GENERATING THE REVENUE NEEDED TO INVEST IN AMERICA

The People’s Budget, an alternative budget for the US, presents a coherent vision and a detailed plan for generating the revenue needed to invest in America’s infrastructure and people. It includes specific proposals for increasing revenue, decreasing tax expenditures (i.e., loopholes and deductions), and increasing efficiency in the public and private sectors. These will more than pay for its spending proposals (which I summarized in my previous post). [1]

Current tax policy is failing in multiple ways. Tax cuts and tax avoidance have reduced government revenue so that it is insufficient to pay for needed spending. Tax policy changes over the last 35 years have exacerbated economic inequality and created complexity that favors politically powerful special interests and those who can afford sophisticated tax accountants and lawyers. The theoretical progressivity of income taxes has been lost through tax cuts, tax deductions, tax avoidance, and favored tax rates and loopholes for high-income individuals.

The People’s Budget addresses the inequities in our tax system through changes in individual and corporate tax laws. Income taxes on the richest individuals would be increased. The tax on income from investments would be raised so it is at the same rate as income earned from working. The People’s Budget also would reduce tax deductions that favor the wealthy, such as interest deductions for mortgages on vacation homes and yachts. It maintains a tax on estates worth over $3.5 million, which current proposals would eliminate. It would also reduce income inequality by increasing tax deductions for low-income families. [2]

Inefficient corporate tax loopholes would be eliminated. Corporate tax benefits from moving jobs, profits, and a corporation’s legal home overseas would be ended. The People’s Budget would ensure that corporations pay their fair share of taxes and that large, multi-national corporations do not enjoy more favorable tax treatment than small, US-based companies. Current tax loopholes make it hard for small businesses to compete with large multi-national corporations.

A small tax would be placed on financial transactions. This is essentially a small sales tax on the buying and selling of financial products, like (but at a much lower rate than) the sales taxes many of us pay on non-financial products we buy. In addition to generating hundreds of millions of dollars in annual revenue, it would also discourage quick turnaround, high-volume, speculative trading of securities that can destabilize markets and that provide no benefit to our economy.

The People’s Budget would close tax loopholes and end subsidies for fossil fuel corporations, while putting a price on carbon pollution. This would end the unjustifiable public subsidies of fossil fuel extraction and use, requiring those burning carbon fuels to pay the true costs of doing so. In addition, the People’s Budget would invest in energy efficiency and clean, renewable energy production.

Income and wealth inequality would be reduced by the tax reforms in the People’s Budget, as well as by its spending proposals, which were summarized in my previous post. The Economic Policy Institute’s (EPI) analysis of the People’s Budget concludes that it “would have significant positive impacts, including improving the economic well-being of low- and middle-class families, … and increasing tax progressivity and adequacy while reducing the deficit in the medium term.” [3]

The People’s Budget would reduce the federal government’s projected debt level by trillions of dollars over the next 10 years. This makes it clear that we can afford investments in our human and physical capital if we reform our individual and corporate tax systems. Furthermore, we can simultaneously reduce income and wealth inequality.

I believe that candidates and the party(ies) who fully embrace the vision and goals of the People’s Budget will find that the American public and voters will strongly support them. Senator Bernie Sanders’ presidential campaign was built on a very similar vision and received tremendous grassroots support. Although President Trump’s rhetoric supported elements of the People’s Budget and many people voted for him believing or hoping that he would bring this kind of change in direction to Washington, his actions to-date have not reflected the vision or goals of the People’s Budget. The Republican Party appears to have a totally different vision for America – one where the rich and large corporations do very well and where everyone else struggles to make ends meet.

The Democratic Party would seem to have every reason to embrace the People’s Budget’s vision and goals. Although the Congressional Progressive Caucus has 75 Democratic members in the House (out of 194 Democratic Representatives), the national Democratic Party has not adopted many of the key proposals of the People’s Budget. The Party has not committed itself to goals and a vision for America that puts the working and middle class before wealthy individuals and large corporations.

