has risen from 3.4 percent to 4.7 percent of GDP. Nonsecurity domestic spending has basically been flat, rising from 3.3 percent to 3.4 percent.
We now spend more in inflation-adjusted dollars on the military than at the height of the Cold War. We spend almost as much as the rest of the world combined. And the Defense Department is regularly cited as the source of most of the federal government’s waste, fraud and abuse. Its books are in such disarray that none of the services can be audited. Sensible budget cuts start with the Pentagon’s budget, not domestic programs.
Tax reform that lowers rates is a rip-off, not a reform. The two co-chairmen of the deficit commission recommend lowering income and corporate tax rates, while removing loopholes, raising more revenue while suggesting most people would end up paying lower taxes. This is a fool’s game. We did this before, in the mid-1980s under President Ronald Reagan. Tax rates went down; tax loopholes were limited. But corporate lobbies weren’t disbanded. Within a few years, the rates stayed low, but the loopholes were back.
Tax reform starts on the top. We now suffer Gilded Age extremes of inequality. The richest 1 percent, who have benefited the most from recent tax cuts, now capture 23 percent of the nation’s income, control as much wealth as 90 percent of Americans and pay effective tax rates lower than schoolteachers.
Wall Street bankers garnered 40 percent of all corporate profits before they blew up the economy. Now, after being bailed out, they are back to paying out record bonuses. Tax reforms should begin with higher top-end rates and taxes on all financial transactions. Not peddling another tax dodge.
The gulf between the voters’ common sense and the current GOP agenda reveals one other thing: Republicans are for cutting spending, not deficits. They insist on extending tax breaks for the wealthy in December, while claiming to be for deficit reduction in March. They protect billions in subsides for oil and drug companies. With rare exception, they take the pledge to never raise taxes.
They are for cutting government — not getting the economy moving or the budget in better balance. They’d better hope the voters don’t figure that out.