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BUDGET AND ECONOMIC POLICY POSITION PAPER
By Dennis Spivack
The Clinton Administration left President Bush a wonderful gift in the form of a budget surplus. This budget surplus was the result of one of a few truly bi-partisan efforts between the Clinton Administration and the Congress. Unfortunately, the Republican-led Congress, under the Bush Administration, has unwisely spent the surplus and we now face the highest budget deficits the United States has ever seen. This is turning into a critical national security problem, as the U.S. government is increasingly beholden to foreign bondholders, especially the Bank of China and Bank of Japan, for financing. The time may come when they use this potential leverage against us.
Tax cuts do serve a purpose when used correctly and at the right time. The problem is that President Bush and the Republicans have continued to cut taxes for the wealthiest Americans when there is no longer a need to stimulate the economy. More importantly, the federal government could have used those added tax revenues to balance the budget and improve healthcare, education, social security, the post-Katrina reconstruction effort, homeland security, environmental cleanups, energy conservation, and our country’s infrastructure, just to name a few needs.
This President has tried to convince the American people that they could have it both ways; that they could finance a war in Iraq without any need to sacrifice and that the government could continue to provide essential services and cut taxes at the same time, without creating budget deficits. This was just not true and shows how the Republicans will say anything, true or not, to justify getting what they want.
The reality of what is happening is starting to strike home to Americans. People are starting to realize that the wealthiest in our country are receiving the overwhelmingly disproportionate benefits of the tax cuts at the same time that they are reaping almost all of the income gains being produced by American economic growth. Working men and women, and others in our society who are unable to work, are being left behind. While wages or pensions might increase by 1-3 % annually, and the minimum wage has not increased for almost a decade, working families and retirees are trying to cope with electric rate increases of 60% to 100%, gas at over $3.00 per gallon, and soaring health insurance premiums and deductibles.
A few months ago, President Bush chose to finance new tax cuts for the wealthy by cutting $39 billion in social programs, which had a devastating impact upon students, families, the elderly and the poor. Bush and the Republican-led Congress also have implemented other cuts that have hurt programs such as veterans’ benefits. Yet at the same time, Bush and the Republican majority in Congress cut taxes for the wealthiest Americans by $56 billion. The Republicans are choosing to finance tax cuts for the wealthy by targeting working men and women, making it harder for working families to survive.
Recently, the Republicans voted for yet another tax cut by allowing the wealthiest taxpayers to both invest and withdraw funds from their retirement accounts without paying taxes. As if that was not enough, the President proposed to eliminate the federal estate tax which would have added another three-quarters of a trillion dollars to the federal deficit over the coming years, pushing our national debt to just under ten trillion dollars. Thankfully, a few Senate Republicans joined with Democrats to reject this proposal.
The United States is now faced with a national debt that in May 2006 was estimated at over eight trillion dollars, which breaks down to about $28,000 for every man, woman and child in America. At the same time, funding remains inadequate for such programs as healthcare, education, homeland security, and border security. Much of this debt is funded by borrowing from the Social Security trust fund, so the problem will only get worse as the baby boom generation retires and begins receiving Social Security payments.
The obvious question is what can be done to address this growing challenge. In order to mitigate the problems of the current deficit, the first step I would recommend would be to roll back the tax cuts on the wealthiest Americans, especially those making hundreds of thousands of dollars a year. At the same time, I would insist on increasing the minimum wage, to begin to close the growing gap between the richest few and everyone else in America.
Second, I would rescind the June 2005 Highway Bill, which represents “pork barrel” politics at its worst. It was pointed out that following Hurricane Katrina, there was enough money in the transportation bill to fund the entire Katrina reconstruction. Yet, the Republicans refused to make the suffering of the people in the aftermath of Katrina a real priority, rejecting calls to rescind the bill to provide for an adequate relief effort.
Third, I would make future governmental spending more accountable, to reduce government corruption and waste. For instance, there is no place in this day and age (except in rare emergencies) for no-bid contracts, especially for well-connected companies like Halliburton that offer overpriced and ineffective services, feeding off of and bleeding our national security efforts. There is also no excuse for wasting vital reconstruction funds, such as we saw after Katrina when billions of dollars were spent on unneeded mobile homes which were left standing empty, while other reconstruction needs were not addressed.
Fourth, in order to cut “pork barrel” spending, I am recommending that a commission be established (similar to the 9/11 Commission with equal representation of Democrats and Republicans) which would review and prioritize the Country’s infrastructure needs. Monies would then be set aside in the annual budget to address these needs based upon their priority. The long term savings to the Country could be tremendous. Just imagine if fixing the levees off of the coast of Louisiana was on this priority list. Maybe just maybe, the devastation caused by the Katrina could have been avoided or mitigated, resulting in saving of lives and property damage.
Fifth, if there is a draw down of troops in Iraq and greater military and financial participation in the reconstruction efforts by our Middle Eastern allies and the UN (See War in Iraq and Proposed Exit Strategy Position Paper), then our expenditures in that war and reconstruction efforts should be reduced.
Sixth, there are programs, such as Medicaid, where savings can be realized through greater cooperation between the federal and state governments. The various levels of government could work together to streamline the entire system to make it work more efficiently. At the same time, costs for the new prescription drug plan could be reduced—and the gaps in that program plugged—if Congress removed the handcuffs preventing Medicare from negotiating for discounts on the drugs it buys.
Seventh, while this may not appear to be a substantial savings, the formula for members of Congress’ generous pension benefits should be adjusted, so that the taxpayers are not absorbing this high cost. When they travel, they should lodge in places like the Comfort Inn, Motel 6 and the Sleep Inn rather than the more luxurious accommodations. By acting in this manner, they would face some of the same challenges ordinary Americans deal with every day, and at the same time send a clear message to the American people that they are serious about the deficit.
Finally, we need to address America’s growing trade deficit. Congress can help by investigating corporate outsourcing practices, especially cases where entire factories are closed and the jobs shipped overseas. At the very least, Congress should remove the tax incentives that currently encourage such practices, so more of what we consume will be made in America. New incentives for car companies to build fuel-efficient cars would not only be a step toward a sensible energy policy; they would also help Detroit restructure, to keep manufacturing jobs here in the U.S.
The above proposals are steps which can be taken immediately to reduce the annual growth of the federal deficit. With a growing economy and revenues rising, those revenues should begin to offset our expenditures.
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