“You’ve convinced me. Now go out and make me do it.”
Where: Foley Square (J or Z trains to Chambers Street or 4, 5, or 6 to Brooklyn Bridge-City Hall)
“You’ve convinced me. Now go out and make me do it.”
Here’s the GOP’s rationalization for the sequester:
…Representative Cathy McMorris Rodgers of Washington State, the chairwoman of the Republican conference, also called the cuts “devastating” to America, but said that Republicans in the House would not yield on the issue of taxes.
“Spending is the problem, which means cutting spending is the solution,” she said. “It’s that simple.”
Let’s take a look at President Obama’ spending in historical comparison. As you can see in the chart below, President Obama has presided over the lowest rate of government spending in a very long time.
How does US government spending compare with that of other members of the Organization of Economic Cooperation and Development (OECD)? (NOTE: All figures below reflect the situation BEFORE the sequester cuts began to be implemented.)
The US was ranked number 22 out of 30 in terms of social spending as a percentage of GDP in 2012:
Public Social Spending as a Percentage of GDP
Meanwhile, US military spending represents 43.3% of the world’s total in that category—by far the highest of any country on earth. Many in the GOP tried to prevent cuts to military spending in the recent showdown over the sequester, and there are reports that the GOP will attempt to return military spending to its pre-sequester levels in the upcoming Continuing Resolution. Clearly, as far as the GOP is concerned, all spending is created equal, but some is more equal than others.
What have we been getting for our money?
As you can see in the chart below, we have the highest poverty rate of any of the OECD countries listed below.
Relative poverty rate in the United States and selected OECD countries, late 2000s
Similarly, we have the highest child poverty rate of any developed country in the OECD.
Child poverty rate in selected developed countries, 2009
Moreover, US social welfare spending is less effective in reducing the relative poverty rate than that in any other OECD country listed below.
Extent to which taxes and transfer programs reduce the relative poverty rate, selected OECD countries, late 2000s
The relationship between our relatively meager social spending and our poverty rate indicates that the low level of the former is related to the high level of the latter.
Social expenditure and relative poverty rates in selected OECD countries, late 2000s
According to the CIA Factbook, the United States ranks 51st out of 222 countries, behind every Western European country, Japan, Australia, Hong Kong and even Bosnia and Herzegovina.
The US has the highest rate of teenage pregnancy of the 25 countries ranked by the CIA Factbook. A graphic representation of this data can be found here.
Meanwhile, the GOP is adamantly opposed to raising taxes to reduce the deficits and debt. Their refusal to allow any taxes to rise led them to prevent any alternative to the sequester to come up for a vote in Congress. What do US tax rates look like compared to other OECD countries?
US taxes as a percentage of GDP are lower than those of any countries except Turkey, Chile and Mexico, as shown below:
So the GOP has forced arbitrary, indiscriminant and draconian spending cuts on the US government at a time when (a) we’re already spending at a much lower level than any other US administration since Eisenhower; and (b) our very low rate of social spending is strongly correlated with our very high rates of poverty, teenage pregnancy and relatively low life expectancy. They have done so while refusing to allow a penny more in tax increases, despite the fact that the US already has one of the lowest rates of individual taxation of any industrialized country.
Economic Effects of the Sequester
It is estimated that the sequester cuts will cause 750,000 people to lose their jobs in 2013 alone. The Congressional Budget Office (CBO) has estimated that the cuts will reduce GDP in 2013 by about half of a percentage point—this at a time when unemployment is about 8% and GDP growth is about 2.5%. The CBO estimates further that the economy will go into recession for much of 2013 as a result of the cuts.
Here are the Office of Management and Budget (OMB) estimates of the programs that will be cut:
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Barack Obama has been reelected on a platform calling for a reduction in income inequality and a frankly liberal vision of government. He is only the second Democratic president since FDR to win a second term in office.
The GOP lost two seats in the Senate and eight in the House of Representatives, retaining control of the latter. While the GOP retained more House seats than would have been possible in the absence of extensive gerrymandering, their party has now lost the popular vote in five of the last six elections. Clearly, there is little to support claims that they have a popular mandate. However, many in the GOP still insist that there’s no need for them to change their political positions; rather, they need to improve their use of technology and present their message in a more upbeat fashion. Nonetheless, continued GOP control of the House means we can expect continued political polarization and paralysis, particularly since the GOP reaction to the election has been spectacular in its lack of self-reflection.
