Tag Archives: House Budget Committee

The Progressive Path To Deficit Reduction

Today, President Obama will deliver a wide-ranging speech laying out a strategy to deal with the U.S. budget deficit. Although the exact policies that he will endorse are unknown, he is expected to lay out a vision that will alter the country’s entitlement programs and call for high-income earners to pay more taxes. In addressing the U.S. debt, Obama is entering an increasingly heated debate about how to address our long-term deficits in a way that does not shoulder Main Street Americans with undue burdens or hinder job growth. On one side, conservatives are proposing cruel plans that would sacrifice the services and investments in America’s great middle class while asking nothing more from the wealthiest among us. On the other side, a growing number of progressives are demanding fair sacrifice that protects our crucial needs while demanding fair sacrific e from those who are richer than ever. The path that we choose will determine the very kind of country we will have in the future: one where only the wealthiest among us have opportunities or one that enshrines the American Dream — the idea that anyone, no matter what their background, can work hard and succeed.

EXPLAINING THE DEBT: To understand the most responsible way to tackle our long-term deficit problem, it’s important to first understand exactly what the challenge of the debt is and what caused it. Interest rates and inflation are currently low, and addressing unemployment is a far more pressing immediate problem. A March 2010 CBS News poll found that 51 percent of Americans said that jobs/economy is the most important problem facing the country, and only seven percent said the deficit was. Still, we should address the $14.2 trillion debt and the $1.3 trillion budget deficit over time, as doing so is crucial to our long-term economic health. In the short-term, there are a handful of major factors driving our debt. This includes the cost of two wars, a runaway defense budget, the Bush tax cuts for the wealthiest Americans, taxes on the richest Americans being the lowest in a generation, and a recession caused by the lack of regulation of Wall Street. The greatest long-term driver of our debt is health care costs, with our “possibly most inefficient” system in the world having us spend more than any other country in the world on health care with worse results. Thus, long-term deficit reduction plans that do not seriously deal with these causes of the current debt are avoiding the key issue.

EMACIATING MAIN STREET, ENRICHING THE RICH: Conservatives in Congress and the right-wing intelligentsia have unleashed a flurry of deficit reduction plans in recent months, which both continue to enrich the wealthy with massive tax cuts and which take aim at programs and investments for Main Street — solutions that were tried under the previous president and failed. In House Republicans’ much-touted budget resolution, H.R. 1, some of which made it into the recent budget deal to keep the government open, they dramatically cut Pell Grants, Head Start, foreign aid to children suffering from malaria, and other programs that benefit ordinary p eople, but are in no way the cause of our modern deficits. House Budget Committee Chairman Paul Ryan (R-WI) upped the ante when he released his FY2012 budget, which continues to call for massive and crippling cuts to the Pell Grant program, slash the Food Stamp program by $127 billion over ten years, effectively privatize Medicare, and likely increase taxes on the middle cl ass while dramatically cutting them for the rich and corporations, actually making taxes on the rich lower than at any other time since Herbert Hoover’s presidency. At the end of the day, Ryan’s budget would leave the safety net in tatters, investments in Main Street severely under-funded, and would have seniors paying the majority of their income for health care, destroying the promise of Medicare — a system that Americans actually want expanded, not crippled. And while these conservatives are quick to ask Main Street to pay for debt that it did not primarily cause, they have no problem exempting some of the nation’s biggest dirty energy corporations from fair sacrifice. Last month, House Republicans effectively said “so be it,” as they voted in lockstep to protect billions of dollars in corporate welfare for Big Oil.

THE PROGRESSIVE PATH: While conservatives seem intent on blaming the poor, the sick, the elderly, and the middle class for deficits that they did not primarily cause, progressives are promoting plans that tackle the deficit by promoting fair sacrifice and responsibility. The CAP report “The First Step: A Progressive Plan for Meaningful Deficit Reduction” lays out a number of progressive deficit reduction steps that rely equally on raising revenues and cutting spending. It calls for implementing a graduated surtax on adjusted gross income for households making more than $1,000,000 a year, imposing a $5 per barrel fee on imported oil, and other measures that, when combined with spending cuts like wasteful tax expenditures, subsidies for Big Oil, a downsized defense budget more appropriate to our needs, and other measures, would yield single-year deficit reduction of $255 billion. This plan would stabilize the debt situation by 2015. This plan would stabilize the budget situation by 2015. Meanwhile, the Congressional Progressive Cauc us (CPC) has put out its own budget proposal, called “The People’s Budget,” which if enacted would reach primary balance in 2014 and result in a budget surplus by 2021. The major proposals within the budget include, but are not limited to, enacting a millionaire’s tax, initiating a progressive estate tax, ending corporate welfare for the dirty fuels industry, reining in the defense budget, and enacting a public option in the health care system as well as authorizing Medicare to negotiate with drug companies for lower drug prices. Economist and Director of the Earth Institute at Columbia University Jeffrey Sachs notes that the CPC budget is a “truly centrist initiative,” if judged by American public opinion. Progressive economist Dean Baker has proposed allowing Medicare beneficiaries to seek care overseas, taking advantage of cheaper health care systems. Baker estimates that if fifty percent of Medicare beneficiaries opted for this globalized option, then taxpayers would save more than $40 billion a year by 2020. Additionally, there are numerous proposals for a financial transactions tax — which would ask that some of the very same banks that caused the global financial crisis would be responsible for helping us pay for it. A Dean Baker analysis of these plans finds that a “0.25 percent tax on trades of stocks, bonds, derivatives, and other Wall Street financial instruments…would easily raise between $50 billion and $150 billion annually,” while doing little to actually harm economic productivity. While there is healthy debate among progressives about these ideas, they make one thing clear: there is a way to reduce long-term de ficits that does not have to unduly harm Main Street America and that asks for fair sacrifice that includes the richest among us.

