The Citizens' Commission On Jobs, Deficits And America's Economic Future is releasing its report today, and its recommendations will be very different from those of the self-described "bipartisan" plans now dominating Washington conversations. (They are bipartisan in a way, come to think of it, since polls show that many of their ideas are disliked by both Democrats and Republicans.)
There is an urgent need to broaden the policy debate. Plans like the Simpson/Bowles and Rivlin/Domenici proposals rely on a narrow range of unpopular policy ideas -- ideas that fail to address the causes of either current or projected deficits. What's more, they fail to recognize that a healthy government budget depends on a healthy economy, and a healthy economy depends on jobs. The Citizens' Commission's proposals bring deficit spending under control while investing in a future based on jobs and economic growth.
Don't believe the naysayers: It can be done.
The Right Thing
The Citizens' Commission was organized and supported by the Campaign for America's Future and the Institute for America's Future*. As the name suggests, the Commission addresses the subject of deficits in its rightful context: the economy as a whole. And as the name also suggests, its proposals closely mirror the public's preferred deficit solutions. That's not, however, because the distinguished members of this panel were looking for popular answers. It's because the popular answers also happen to be the right answers.
This a fascinating moment in history: The right things to do are also the most popular things to do. But they're up against a Washington culture of politicians and consultants whose ideas were germinated and nurtured in well-funded think tanks and similar institutions. Those ideas are ill-suited to the problem at hand, yet they've become a deep-seated Washington consensus. That consensus runs so deep, in fact, that it raises a question which may never have been asked before in politics:
Will our leaders have enough courage and fortitude to stand up and do the popular thing?
The Citizens' Commission report, like that presented by The Century Foundation, Demos and the Economic Policy Institute (EPI), lays out a very different path to financial stability. A number of those differences deserve widespread attention, but the best place to start is with what may be the most important principle of all:
Any 'deficit plan' that doesn't address jobs, first and foremost, is selling this country short.
Herd Mentality
Nevertheless, a small group of well-financed politicians and economic advisors is advising the country to abandon economic fairness, slash its most treasured programs, and expand already-massive tax giveaways to wealthy. They've captured the media and policy limelight by insisting that these steps are necessary, their choices are "tough," and their unpopularity only proves these proposals "slaughter sacred cows." But their proposals aren't necessary -- in fact, they're counterproductive. And they're hardly "tough" on the people doing the proposing.
As for "sacred cows," this crowd's got enough fill every ranch in Texas. Here's one: They want more tax cuts for the rich -- even though past tax cuts for the wealthy were a major cause of today's deficit! Protecting rich tax breaks is the lead steer in their sacred herd. Another bovine idea they refuse to sacrifice is their obsession with cutting Social Security, which is barred by law from adding to the deficit.
Git along, little dogies.
This crowd's philosophy of "austerity economics" is for doomsayers, negative thinkers, and people who lack faith in their own nation and its citizens. These hoarders are out of step with the public and out of tune with the music of the American spirit. They would turn the "shining city on a hill" to a huddled enclave in the valley -- with a few McMansions glowing in the distance. These grim plans call for great sacrifice from the many and more comfort for the few -- and after all that, they don't even address the real problems.
Where's the beef?
Fix What's Broken and Don't Mess with What's Not
The Citizens' Commission recommendations are steeped in economic rigor and the lessons of history. They address the real causes of today's deficit -- runaway tax cuts, unchecked military spending, and a recession caused by Wall Street greed and speculation. They protect Social Security, which is another day's topic -- except to point out that retired people spend most of their income,rather than save it, and spending creates jobs.
Jobs First
Jobs will put money in the hands of people that will spend it, not those who would hoard it. That improves the economy for those around them, too, leading to still more jobs. We lost 8 million jobs in the recession, and we need 3.5 million just to cover new entrants into the workforce. We would need 300,000 new jobs each month, for years to come, just to get us back to where we were before Wall Street broke the economy, and we haven't been seeing anything close to that. The economy can't heal when 17 % its workforce, the consumers who are the engine of growth, is unemployed or underemployed.
The cycle of unemployment needs to be replaced with a cycle of employment, and government needs to get the ball rolling.
