What Americans Want: The People's Budget

A national budget tells a lot more about a country and its politics than simply where the government's money comes from and where it goes. As President Obama rightly stressed, it is also "about the kind of future we want ...[and] the kind of country we believe in."

But as happens so often in the United States, the political and media establishments distort the public debate by accepting the right-wing's framing. In this case that means the issue is simply deficits and spending cuts, not national needs and adequate revenue. In this context, Rep. Paul Ryan (R-Wis.), the architect of the Republican budget plan, gets taken seriously when he proposes--with echoes of Vietnam--that we destroy Medicare in order to save it.

Consequently, the public is confused. More significantly, the corporate media give progressive alternatives short shrift, even though opinon polls show the public often supports such measures.

The United States could do much better with more active and--yes--even bigger government, partly because many of the things our society needs, the government can do more efficiently, fairly and effectively than private individuals and businesses in a market.

The corporate press, acting in its own self-interest, is loathe to report this fact.

For example, where have you read about "The People's Budget"? It is an alternative budget offered by the 81-member Congressional Progressive Caucus that takes steps toward a saner role for government while reducing the deficit more and faster than either Ryan's "Plan for Prosperty" or Obama's plan.

The People's Budget immediately rescinds Bush tax cuts for the rich and lets the others expire (retaining some changes especially beneficial to the middle class), but it also taxes estates progressively, imposes the millionaire's tax proposed by Rep. Jan Schakowsky (with several new, higher income tax brackets for the very rich), taxes capital gains as regular income and imposes a financial speculation tax.

The People's Budget also enacts a healthcare public option and mandates negotiation of prescription prices to reduce healthcare spending. It cuts wartime and baseline military spending and provides for bringing troops home from the wars in Southwest Asia. The budget strengthens Social Security by expanding the base of taxable earnings, and it increases spending for job creation, education, clean energy, infrastructure, transportation and scientific research.

Conventional budget wisdom

On the other hand, the Republican plan imposes two-thirds of its cuts on modest-income households, according to the Center on Budget and Policy Priorities (CBPP).

By making Medicaid an underfunded block grant, it guarantees taking healthcare from the needy, including the elderly poor. Privatizing Medicare with underfunded vouchers will double the out-of-pocket expenses for the average future 65-year-old. Privatization not only shifts costs to seniors but also increases their overall medical costs, since private insurance is less efficient than Medicare. And for good measure, the Ryan plan repeals the Affordable Care Act and its cost controls.

The plan also contains absurd giveaways, such as $4.2 trillion in tax cuts mostly for the very affluent over the next decade, and even repeals some recently passed regulations of the financial industry. Despite all the deficit hullaballoo, Ryan's plan only slightly reduces the deficit in the next decade (by $155 billion) because his destructive cutting mainly funds the tax cuts. Ryan does set long-term plans to reduce federal spending from 23.75 percent of gross domestic product to less than 15 percent by 2050, the lowest share since 1951. But a bipartisan proposal made in early February to cap spending at even 20.6 percent of GDP would "force deep cuts in Medicare, Medicaid and Social Security," according to the CBPP.

By contrast, President Obama would make modest cuts in military spending, end the Bush tax cuts for the rich, and limit tax expenditures (e.g., tax credits and deductions). He would impose tighter cost controls on Medicare and make Medicaid more flexible while preserving both programs. He proposes a "debt fail-safe" trigger to enforce reduction of debt to his target levels. But his budget would maintain investments in education, infrastructure and research.

On the issues, the public seems much more on the president's side--and would even support a more progressive solution.

American dreams vs. reality

Indeed, Obama is overly conservative.

Given a choice, most Americans prefer a much more egalitarian society, according to a 2010 study by Duke and Harvard economists.

Most rich industrial countries recognize that government must play a large role to achieve social solidarity, comparative economic advantage in a global economy, and satisfy voters' preferences, but the United States has nearly the lowest tax revenue as a portion of GDP of all 34 countries in the Organization for Economic Cooperation and Development. And compared to other OECD countries, the United States is near the bottom in terms of equality and ranks extremely low on social spending, poverty rates, ease of escaping poverty, life expectancy, infant mortality, voter participation and other indicators.

When pollsters at the University of Maryland presented voters with information and a variety of options on the budget, on average they increased taxes (especially on incomes over $100,000 or more), cut military spending and increased spending on education, job training, environmental protection and alternative energy far more dramatically than Obama did. In another poll, the same researchers found that only 59 percent of Americans think a free market system is best--a sharp 15 percentage point drop from 2009.

Similarly, the Democrats, and progressives in general, have failed to make a political issue of how the right has successfully, and quite consciously, instituted polices that have redistributed wealth upward. Over the last 25 years, the top 1 percent of American households more than doubled their share of the national income from 12 to 25 percent.

If income growth had been distributed equally since 1979, University of Wisconsin professor Joel Rogers calculates, households in the bottom four-fifths would each be making $5,600 to $10,100 more per year, thus increasing consumer demand to stimulate the economy and an ability to pay taxes. But as incomes for the 400 richest households quadrupled over the past dozen years, their tax rate fell by nearly half, thanks to both rate cuts and tax loopholes.

Instead of debating the fairness of this inequality, Washington is focused on the government's large deficit. Conventional wisdom--recently offered by Standard & Poor's, which has been wrong on every major economic crisis of the past 15 years--dictates dealing with the deficit quickly. Yet the deficit hysteria ignores two points. First, the country urgently needs more--and better--jobs. Second, while conventional wisdom also mandates deep cuts in government spending to address the deficit, increased revenues would deal with the problem equally well.

We are burdened by the deficit today thanks to Bush tax cuts (which favored the rich), the wars in Afghanistan and Iraq, the financial crisis, the resulting Great Recession (with less revenue and increased costs) and rising healthcare costs (made worse by Bush's poor design of the Medicare prescription drug program).

The people's choice

Yet the Democratic Party has been overly willing to seek a compromise that accepts--but tempers--Ryan's framework, while giving inadequate attention to how the deficit actually grew.

As a result of their muddled message, according to an April Democracy Corps poll, voters initially approved the Ryan budget by 48 to 33 percent and gave Republicans a 16-point advantage over Democrats on having the best budget approach. But given more complete information, support for Ryan's budget fell sharply. In other words, the Democrats (perhaps in thrall to corporate interests) have failed to forcefully articulate the vision voters already support.

The People's Budget, on the other hand, reflects the historical context. It is also more in tune with the sentiments of voters than either Ryan's or Obama's plan. Overwhelmingly, multiple polls show that voters oppose deep cuts in or radical transformation of Medicare (78 percent opposed in a Washington Post poll). By large margins, voters support a surcharge income tax on millionaires and billionaires, which is similar to the higher rates Rep. Schakowsky proposes (81 percent in a March NBC/Wall Street Journal poll). And a majority favors military spending cuts as a first step in deficit reduction (56 percent in the Post poll).

The People's Budget is a lot more courageous, sensible and honest than either Ryan's plan or Obama's. It is a program that progressives and--if ardently championed--most Americans would support as a path not only to a responsible budget but also to a more prosperous, equitable future.