If it were possible to gather the world’s top 100 economists together in a room and ask them which makes more sense at this point in America’s history—making draconian reductions in the budget deficit or creating more jobs and developing new businesses, 90 of them (at least) would vote unequivocally for the latter. And those that voted for the former would mostly have close ties to the Cato Institute or the Heritage Foundation.
If you went further and asked those same economists what drastically reducing the budget deficit would mean to our recovery from the Great Recession, that same 90% would be divided between those who would say it would throw us back into recession, perhaps even a deeper one, and those who would say it would elongate the recovery process but not necessarily derail it.
What even the 10% of economists for conservative hire would say is that reducing the federal budget deficit should be a decade or even multi-decade long process with cuts carefully calibrated to rein in spending gradually in order to minimize short-term harm to the economy.
What nearly every one with a triple digit IQ will tell you is that budget reduction can’t be done just by cutting spending, that at some point taxes of nearly every flavor will have to be increased. The triple digit folks might also remind those who fall a bit short of that mark about the economy that existed during President Clinton’s time in office—a period when unemployment was about 5%, the federal budget actually contained a surplus, and individual income taxes were higher pretty much across the board. Economists would then step in and remind us all that simply restoring the marginal tax rate on the richest 5% of Americans to Clinton-era levels would reduce the budget deficit by something on the order of 900 billion dollars over the next decade, and by exponentially more than that in the decades to follow.
Determinedly flying in the face of economist advice and intelligent common sense, the House Republican party recently introduced a budget bill that maintained nearly every tax break already in place, added a couple of new ones and sliced 32 billion dollars from every agency not named Medicare, Medicaid, Social Security or Defense. That amount would come from budgets already in place for four months and would be fully deducted by the end of this fiscal year. Annualized, the cuts the Republicans proposed would total about 74 billion. Draconian as that seemed, it wasn’t nearly draconian enough for freshmen Tea Party Republicans who immediately demanded that Congressman Harold Rogers (Chair of the Appropriations Committee) go back to work and find 26 billion more in order to meet the 100 billion dollar benchmark included in the election year Promise to America. Rogers humbly submitted to their demands and is working on the problem as I write.
Other than the obvious recovery-killing, job-killing, social safety-net killing, quality-of-life killing effect cutting the roughly 25% of the federal budget that isn’t going to one of the above mentioned four programs by nearly 40% in what is actually less than one year, the question this whole mess begs is—what’s so damn magic about 100 billion dollars? What economic analysis did John Boehner and Paul Ryan employ last Fall when they created the Promise to America that indicated 100 billion dollars was a healthy amount to cut from the federal budget in one year? If there was such an analysis, they’ve never made it public, which leads one to believe that 100 billion was chosen because it provided a catchy sound bite.
Not surprisingly, virtually all the cuts proposed are on labor programs, education programs, health programs, regulatory programs and social programs. Not one cut is directed at Wall Street, agribusiness, the energy industry, or—surprise, surprise—the wealthiest individuals in the country. In a new documentary film on Ronald Reagan, his son Ron opines that his father “may have been vulnerable to the idea that poor people were somehow poor because it was their fault.”
What the Republican Tea Party in the House is proposing smacks awfully of that attitude as well. It is perhaps the clearest example we have yet seen of ideology trumping thoughtful consideration of what would be best for the country. The budget proposed by the Republicans will absolutely reduce the budget deficit, and will do so in a remarkably short period of time. It will do it however at the expense of the poor and the middle class, who will become poorer, lower on the middle class spectrum, and in greater numbers out of work. It will do at the expense of educating our young people, thus making them—and this country—less competitive going into the next decade. It will do it at the expense of our infrastructure, making it less efficient and the country less economically viable going into the next decade. It will do so at the expense of investment in green energy, insuring that we drop further and further behind in an area that offers the greatest hope for future employment growth and industrial leadership.
What the Republicans party—pushed along by a radical fringe it seems unwilling or perhaps unable to control—proposes is essentially that the country should bite off its nose to spite its face. “We should never have gotten this far in debt,” scream the Tea Baggers, “so let’s punish our wanton behavior by whipping the economy and its profligate masses so hard we force them permanently to their knees.”
Lost in the vortex of Republican ideological idiocy is the budget President Obama proposed. It recognizes the need to make inroads on the budget deficit, but it also recognizes the need—enunciated by that 90% of economists--to continue stimulating the economy by investing in education, infrastructure and new industry. It also recognizes that the government has certain duties only it can perform and the health of the country depends on it doing them well. The Republican proposal, for example, would take 450,000 police off the streets. Probably not smart. Obama’s budget maintains that funding. The Republicans would cut Pell Grants by 15% this year and by nearly 50% the following year. That could potentially remove over a million students from college this year and nearly 4.5 million the year after. Obama’s budget eliminates Pell Grants for summer school, but otherwise maintains its funding at present levels.
Obama’s budget proposes investment (what the Republicans call spending increases) in infrastructure projects, transportation, and especially in new green energy projects. It partially pays for those by removing 46 billion dollars in tax breaks for oil, gas and coal companies over the next ten years and capping the amount of itemized deductions the wealthies may claim. It also reduces defense spending by 78 billion dollars over 5 years. In that area, Obama’s budget proposal actually cuts less than Defense Secretary Gates and the Joint Chiefs recommended.
What Obama’s budget proposal doesn’t do is address Medicare in any significant way. I’ll be taking a look at that problem in a future blog. For now, what Obama has outlined is a budget that should at least serve as a strong starting point for considered discussion. There are areas certainly where cuts could be deeper. There are places certainly where perhaps new investment now is not the wisest thing. There may even, God forbid, be other ways revenue could be enhanced. But his budget is at least one that recognizes the best wisdom of the best economists in the world, and one that represents an effort to do what might best serve the short and long term interests of the country.
The Republican alternative serves nothing but an electioneering ideology.
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