"Stimulus" Is Not a Four-Letter Word
Political spinmeisters have turned the word "stimulus" into an epithet. Whatever you call it, civil engineers say our nation's infrastructure ranks "C" or "D," which poses safety and quality-of-life problems. Much of the money in the Citizens' Commission report would go to rebuilding our infrastructure. Other funds would be used for green jobs that would put people to work and improve our economy, while helping us move to more reliable and environmentally safe sources of power while spending less on energy.
$100 billion per year would help financially strapped states and prevent 500,000 workers from being laid off. That wouldn't just prevent more unemployment and economic pain. It would also prevent cutbacks in desperately needed services like law enforcement, firefighting, and education. Additional funding for local communities would provide even more jobs.
"Stimulus" may have become a dirty word, but President Obama's program put 3.5 million people back to work. That wasn't enough to get us out of the hole the bankers made -- but 3.5 million households are pretty happy about it. So are the tens of millions of people whose livelihood has been improved by their spending. When we invest more in America's future, there will be more happiness, along with increased prosperity and growth.
And more tax revenue to cut that deficit.
Get Companies to Invest Again
American companies are sitting on $2 trillion in cash, and corporate profits just made a historic leap. Yet unemployment is still painfully high. The conventional deficit wisdom doesn't address this problem. That fact's made painfully clear in the deficit plan co-authored by Alice Rivlin, who came up with many of the poorly-aimed ideas now popular in Washington. Rivlin and her partner, former Sen. Pete Domenici, boast of a "payroll tax holiday and other measures to reduce the debt.' But a payroll tax "holiday" would, of course, increase the debt -- that is, unless the shortfall was taken from Social Security's Trust Fund, in which case it would take money away from seniors. (As we've said, this crowd is obsessed with cutting Social Security.)
And it wouldn't create jobs. At a time when corporations have trillions in cash on hand and just posted record profits, money clearly isn't the problem. Customers are the problem -- as in, there aren't enough of them.
Companies will invest and hire when more customers are ready to buy what they're selling. A government investment plan will put people back to work -- and then they'll spend.
Banks Should Be Banks Again
The Citizens' Commission plan proposes a financial speculation tax that will generate an estimated $130 billion in the year 2015. That's deficit-cutting revenue. But the financial speculation tax will also reduce the banks' incentive to take the low- or no-cost money they get from government entities and use it like casino chips. They'll have a greater incentive to lend money -- which, once upon a time, is what bankers did for a living.
The speculation tax, combined with a proper mix of incentives for appropriate lending, will ensure that banks carry out their proper and necessary economic function. Their lending would be redirected toward investment and away from speculation, and targeted toward the small- and medium-sized companies that create jobs.
Conclusion: Cut Deficits, Not Jobs
The Bowles/Simpson and Rivlin/Domenici school of thought -- a well-funded school supported by an interlocking cast of characters -- wants to balance the budget before the economy is ready. Any deficit plan, even the Citizens' Commission plan, should be kept in check until employment returns to acceptable levels. Their arbitrary spending ceilings would prevent us from creating new jobs, and their proposed cuts would destroy current jobs. There's no need to impose a grim, spartan future of diminished expectations on a nation that can recover from its current wounds and emerge stronger than ever.
We need patience, wisdom, and clear thinking, not a frenzy of budget-cutting that undermines the country's energy and purpose. What's more, a "deficit plan" isn't worth the name if it doesn't address the causes of the deficit. And an economic program that doesn't consider the entire economy is like a doctor that would kill the patient to cure the disease.
There's a better way to manage our economy and reduce future deficits -- a way that respects the American people and builds on their abilities, a way that allows us to overcome today's difficulties as we've overcome the difficulties of the past. We can invest in the future -- that is, invest in ourselves -- and then reduce our deficits in a mature and balanced way. Economic wisdom calls for optimism, not pessimism. It calls for expansion and fair play, not constriction and hoarding. It calls for courage, not fear.
Anything less sells this country short.
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[*] Where I work, and where I assisted in the preparation of the Commission report.
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project and the Strengthen Social Security campaign. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates