Fixing The Deficit Without Making Things Even Worse

Wall Street's proposals to fix the deficit may be wonderful for Wall Street... but they are WRONG for America

Thursday night, when everyone was finishing up with the Democratic convention in Charlotte, author David Korten (Agenda For A New Economy) tweeted a recommendation for an article by John Cavanagh ay Yes! Magazine, 7 Ways To End The Deficit (Without Throwing Grandma Under The Bus). Cavanagh is looking for a more just, more secure, more sustainable economy... as Korten did in his book. And as we have been over the past month in our exploration of Jacob Hacker's alternative to the failed Austerity Agenda Paul Ryan and Mitt Romney are pushing.

Along with 16 congressional candidates we've been looking at the proposals Hacker and his partner Nate Loewentheil have made-- "Prosperity Economics"-- to help us create prosperity across all income classes, reform our broken political system, invest for the long term and, not incidentally, fix the debt problem-- all without cutting vital government programs. Here's how Dr. David Gill, a Democrat in downstate Illinois running strongly for an open seat (IL-13) put it:

The politics of austerity embraced by Paul Ryan and the rest of the Republicans are not a solution to the ongoing economic malaise here in central Illinois-- in fact, such policies will only exacerbate the real pain that has been experienced by so many of my neighbors for so many years now. The ever-growing income gap between the extremely rich and the rest of us has reached historical proportions, and it is this gap that fuels economic misery on "Main Street." Politicians who refuse to acknowledge the need to have corporations and millionaires and billionaires pay their fair share are serving but a tiny minority of their constituents, and they are forcing us to remain in an economic quagmire. American workers are amongst the most productive in the world, but with real wages stagnant for 30 years now, with virtually all the gains going to a small fraction of society, we are left with a populace unable to enjoy the fruits of its labor, and unable to fuel economic recovery. Austerity is not the answer-- investing in people is the answer! Make the millionaires and billionaires pay their fair share. Put in place Improved Medicare for All, which will provide an economic stimulus the likes of which we've rarely seen by taking back the 30+% of our health care dollars currently wasted on the private health insurance industry. And fully invest ourselves in the Green Revolution so desperately needed to ensure clean air and clean water for generations to come, producing hundreds of thousands of jobs in the process. These are the steps which will restore our economic health and bring additional benefits in the bargain.

There was one sour note in Clinton's speech on Wednesday and one sour note in Obama's speech on Thursday-- and they were the same sour note: threats of a so-called Grand Bargain with the Republicans, a Grand Bargain based on conservative plans to further shred the social safety net. The last time Democrats entered into a Grand Bargain with the Republicans-- that time is was Teddy Kennedy and George W. Bush-- the end result was No Child Left Behind. Obama's deal with Boehner would be far worse-- and catastrophic for the Democratic Party brand and their reputation as a party willing to stand up for the legitimate aspirations of working families. It's why, in the end, even with the potential nightmare of a Romney/Ryan regime, I won't be voting (albeit safely in California) for Barack Obama. Obama could learn a lot from Cavanagh's deficit reduction proposals, far more than what he seems intent on doing for his party's corporate donors. Cavanagh reports that there are seven steps that, together, more than eliminate the deficit while making the country more equitable, green, and secure.

Our first three proposals could bring in $329 billion a year; this alone would solve the deficit problem while helping to close the yawning inequality gap.

• 1.  Tax Wall Street: $150 billion per year. A tiny tax on stock and derivatives transactions, which several European countries are on track to adopt, would discourage Wall Street speculation, fill the hole in the deficit left by the Bush tax cuts, and leave plenty left over to fund lots of programs. The National Nurses Union and many other allies are fighting hard for this.

• 2.  Tax Corporations and Stop Tax Haven Abuse: $100 billion per year. The Financial Accountability and Corporate Transparency coalition has pointed out that one of the main ways that corporations avoid paying taxes is by declaring their profits in overseas tax havens like the Cayman Islands. 
 
• 3.  Tax the Wealthy Fairly: $79 billion per year. Our rigged tax code lets CEOs pay a lower tax rate than their secretaries do (as Warren Buffett keeps pointing out). The proposed Fairness in Taxation Act (HR 1124) would address this by adding five additional tax brackets for incomes over $1 million.

These three policy changes would go a long way toward making our society more equal, and that means better health, too. There is a terrific body of global evidence, a lot of it compiled by British researchers Richard Wilkinson and Kate Pickett, that more equal societies are much healthier. People at all income levels live longer; they are more fulfilled; and there is less violence. The United States, a relatively equal society as recently as the 1970s, is now off the charts in terms of wealth and income inequality. It doesn’t have to be that way. Just as we created a more just and vibrant economy and a strong middle class through fair taxes between 1940 and 1980, we can do it again through progressive taxation.

The second source of revenue would make the economy more green, a key imperative in a world where the environmental crisis is now as deep as the economic one. We found two simple ways to raise revenues and help save the environment.

• 4.  Tax Pollution: $75 billion per year. A tax on the carbon content of fossil fuels would reduce our dependence on oil while cutting air pollution and emissions of greenhouse gases. And, as economist Robert Frank pointed out on August 25 in the New York Times, “News that a carbon tax was coming would create a stampede to develop energy-saving technologies.”

• 5.   End Fossil Fuel Subsidies: $12 billion per year. This call should unite left and right. Why would anyone want to maintain a giant government subsidy to an industry that is the world’s major contributor to fossil-fuel emissions? 350.org has made this a centerpiece of their work. We should be able to win this.

Finally, there are simple ways to cut the military while making the country and the world more secure. More than half of government discretionary spending now goes to the military. Congress has long avoided cuts, in part because they equate military spending with jobs, but IPS has pointed out that almost every other industry employs more workers per dollar than the military. Plus, there is now bipartisan support for two sets of significant cuts.

• 6.  End Military Waste: $109 billion per year. A broad spectrum of experts has found over $100 billion a year in waste that could be eliminated with no sacrifice in security. Three recent commissions, two of them bi-partisan, have recommended roughly $1 trillion in military cuts over 10 years.

• 7.  Close a third of our overseas bases and our Iraq operations: $21 billion per year. Over two decades after the Cold War ended, the United States still maintains roughly 1,000 military installations in other countries. A majority of the President’s own deficit commission, which includes three Republican senators-- the National Commission on Financial Responsibility and Reform-- backed a proposal to close one third of our overseas military bases.

These seven simple steps would raise close to $550 billion a year. They would quickly erase the fiscal deficit  and return the country to a healthy budget surplus. There would be hundreds of billions left to invest in key sectors that could make the country more secure, more green, and more equitable: care jobs, green jobs, infrastructure jobs.

In other words, this plan could help erase the nation’s dangerous social and environmental deficits.
Many groups-- from Jobs with Justice to National People’s Action to the AFL-CIO-- are organizing to counter a push by the Right to use the deficit crisis to shred social programs and our nation’s safety net. Let’s up the ante and spread the message. America is not broke. We have plenty of resources to rebuild shared prosperity in the U.S.

Would you like to see the country move down this path rather than the path the GOP and Wall Street are insisting on? The Prosperity candidates will help give Obama the strength and resolve he needs to resist Austerity. Please do what you can to help them get elected in November.