Our democracy is threatened. Plutocracy, where a relatively small number of wealthy individuals control the government, might be a more accurate description of our current political system. Currently, neither of our major political parties is committed to government of, by, and for the people, as opposed to wealthy individuals and corporations. The People’s Budget would change this.

I encourage you to contact your Representative and Senators in Congress to encourage them to support the Congressional Progressive Caucus’s comprehensive, well thought out proposals that make up the People’s Budget. We need to support the working and middle class, decrease income and wealth inequality, and invest in preparing America and Americans for the future. The People’s Budget makes it clear we can do this and lays out a realistic plan to do so.

[1] Vanden Heuvel, K., 5/9/17, “Trump’s budget betrays his supporters. Here’s one that doesn’t.” The Washington Post

[2] Congressional Progressive Caucus, retrieved 7/7/17, “The People’s Budget: A roadmap for the resistance,” https://cpc-grijalva.house.gov/uploads/FINAL%20CPC%20Budget%20FY18%20Executive%20Summary.pdf

[3] Blair, H., 5/2/17, “‘The People’s Budget’: Analysis of the Congressional Progressive Caucus budget for fiscal year 2018,” Economic Policy Institute Policy Center (http://www.epi.org/publication/the-peoples-budget-analysis-of-the-congressional-progressive-caucus-budget-for-fiscal-year-2018/)

AN ALTERNATIVE BUDGET FOR THE U.S.

Meaningful alternatives to the policies being put forward in Washington, D.C., are available, but do not get the attention they deserve, particularly from our mainstream, corporate media. For example, the Congressional Progressive Caucus has prepared a detailed, well thought out alternative budget for the country.

The People’s Budget, as it is called, presents a coherent vision and plan for making our democracy and economy work for everyone, not just the wealthy. It promotes true full employment (i.e., full utilization of the workforce’s skills) and reduces income and wealth inequality. It is a comprehensive ten-year plan that provides much more detail than the budget document presented by the Trump administration. [1] It includes specific dollar amounts for all major budget items for fiscal year 2018, which starts Oct. 1, 2017, as well as for the next 10 years.

The Economic Policy Institute (EPI) has analyzed the People’s Budget and concluded that it would make our tax system more progressive (i.e., fairer) and increase revenue so we can afford to address national needs and priorities. In addition, it “would have significant positive impacts, including improving the economic well-being of low- and middle-class families, making necessary public investments, strengthening the social safety net, and … reducing the deficit in the medium term” (i.e., in 2-3 years). [2] The EPI estimates that the People’s Budget would bring the US economy to a full recovery from the Great Recession of 2008, increasing Gross Domestic Product (GDP, the total of all the goods and services produced by the US economy) by 2% and employment by 2.4 million jobs in the near term (i.e., over the next 1-2 years). It would end the under-use of productive resources, particularly the under-employment of the workforce, and improve productivity, which would produce growth in workers’ incomes and living standards.

The People’s Budget would spend $2 trillion over 10 years to repair our crumbling infrastructure and provide jobs. It would repair and modernize our energy, water and sewer, and transportation systems, while increasing access to reliable, high-speed internet services. The infrastructure spending would cover 92% of what the American Society of Civil Engineers has estimated is needed to make our infrastructure safe and up-to-date.

It would also invest in our human capital through spending on our education system. It would make health care and child care affordable. It would support the working and middle class and improve their economic security. It would strengthen our safety net programs while reducing the need for them. It would provide support to the strained budgets of state and local governments, supporting, for example, local public safety and K-12 education systems.

While the spending in the People’s Budget would increase the deficit in fiscal year 2018 (FY2018), it includes increases in revenue and decreases in tax expenditures that would not only pay for its spending proposals, but reduce the federal budget deficit in subsequent years. [3] (More detail on this in my next post.)