President Obama pledged in 2012 to end tax cuts for individuals making over $200,000 per year and households making over $250,000 per year. In the fiscal cliff negotiations recently ended, those limits were changed to $400,000 per year for individuals & $450,000 per year for households. This is seen by many on the left as a sign of Obama’s weakness as a negotiator.
Like many observers, Andrew Samwick sees the taxation part of the fiscal cliff deal as a failure of leadership:
As a matter of revenue, we now permanently have a tax system that will not raise enough revenue to cover our expenditures. As a matter of policy, we continued to constrain our choices based on whether some portion of legislation that wasn’t popular enough to pass initially without explicit sunsets should be continued or not. The proper course of action for President Obama was to allow all the sunsets to occur and then to force the Republicans to propose legislation to achieve their political objectives. Instead, he surrendered his political advantages and handed it to them without a fight. What an abject failure of leadership.
On the other hand, Obama was adamant in refusing to negotiate again over the debt ceiling and the GOP backed down, punting the issue down the road into March. It remains to be seen whether they will renew the fight over the debt ceiling at that point. Obama, as noted by Samwick, had maximum leverage at the end of 2012 because all the Bush tax cuts were scheduled to expire. Had that happened, Obama could have forced the GOP to put forth new tax cut legislation, which he could have been in a position to veto if it included tax cuts for those making over $200,000/$250,000 per year. However, it is not clear if the GOP would have made extension of unemployment benefits conditional on additional tax cuts or drastic spending cuts; nor is it clear that the Democrats in the Senate would have supported Obama’s stated position on taxes had tax cuts for the wealthy been included in a 2013 tax bill.
In addition, Obama forced the GOP, for the first time since Bill Clinton’s presidency, to accept an increase in taxes. He got an extension of unemployment benefits for one year, and he staved off GOP demands for sharp cuts in Medicare, Medicaid and Social Security.
Robert Greenstein of the Center for Budget and Policy Priorities observes that the upcoming budget confrontations will likely be over additional deficit reduction measures embodied in the upcoming fiscal 2013 budget negotiations, sequestration, and raising the debt ceiling. The GOP continues to insist that any additional revenue be offset by additional budget cuts (with the exception, it seems, of the debt ceiling, which the GOP recently voted to suspend for the next three months and which they have stated will not be the focus of another budget showdown a la 2011). Greenstein predicts either a government shutdown or a constitutional crisis due to interparty conflict over the upcoming budget standoffs.
In addition to a debt ceiling standoff, the GOP temporarily abandoned the so-called “Boehner rule,” by which every dollar of new spending must be matched by a dollar of spending cuts, regardless of context. However, there is no indication as of yet that they will not return to it, a possibility that should concern us all.
As Robert Greenstein observes,
This rigid formula would require additional spending cuts in any year in which the debt grows in dollar terms, even if the debt is stable or shrinking in relation to the economy. Under the formula, programs that strengthen economic growth or serve low- and middle-income Americans could be cut to allow the debt ceiling to be raised, but savings from curbing special-interest tax breaks would not count for this purpose.
He notes that “The Boehner rule would require about $4 trillion more in program cuts over the next ten years than Bowles-Simpson” and would be even more drastic than the Ryan plan.
Yet austerity budgeting is already being tried in the UK and elsewhere in the Eurozone, yielding disastrous results. The results have so far included a double-dip recession in the UK, record unemployment in Greece and Spain, and other such miseries. This should not be surprising. Whether conservative ideologues like it or not, government programs are part of the overall economy; drastic cuts in funding to programs providing benefits to the elderly, the poor, veterans, etc., result in a sharp decline in the amount of money those recipients can spend. To put it very simply, the idea that cutting federal spending during an economic downturn will lead to a boost in economic growth is like telling farmers that their crops will grow faster during a drought if deprived of their supply of water.
Moreover, while it is undeniably true that the deficit and debt are very high by historical standards, the current historically low interest rates and inflation rate mean that there is no need to pay down the deficit and debt immediately. We clearly need to reduce both in the medium and long term, but there’s no need for the draconian cuts demanded by the GOP.
To this argument austerity proponents respond that we face a crisis–our high debt and deficits will turn the US into another Greece. Yet this claim doesn’t hold water. Greece is a small country, almost entirely dependent on foreign trade, where 51% of economic activity occurs on the black market, no one pays taxes, the national debt exceeds the country’s GDP, and unlike the US, Greece does not have its own currency (meaning it cannot make monetary adjustments to deal with its debt payments). There simply is no comparison between Greece and the US.
