by Randolph T. Holhut
Chief of AR Correspondent
June 12, 2011
DEFICIT REDUCTION: THE WRONG POLICY AT THE WRONG TIME
DUMMERSTON, Vt. -- You might think that with the unemployment rate up above 9 percent once again, and with the U.S. economy showing few signs of signs of recovery, that there would be more talk about economic stimulus and less talk about the federal deficit.
The rate of chronic long-term unemployment is worse than it was during the Great Depression. About 6.2 million Americans -- 45 percent of all unemployed workers -- have been jobless for longer than six months, and more than 1 million Americans have used up all of their unemployment benefits.
Of course, these are not normal times, and our lawmakers in Washington - and the media that fawn over them -- run the gamut from clueless, to spineless, to demonstrably insane.
That is why there is more concern about the deficit, and almost no concern over seeing 25 million Americans who want full-time work, and can't get it.
As demonstrated by the poll numbers and the turnout at the recent town meeting events held by Republican members of Congress, there is little support for the federal budget plan by Republican Congressman Paul Ryan that would dismantle Medicare and other government programs to pay for more tax cuts for the wealthy.
Yet Ryan's budget blueprint is still taken seriously in the press, and the Republicans in Congress can still claim to be concerned about the deficit, all the while putting forth proposals that would make it far bigger than it is now.
I long for the day when someone in the elite media finally points out the painfully obvious fact that Republicans do not care in slightest about the federal deficit, a deficit they played a major role in creating.
This isn't partisan puffery. This is true. The Ryan budget doesn't achieve a balanced budget until 2063.
That's right - 42 years from now!
Why? Because the Ryan budget isn't about deficit reduction. It's about tax reduction for the wealthy. It cuts taxes on the top income bracket from 35 to 25 percent, and does likewise for corporate income tax rates.
At the same time, military spending would continue to increase as virtually every other non-defense program in the budget is gutted.
The Ryan budget would add an additional $42 trillion in debt over the next four decades. By contrast, the Congressional Progressive Caucus' "People's Budget" would create a budget surplus by 2021 while saving Medicare and Social Security. How? By raising taxes on the wealthy, closing tax loopholes, cutting defense spending and spending money to create new jobs to rebuild our economy.
Of course, the chattering class in Washington deems the Ryan plan to be the serious plan, while the Progressive Caucus' budget plan is ignored.
Equally obvious is this truth. Three decades of supply side economics - the theory that lower tax rates encourage more investment, which creates more jobs and more prosperity, which creates more tax revenue despite lower rates -- simply have not worked.
The current federal deficit is about $13.5 trillion. About 70 percent of that amount was amassed during the Reagan, Bush I and Bush II Administrations. All three cut taxes. All three presided over recessions. All three made no effort to rein in spending.
It was only under a Democratic president - Bill Clinton - where we saw government spending decrease, saw balanced budgets and saw the longest continuous economic expansion in our nation's history.
Besides the utter failure of supply side economics, another big reason why there so many jobless Americans, and why the supposed recovery from the 2007-08 housing bubble collapse hasn't been seen on Main Street, is that U.S. corporations are sitting on $2 trillion of profits that they refuse to reinvest into the economy.
As economist Robert Reich has repeatedly pointed out, the problem with the U.S. economy is not the federal deficit, it is the demand deficit. When the private sector can't, or won't, spend money, it is up to the government to pick up the slack.
But when your government is shoveling money in the form of tax breaks and subsidies to the wealthy and corporations, while expecting working Americans to pay more taxes and receive less protection from the perils of age and illness, you are building an economic system that cannot survive.
Certainly, the Tea Party Republicans that control the U.S. House and the two dozen or so state legislatures around the nation have shown their true colors. They are waging class warfare with a viciousness unprecedented in our time. Their policy priorities seem to indicate that they want people to suffer and die so their wealthy benefactors can grow more wealthy.
Putting deficit reduction ahead of job creation would not just be a political mistake for the Democrats, it would be a huge economic mistake that will prolong this recession and hurt millions of Americans who have already suffered through the worst recession since the 1930s.
President Obama should know this. The Democrats in Congress should know this. But Obama and the Democrats are afraid to point out that not only are the Republicans totally not interested in deficit reduction, Republicans are also totally not interested in the economic well-being of the 98 percent of America that's not super-wealthy.
Given the flock of turkeys that are running for the Republican nomination for president in 2012, it's not like President Obama has to worry about winning a second term. But it not sufficient for Obama and the Democrats to be merely less worse than the Republicans. They have an obligation to put people ahead of plutocrats, and the well-being of the nation ahead of cynical politics.
If Democrats fail to do this, they may lose more than just an election cycle.
AR Chief of Correspondents Randolph T. Holhut has been a journalist in New England for more than 30 years. A graduate of Harvard's Kennedy School of Government and a prize-winning editorial writer, he edited "The George Seldes Reader" (Barricade Books). He can be reached at firstname.lastname@example.org.