The People’s Budget would reverse the reductions in domestic spending that have been made over the last 10 years of austerity budget cutting and the previous 25 years of cuts and failure to keep up with inflation. These cuts have reduced spending for education, job training, research, aid to state and local governments, and just about every other type of non-defense public spending. Current non-defense discretionary spending is near a historical low and current budget plans would have it continue to decline over the next 10 years to new all-time lows. The government spending cuts of the last 10 years have been a major – if not the major – cause of the slow recovery from the 2008 Great Recession. The People’s Budget would gradually increase non-defense discretionary spending to its historical level as a percentage of GDP by 2022.

In the health care arena, the People’s Budget strengthens and improves the Affordable Care Act (aka Obama Care). It would provide a public, Medicare-like option in each state’s insurance market, providing competition for the private insurers. This would ensure that the private insurers must provide good coverage at reasonable rates to be competitive. It would also allow states to transition to a single-payer, Medicare-for-All type health care system if they would like to. It would expand access to mental health services and to drug addiction treatment. It would lower prescription drug costs by allowing Medicare to negotiate drug prices (as Medicaid, veterans’ health care, and private insurers currently do) and by reforming laws covering drug patents and pricing.

The People’s Budget invests in our human capital by supporting our education system from birth to career. It makes quality early care and education (aka good child care) affordable for all families. It invests in our K-12 education system and in special education from birth through age 21. It increases educational opportunities in computer science, allows refinancing of student debt, and makes debt free college a possibility for all students.

Workers are supported by increasing the minimum wage, strengthening collective bargaining rights, and addressing gender pay equity. It would increase funding for the safety net where needed, especially for assistance to workers whose jobs have been moved overseas. Support for small businesses would be increased to support job creation.

Overall, the People’s Budget is projected to cut the number of people living in poverty in half in 10 years. As part of its comprehensive plan, the People’s Budget also addresses problems with our support for veterans, our criminal justice system, our immigration system, and voting rights and elections. It would modernize and increase efficiency in the Defense Department, reducing military spending while increasing funding for diplomacy and international humanitarian programs.

Some people say we can’t afford the investments in our human and physical capital that the People’s Budget calls for. However, it includes specific proposals for increasing revenue, decreasing tax expenditures (i.e., tax loopholes and deductions), and increasing efficiency in the public and private sectors that will more than pay for its spending proposals. I’ll summarize these proposals in my next post.

[1] Vanden Heuvel, K., 5/9/17, “Trump’s budget betrays his supporters. Here’s one that doesn’t.” The Washington Post

[2] Blair, H., 5/2/17, “‘The People’s Budget’: Analysis of the Congressional Progressive Caucus budget for fiscal year 2018,” Economic Policy Institute Policy Center (http://www.epi.org/publication/the-peoples-budget-analysis-of-the-congressional-progressive-caucus-budget-for-fiscal-year-2018/)

[3] Congressional Progressive Caucus, retrieved 7/7/17, “The People’s Budget: A roadmap for the resistance,” https://cpc-grijalva.house.gov/uploads/FINAL%20CPC%20Budget%20FY18%20Executive%20Summary.pdf

DEREGULATION AND THE ELECTION OF TRUMP

Thirty years of deregulation have produced a declining standard of living and reduced economic security for the working and middle class. This is causing them significant stress and anxiety. In particular, there is strong evidence of the toll this is taking on the members of the white working and middle class. After decades of increasing life expectancy among all Americans, the life expectancy of middle-aged (35 – 59 years old), non-Hispanic whites without a college education is now actually declining largely due to premature deaths from drug and alcohol abuse and from suicides. [1] These “deaths of despair” as they are being called, are linked to the stress of falling behind one’s own life expectations as well as relative to others. [2] [3] [4]

The loss of economic well-being for the working and middle class generally has produced real anger against the political establishment that has allowed and abetted it. Numerous books have been written on the alienation of this demographic group. [5] It’s no wonder many of them voted for Trump and against the Washington, D.C., establishment in 2016. Many of them felt they had no better way to express their anger or to demand change in our policies than to vote for Trump. The fact that Trump (despite some of his rhetoric) is the embodiment of everything that has driven workers to this brink of despair is the great irony of the election. It is also an indication of the incredibly deep frustration, anxiety, and despair felt by many in the middle and working class.