If the GOP returns to such demands (and there’s no evidence to suggest otherwise), it will be imperative for people with progressive values to put maximum pressure on the parties involved to resist GOP efforts to use the budget imbalances they themselves created, to a great degree, as an excuse to hack away at government programs benefiting the most vulnerable among us. The sequester must be altered to avoid huge cuts to domestic spending. The debt ceiling must never again be an object of negotiation–in fact, it has no real function and should be repealed. And the fiscal 2013 budget, negotiations for which will start soon, cannot include drastic cuts to domestic spending. Underlying our opposition to such cuts must be the fact that in the current economic and budgetary context, there is no emergency.
The GOP will get three more bites at the budget cutting standoff apple in the next two months. Looming are (a) the battle over sequestration (just postponed by the fiscal cliff deal); (b) the need to raise the debt ceiling; and (c) the 2013 budget battle, which will start with the Continuing Resolution. Keep your powder dry–you’ll need it.
[Update: Fixed header tags, added revenue graph and concluding paragraph]
The fever-pitch intensity of an election year has given way to Hurricane Sandy relief efforts, followed by the Newtown shootings and a smorgasbord of exciting new strains of flu virus and other such transmittable delicacies.
Now that the dust is settling from the fiscal cliff negotiations, it might be useful to take a moment to consider where we are politically and economically, and what that may mean in terms of our next steps. I will focus first on the recently completed “fiscal cliff” deal–what’s in it and who’s affected by it.
The “fiscal cliff” standoff resulted in a deal including the following:
Source: The Committee for a Responsible Federal Budget (CRFB)
Despite the increase in top marginal tax rates, the wealthy will continue to do quite well. While individuals earning over $400,000 per year and households earning over $450,000 per year will see a rise in their marginal tax rates, they will enjoy a cut in taxes below the marginal rate, just like everyone else. Thus an individual earning over $400,000 per year will pay a 39.6% tax on the amount over $400,000, but a 25% tax on the amount between $35,350 and $85,650, and so on. In addition, as Matthew O’Brien notes, raising the estate tax is a matter both of tax fairness and revenue. Simply allowing the estate tax to revert to Clinton era levels would have yielded $375 billion more in tax receipts than will come from the fiscal cliff deal of a $5 million exemption and an estate tax rate of 40%, which is a huge giveaway to the wealthy.
The extention of the doc fix will benefit doctors receiving Medicare payments.
The elderly have been spared, at least temporarily, from the draconian cuts to Medicare, Medicaid and Social Security championed by the GOP.
Another extension of unemployment insurance will benefit the unemployed. On the other hand, expiration of the payroll tax moratorium means those taxes will go up for working people–a large segment of the population.
As Joe Weisenthal notes, “The difference between the Obama Tax Cuts and the Bush Tax Cuts? Obama’s are permanent.” And Brad DeLong observes that “[u]nfunded tax cuts are, in the long run, bad juju. We cannot make policy on the expectation that the U.S. will always be able to borrow at negative real interest rates. And we should make policy aiming for a low debt-to-GDP ratio, because emergencies will arise in which we will want to boost federal spending quickly and substantially to attain important national purposes.” Yet he sees no obvious policies that will fund those tax cuts.
Think about what it took just to end the Bush tax cuts for the wealthiest 2% of the population. Consider that and DeLong’s statement about the need for a low debt-to-GDP ratio, and bear in mind that the US had, before the fiscal cliff deal, the lowest personal income tax rates of any industrialized nation (and some of the lowest social spending as a percentage of GDP, not coincidentally). What do you think it will take to raise taxes in the future, after the economy returns to full strength, as we try to pay down the deficit and debt? And if we cannot increase revenues via taxation, what choice will we have but to slash federal spending? That is the logic behind the GOP’s starve-the-beast approach to tax policy–an approach that has just gained additional power.
The CRFB, a center-right organization focused, a la Pete Peterson, on reducing the deficit and national debt, sees positive results in (a) the postponement of drastic sequestration cuts; (b) the increase of $620 billion in federal revenues resulting from tax increases; (c) establishment of the “precedent that extending the sequester has to be paid for and strengthen[ing] the precedent that the doc fix should be waived only along with offsetting health provisions;” and (d) the possibility that lawmakers can find alternatives to the upcoming sequester.
