Senate Budget Committee Chairman Sen. Kent Conrad, D-N.D., said on Sunday that the so-called "Gang of Six"—three Democratic and three Republican senators trying to forge a deficit-reduction deal—has made "enormous progress" toward its goal. Don’t assume that’s good news. It could mean this gang is about ready to pop a cap in the economic aspirations of millions of Americans.
While we don’t know the details, it’s widely assumed that because four of the Gang of Six were members of President Obama’s ill-fated deficit commission last year—Sens. Richard Durbin, D-Ill.; Mike Crapo, R-Idaho; Tom Coburn, R-Okla; and Conrad—whatever deal these members will concoct will mirror the report of the commission’s co-chairs. That report included a call for raising the retirement age, cutting Social Security benefits and raising Medicare premiums, in addition to deep cuts in other government services to bring about a $4 trillion reduction in the deficit over 10 years.
Some news reports have the gang negotiating roughly one dollar of increased revenue for every three dollars of budget cuts, which if they succeed in uniting around such a plan would make their entry into the budget deficit debate sound downright moderate when compared to the spending cap plan proposed by Sens. Bob Corker, R-Tenn., and Claire McCaskill, D-Mo. That plan would set a federal spending cap of 20.6 percent of the nation’s gross domestic product in 10 years, lowering that percentage from the 23 percent it is today.
On Friday our sister site, TheMiddleClass.org, gave a "thumbs down" to the Corker-McCaskill CAP ("Commitment to American Prosperity") Act, warning that if it were enacted "the consequences would be calamitous: deep cuts in Social Security and Medicare, broad slashes or outright elimination of programs supported by the middle class, and a government rendered incapable of responding to the next economic downturn."
Like Corker-McCaskill, the Gang of Six plan, if it comes to fruition, is expected to adopt some form of spending cap based on the size of the economy. Also, President Obama has his own "debt failsafe" proposal on the table, which would force across-the-board cuts in spending if economic projections show federal spending increasing as a share of GDP. (It is a proposal along those lines that Senate Majority Leader Harry Reid has said he would support.) The big difference is that Obama would exclude Social Security, Medicare and some other safety-net programs.
All of these caps will do needless harm to families and the overall economy.
Any cap that forces federal spending anywhere near 21 percent of GDP, and includes Medicare, Medicaid and Social Security under that cap, would most likely force a massive shift of health care costs to seniors as well as Social Security benefit reductions. It would require implementation of something on the order of the Rep. Paul Ryan Medicare privatization plan in order to get spending under the cap, or hundreds of billions in cuts elsewhere in the budget.
Such a cap would also magnify already deep cuts in a host of programs that already were cut in the 2011 budget and are cut more deeply in the 2012 budget proposal passed by House Republicans. That includes job training programs, various forms of economic development aid to states and localities, green energy investment, high-speed rail and other forms of transportation, and research. President Obama has said he wants to focus spending in key areas that will help the American economy "win the future," but there won’t be much room to win the future under such a budget cap.
Worse, the spending caps now being considered would require the federal government to cut federal spending even deeper if the economy slips into another recession—precisely what you don’t want the government to do when the private sector is laying off workers. Spending on "economic stabilizers"—from food stamps to unemployment compensation—not only serve as lifelines to people in need during a recession but they help keep recessions from deepening, since aid recipients pour that aid back into the economy as they buy food and pay their household expenses. The Recovery Act spending that kept an estimated 3 million people off the unemployment rolls would not have been possible if these spending caps had been in place.
A better way to bring down the federal deficit to a sustainable level would be to focus on growth and on getting people back to work, and to end once and for all the tax expenditures to corporations and the wealthy. The House Progressive Caucus budget proposal balances the federal budget by 2021 by cutting both unnecessary spending and unnecessary tax breaks, and asking millionaires and billionaires to share in the sacrifice we’re asking of working families. Rep. John Tierney, D-Mass., has introduced legislation that would eliminate 30 tax breaks that cost $60 billion a year, and give the Government Accountability Office the mandate to measure the value of tax breaks with the same scrutiny that spending programs receive.
On Friday, a group of mayors in Chicago for an urban design meeting allowed their frustration with the budget debate in Washington to boil over. "Mayors could never get away with the kind of nonsense that goes on in Washington," Philadelphia Mayor Michael Nutter was quoted as saying in The Huffington Post. The "nonsense" he was referring to was the federal budget cuts that have tricked down to cities in the form of laid-off police officers and teachers and slashed public services. These cuts have made in some cities made recessionary conditions worse; at best, they have made it harder for cities to recover. And when these cities struggle, they cannot fulfill their potential as economic growth engines.
That’s why we need a different kind of budget debate, based on thoughtful and proven ideas from progressive leaders in Congress, focused on getting people working again and jump-starting the recovery of communities that are still deep in recession. The spending cap of the austerity advocates is being touted as the "adult" approach to deficit reduction, but there is nothing adult about putting a cap in the needs of low- and middle-income families for a growing supply of good jobs, a reliable safety net and a secure retirement.