Both in the U.S. and internationally, democracy – the power of the people to drive policy making including regulation – has only been successful when corporate power is under control. Regulation of big corporations has historically been necessary for workers to have the economic security that allows them to realistically engage in life, liberty, and the pursuit of happiness. In a capitalistic society, a basic level of economic security is essential if individuals are to have the freedom to make important choices in their day-to-day lives (such as where to live and what education to obtain for themselves and their children). [6]

For a capitalistic democracy to work, market place rules and regulations are essential to maintain fair and competitive markets for consumers and workers. They are also necessary to keep large corporations from wielding controlling influence over government and undermining democracy. When President Teddy Roosevelt used anti-trust laws to break up giant corporations in the early 1900s, the focus was “less on the power of giant corporations to dominate markets and more on the power of giant corporations to dominate government.” [7]

The political establishment in Washington, D.C., appears either to have forgotten this lesson of the early 20^th century or to have allowed themselves to be bought by the corporate elites. As a result, the anxiety, anger, and frustration of the working and middle class has grown to historic proportions. In the election of 2016, they voted for Trump for President to clearly repudiate the Washington establishment. The Tea Party wing of the Republican Party and the Bernie Sanders wing of the Democratic Party both reflect this same rebellion against the political establishment, albeit from opposite ends of the political spectrum.

How this anxiety, anger, and frustration gets expressed in the future is very much up for grabs. We’re likely to be in for a rocky ride politically as individual candidates and the political parties battle to channel this energy and emotion in elections and policy making.

If we want to have a democracy instead of a corporatocracy and to revitalize our working and middle class, we must restrain corporate power, both in the private market place and in the public sphere of government. Strong regulations that control corporate power; protect the well-being of workers, consumers, and the public; and ensure that political power rests with the people are essential. As Supreme Court Justice Louis Brandeis warned in the 1930s, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” [8] Clearly, Justice Brandeis understood that great wealth also means great political power, which, when concentrated in the hands of a few, is antithetical to democracy.

[1] Boddy, J., 3/23/17, “The forces driving middle-aged white people’s ‘deaths of despair,” National Public Radio (http://www.npr.org/sections/health-shots/2017/03/23/521083335/the-forces-driving-middle-aged-white-peoples-deaths-of-despair)

[2] Payne, K., 7/5/17, “Economic inequality goes well beyond the bank account,” The Boston Globe

[3] Burke, A., 3/23/17, “Working class white Americans are now dying in middle age at faster rates than minority groups,” Brookings (https://www.brookings.edu/blog/brookings-now/2017/03/23/working-class-white-americans-are-now-dying-in-middle-age-at-faster-rates-than-minority-groups/)

[4] Case, A., & Deaton, A., 5/1/17, “Mortality and morbidity in the 21^st century,” Brookings (https://www.brookings.edu/wp-content/uploads/2017/03/casedeaton_sp17_finaldraft.pdf)

[5] Kuttner, R., 10/3/16, “Hidden injuries of class, race, and culture,” The American Prospect (http://prospect.org/article/hidden-injuries-0) This is an insightful review of nine books on the “decline of the white working class and the rise of the Tea Party and Donald Trump.”

[6] Kuttner, R., 4/7/17, “Corporate America and Donald Trump,” The American Prospect (http://prospect.org/article/corporate-america-and-donald-trump)

[7] Warren, E., 2017, “This fight is our fight: The battle to save America’s middle class,” Metropolitan Books, NY, NY. p. 159

[8] Warren, E., 2017, see above, p. 159