by Joe Shea
American Reporter Correspondent
April 22, 2011
'SAVE US, O [BLANK], FROM SMALLER MINDS THAN OURS'
DUMMERSTON, Vt. -- It's been pathetic to watch the surrender of President Obama and the Democrats in the face of the Tea Party-fueled Republican goal of spending cuts and austerity for working Americans and tax cuts for the wealthiest Americans.
President Obama attempted to reclaim the debate with his April 13 speech at George Washington University. He offered a proposal to save the government $4 trillion over the next 12 years or so by controlling the costs of Medicare, ending tax breaks for families making $250,000 a year or more, and assorted budget cutting to all areas of the federal budget.
The Republicans in Congress want to lower taxes for individuals and corporations, privatize Medicare, turn Medicaid over to states to administer, and pretty much gut the social safety net. They aren't going to budge from that plan, and why should they? They now control the debate, and Obama's proposal merely is a less-draconian version of the Republican plan.
Just like the previous political battles over the economic stimulus plan, healthcare reform and reining in the excesses of the financial industry, Obama tries to meet the Republicans in the middle - which keeps shifting rightward - instead of robustly defending the social contract that protected and sustained three generations of Americans.
Sure, it's nice that Obama strongly attacked the Republican vision for the federal budget in the GWU speech. But if past is prologue, the lofty rhetoric usually gives way to compromise and giving the Republicans most of what they want.
A chart released last week by the Center on Budget and Policy Priorities, based on data from the Congressional Budget Office, shows that nearly all of the current budget deficit can be attributed to four things - the wars in Iraq and Afghanistan, the Bush-era tax cuts, dealing with the economic downturn and bailing out the financial markets. Take away these factors, and the budget deficit for fiscal year 2011 would be about $150 billion instead of $1.2 trillion.
Notice what wasn't mentioned as deficit-drivers: Social Security, Medicare, and other social welfare spending. Yet the so-called deficit hawks are focused on cutting these programs while leaving the Pentagon and the Bush-era tax cuts unscathed.
That is the central bit of absurdity over the current calls for austerity and budget-cutting in Washington. It is abundantly clear that if we withdraw from Iraq and Afghanistan, restore federal tax rates to Clinton-era levels and were more aggressive in recovering bailout money from the banks, the current deficit disappears. It is equally clear that if we start spending more money on infrastructure, education and technology, more jobs will be created, which in turn boosts tax revenues.
Unfortunately, this simple and sensible solution is rejected as politically unachievable by the chattering classes in Washington. Never mind that poll after poll shows a majority of Americans support such a course. The nihilism of today's Republican Party, and its complete disdain for the public good, is considered bold and daring, while the few progressives who challenge this narrative are ignored.
A trip back to the Clinton years shows the folly of the conservative mantra that raising taxes destroys the economy.
In 1992, the last year before Bill Clinton took office, the United States hit a 15-year high in unemployment at 7.6 percent. The federal deficit was growing fast, fueled by the sharp decline in revenues from the tax-cutting binges of the Reagan era and a massive increase in military spending.
In 1993, the Omnibus Budget Reconciliation Act was passed by a single vote. Republicans howled about how raising taxes on the wealthy and corporations would destroy the economy.
Of course, they were wrong.
Yes, those earning around $500,000 a year saw their taxes jump from 29 percent to 36 percent. The wealthiest 1 percent saw their tax rate rise to just under 40 percent. The cap on Medicare taxes was removed. The corporate tax rate went up to 35 percent. The federal gasoline tax rose by 4 cents per gallon.
Yet the economy wasn't destroyed. Contrary to conservative dogma, increased tax revenue not only reduced the federal deficit, it helped the economy grow.
Unemployment dropped to 4 percent by 1998 - the level that economists generally consider to be full employment - and stayed at that level right through 2000. About 21 million jobs were created during the eight years of Bill Clinton's presidency.
Meanwhile, fiscal years 1998 through 2000 marked the first time since the 1940s that the federal government had posted three consecutive years of surplus. In fact, fiscal 2000 saw a record budget surplus.
This nation could have continued on the path of economic prosperity and federal budget surpluses. Unfortunately, George W. Bush became President just as the tech bubble was bursting on Wall Street.
Bush's first major piece of legislation, the Economic Growth and Tax Relief Reconciliation Act of 2001, cut taxes for the wealthy. The top tax bracket was reduced to 35 percent, and capital gains and estate taxes were also reduced.
Conservative economists said those tax cuts would create jobs while still paying down the federal deficit. Instead, jobs were cut, more U.S. manufacturing jobs were moved overseas, and more wealth was channeled to those at the top. The recession that begun with the end of the tech boom got even worse after the Sept. 11, 2001, terror attacks.
Declining tax revenue, combined with a recession and wars in Iraq and Afghanistan, made the Clinton surpluses vanish within a year. By the time Bush left the White House in January 2009, unemployment was double what it was when he took office and he compiled the worst record of job creation of any president since Herbert Hoover. And he left for his successor, President Barack Obama, the worst economic crisis since the 1930s.
I have little hope for Obama and the Democrats in the current budget fight. The only way that the narrative is going to shift is more feet in the street, more public pressure, more creative forms of protest and dissent to smash the idea that there is no alternative to austerity.
Chief of AR Correspondents Randolph T. Holhut, a graduate of Harvard's John F. Kennedy School of Government, has been a journalist in New England for more than 30 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at email@example.com.