CONGRESS: Ryan’s Radical Vision

Republicans announced last Friday that Rep. Paul Ryan (WI), chairman of the House Budget Committee, will deliver the GOP‘s response to President Obama’s State of the Union address tomorrow. According to reports, GOP leaders chose Ryan because he is supposedly a “champion of slashing government spending.” The seven-term Wisconsin congressman gives Republicans a “chance to emphasize their core message: government spending must come down to reduce the nation’s annual deficit and long-term debt.” House Speaker John Boehner (R-OH) said Ryan — who has been given “stunning and unprecedented” power to shape the budget — is “uniquely qualified to address the state of our economy and the fiscal challenges that face our country.” Ryan is known as the GOP’s numbers guy in the House, and he laid out last year what he calls a “Roadmap” to fiscal health. But as the Washington Post’s Ezra Klein notes, “The more they elevate Ryan, the more they elevate Ryan’s Roadmap. And that document is a timebomb for them.”

PRIVATIZING ENTITLEMENTS: Ryan’s Roadmap puts Americans on the path of privatizing entitlement programs, such as Social Security. The plan boasts about “the creation of personal investment accounts for future retirees” that are “the property of the individual.” (Emphasis in the original document). “Individuals will be able to join the investor class for the first time,” the Roadmap says. The Center on Budget and Policy Priorities (CBPP) notes that “the Ryan plan proposes large cuts in Social Security benefits — roughly 16 percent for the average new retiree in 2050 and 28 percent in 2080 from price indexing alone.” It “initially diverts most of these savings to help fund private accounts rather than to restore Social Security solvency.” CBPP also notes that the Roadmap “would eliminate traditional Medicare, most of Medicaid, and all of the Children’s Health Insurance Program” by creating a private voucher system that won’t keep up with the cost of health care. By 2080, under Ryan’s plan, the Medicare program would be reduced by nearly 80 percent below its projected size under current policies. CBPP summed up Ryan’s plan: The Roadmap’s cuts “would be so severe that CBO estimates they would shrink total federal expenditures (other than on interest payments) from roughly 19 percent of GDP in recent years to just 13.8 percent of GDP by 2080. Federal spending has not equaled such a low level of GDP since 1950, when Medicare and Medicaid did not yet exist, Social Security failed to cover many workers, and close to half of the elderly people in the United States lived below the poverty line.”

MIDDLE CLASS TAX INCREASES: Citizens for Tax Justice found that Ryan’s Roadmap would raise taxes on 90 percent of taxpayers and drastically lower them for the richest Americans. The Economic Policy Institute (EPI) recently reported that the rates for the middle class would be higher than those for the rich under Ryan’s plan. “Middle-class families earning between $50,000 and $75,000 a year would see their average tax rate jump to 19.1% (from 17.7%) under this plan — an increase of $900 on average,” EPI says, while at the same time, “Millionaires would see their average tax rate drop to 12.8%, less than half of what they would pay relative to current policy.” As EPI’s Andrew Fieldhouse concluded, under the Roadmap, “a long tradition of progressive taxation would be abandoned; millionaires and Wall Street bankers would pay significantly lower tax rates than middle-class workers. … Income inequality would soar.” In another giveaway to the rich, the Roadmap calls for a total repeal of the estate and corporate taxes and would introduce a national sales tax. Citizens for Tax Justice (CTJ) said this idea “would eat up a much larger percentage of total income for poor and middle-class families than wealthy families” because the former “spend most or all of their income on consumption,” while “high-income families are able to save much more of their income.” Ryan’s plan claims federal tax revenue will be 19 percent of GDP, but the Tax Policy Center found last year that his proposal would only bring in “approximately 16 percent of GDP, which amounts to a $4 trillion revenue shortfall over ten years.”

LESS REVENUE, MORE DEBT: Despite raising taxes on 90 percent of Americans, the federal government will lose $2 trillion in revenues over the next 10 years under Ryan’s plan, according to CTJ. “It’s difficult to design a tax plan that will lose $2 trillion over a decade even while requiring 90 percent of taxpayers to pay more. But Congressman Ryan has met that daunting challenge,” CTJ wrote. Looking at the most optimistic figures, the Roadmap won’t balance the budget until at least 2063 and it won’t reduce federal debt for decades, exceeding 100 percent of GDP before starting to come down. While proposing drastic cuts to entitlement programs, Ryan said he wants to reduce discretionary spending — which includes such expenditures as education, homeland security and other defense spending — but he has no idea what programs to cut. “I can’t tell you the answer to that,” he said earlier this month. However, anticipating the plan’s unpopularity, GOP leadership isn’t publicly embracing Ryan’s plan but at the same time, it appears willing to allow it to go forward. During the midterm election campaign, the GOP dropped Ryan’s Roadmap from its “Pledge to America” scheme and as the conservative National Review noted last week, “praise for the Wisconsin Republican comes easy and often, full-scale endorsement of the roadmap less so.” But while Majority Leader Eric Cantor (R-VA) said last week that he supports only “elements” of the plan, he said yesterday on NBC’s Meet the Press that “we need to embrace” its direction. And last year, Boehner wouldn’t endorse the Roadmap, but at the same time couldn’t name any specific part he disagreed with. But if Boehner dislikes Ryan’s plan so much, it’s unclear why he made him chairman of the House Budget Committee and gave him new and unprecedented powers to unilaterally set spending limits instead of subjecting those limits to a vote on the House floor. Speaking of Ryan’s new power, Budget Committee Ranking Member Chris Van Hollen (D-MD) said, “Unfortunately, the House GOP is reverting back to the same arrogant governing style they implemented when they last held the majority and turned a surplus into a huge deficit.”