The decision by the Federal Reserve on Wednesday to not increase interest rates right now beyond their current 0.25 to 0.5 percent range is a testament to the fragility of the slow economic recovery the United States is now experiencing.
The response by the Republican-controlled and deeply conservative House Budget Committee later that day was to ignore a growing chorus of economists from around the globe who are saying that it is more important for the federal government to spend smartly on rebuilding the middle class and on the fundamentals needed by a 21st-century economy than to bull-headedly try to balance the federal budget by an arbitrary date, regardless of the consequences.
In that context, the People’s Budget formally released this week by the Congressional Progressive Caucus is not a symbolic exercise. It is central to a debate that the country must have to challenge economic thinking in both political parties that is keeping people who need work from getting it and is choking our economy’s ability to grow.
The House Budget Committee’s budget for fiscal 2017 authorizes $1.07 trillion in spending. It conforms to a bipartisan budget deal worked out in Congress last year – one that was already too austere – but an extreme right wing in the House contends that even this agreement is not good enough. They want a $30 billion increase in spending over this year to be cut out of the bill. Two members of this wing, which identifies itself as the House Freedom Caucus, voted against the budget in committee. Many others have vowed to oppose it on the House floor. That’s even with the budget’s commitment to slash $7 trillion in spending over the next 10 years to bring the federal budget into balance, a feat the Republicans propose to accomplish by dismantling the Affordable Care Act, deeply cutting antipoverty programs and shifting the responsibility for them to the states, and reviving the discredited plan of creating a Medicare private insurance voucher.
House Democrats are also generally united against this bill. It did not receive a single Democratic vote in committee. “The House Republican 2017 budget resolution is a deeply divisive plan to protect wealthy and powerful interests at the top of the economic ladder at the expense of working families, students, seniors, and everyone else,” said a statement by Budget Committee Democrats. The Republican proposal, the statement goes on to say, “relies on the failed theory of trickle-down economics to put the burden of deficit reduction squarely on the middle class and those working their way into the middle class, while failing to close a single special interest tax break to cut the deficit.”
But the Democratic leadership is not using this as an opportunity to push the boundaries of the budget debate and tap into the growing consensus of economists – not just among liberal economists in the United States but economic experts around the globe – that we need more, not less, federal spending on the fundamentals of economic growth in order to head off a recession, or at least better weather one if it comes.
That task is being taken on by the Progressive Caucus People’s Budget, which is expected to be debated on the House floor in early April.
The emerging pro-growth economic consensus was most recently highlighted by a Bloomberg News article about “a school of dissident economists” who would like to see the U.S. and other governments get off their fixation over the size of their budget deficits and instead focus on using government spending to accelerate growth and create jobs.
“Calls for governments to take over the relief effort are growing louder. Plenty of economists have joined in, and so have top money managers. Bridgewater’s Ray Dalio, head of the world’s biggest hedge fund, and Janus Capital’s Bill Gross say policy makers are cornered and will have to resort to bigger deficits,” Bloomberg reported.
The formal name of the theory these economists are turning to is “modern money theory.” Where many economists and politicians, including President Obama, say that governments are much like households and should not spend more than they earn, modern money theorists say that governments that print their own currency, as the United States does, do not have to budget the way that households do. They can print money to finance their spending, and their deficits, and should do so in order to push the economy to its productive limits.
Notably, this group includes advisers to Democratic presidential candidate Bernie Sanders. “Advisers to Bernie Sanders include some of the school’s leading advocates: Stephanie Kelton, a Sanders hire to the Senate Budget Committee, and James K. Galbraith, whose father helped shape President Lyndon Johnson’s “Great Society” programs,” Bloomberg News wrote.
The Organisation for Economic Co-operation and Development in February urged the world’s largest economic powers to use their ability “to borrow for long periods at low interest rates” to increase spending in order “to strengthen demand” in the face of signs of a global economic slowdown.
That call comes from painful experience. When the global recession hit in 2008, the United States responded in 2009 with President Obama’s fiscal stimulus plan, which included more than $400 billion in spending on such items as infrastructure, green energy and aid to state and local government programs. The result was the creation of millions of jobs that helped the country recover from recession. Several major European countries did the opposite, and the result was economic stagnation and stubbornly high unemployment.
Now not only do House Republicans vow to follow the disastrous policies of the European austerians, but all of the Republican presidential candidates have at some level vowed to reinforce those policies. The People’s Budget would be a clean break from the false “wisdom” of tightening our national fiscal belts when what the nation most desperately needs is a major effort to fix our infrastructure, invest in the green energy of the future, and ensure that people who want to work have the ability to get a job and live in financial security.
That should not be too much to ask.
To declare yourself a citizen co-sponsor of the People’s Budget, and to show Congress that the ideas in the People’s Budget have broad support, sign this petition that will be delivered to Congress when the House begins floor debate.
This article has been updated since House Speaker Paul Ryan announced a delay in House floor consideration of the House Republican budget and any alternatives.