They oppose the absence of (e) debt stabilization measures; (f) “serious entitlement reforms;” (g) “a process to enact pro-growth and revenue generating tax reforms;” or (h) offsets to the costs of tax extenders and unemployment insurance benefits. In addition, they deplore (i) the $4 trillion cost of making the Bush tax cuts permanent and extending the AMT patch; (j) use of a gimmick to pay for the sequester; and (k) what they term the missed opportunity to provide a comprehensive debt reduction package.
Underlying their dedication to budget cutting are fears of inflation and that high deficits will soon result in the government “crowding out” private investors as it borrows increasing amounts of money from the federal reserve to pay the interest on the national debt.
Unlike the CRFB, Pete Peterson and other so-called deficit scolds, economists adhering to the Keynesian approach to recessions such as Paul Krugman, Brad DeLong, Robert Reich, and Mark Thoma, argue that cutting government spending at this point is exactly the opposite of what should be done during a slowdown. They argue instead that renewed federal stimulus spending at a time of historically low interest rates and inflation would boost the economy, resulting in increased tax receipts that would go toward paying down the deficits and, eventually, the debt. They also note that there are no signs of inflation and that interest rates are at historically low levels. Accordingly, they disagree with the CRFB on point (f) above in particular, and are highly suspicious of the grand bargain touted by the deficit scolds. In general, this latter group of critics is highly critical of the fiscal cliff deal’s extension of tax cuts to the $400,000/$450,000 limit.
The deal offers little in the way of economic stimulus to the economy. In fact, economist Brad DeLong estimates that the deal will reduce GDP this year by about 2%. While unemployment insurance has been given another one-year extension, the payroll tax cut has ended. Meanwhile, unemployment is about 7.4% and GDP growth remains much lower than the level needed to create enough jobs to bring the millions of people unemployed by the Great Recession back into the workforce.
Meanwhile, Robert Greenstein notes that the deal represents a modest slowdown in the rate of increase in income inequality.
The bottom line, in budgetary and economic terms, is that the deal largely preserves the status quo. While deeply disappointing to budget hawks and others seeking to use high deficits and debt (which the GOP racked up intentionally as part of their starve-the-beast strategy), the fiscal cliff deal has preserved unemployment insurance for another year, spared the elderly and the poor from draconian cuts to programs they need, and avoided, at least temporarily, the most recessionary effects of austerity budgeting.
AMT (Alternative Minimum Tax): This was established to prevent the wealthy from paying taxes. However, it was never indexed for inflation, the result being that the AMT now applies to many middle class families. If the AMT were allowed to expire, many middle class families would end up paying significantly higher taxes.
Austerity budgeting: The idea that imposing sharp spending cuts during an economic downturn will lead to the elimination of deficits, paydown of debt, and a dramatic increase in economic growth.
Debt: The sum of accumulated deficits.
Deficit: The gap between federal income & federal spending in a given fiscal year.
Doc fix: An annual measure to prevent a reduction in Medicare payments to doctors.Fiscal cliff: The combination of expiration of the Bush tax cuts & imposition of sharp federal spending cuts imposed as a way around the 2011 debt ceiling standoff facing the US at the end of 2012.
Marginal tax rates: The tax rate paid on income within a specific income bracket.
Sequestration: The package of sharp cuts in federal spending imposed as a way around the 2011 debt ceiling standoff.
We have been informed by OccupySandy that the volunteer effort scheduled for 520 Clinton Ave., Brooklyn, will be closed on November 22nd, Thanksgiving Day. All willing to generously contribute their time on Thanksgiving Day should go to St. Jacobi Church, located at 5406 4th Ave. (Sunset Park), Brooklyn, NY 11220. Please see additional information on this event at http://interoccupy.net/occupysandy/locations/.
Thanks you and Happy Thanksgiving!
Every Thanksgiving, as we sit down with our loved ones, we reflect on all that we are grateful for in our lives. This year, the list may be longer as we recognize, post-Sandy, the importance of the conveniences we often take for granted: flushing toilets, running water, medical supplies, heat, and the juice to charge up our laptops and phones.
Thankfully, electricity has been restored to much of Staten Island, the Rockaways, and Hamilton Beach in Queens, but not for everyone–many are still displaced from their homes or waiting for vital services to be restored. Here are a few ways that youcan lend a hand:
If you would like to volunteer on Thanksgiving Day, Thursday, November 22nd, join #OccupySandy from 8 AM – 4 PM, no sign up is required! They will be working to provide hot meals at the Church of St. Luke & St, Matthew at 520 Clinton Ave in Brooklyn.
Coney Island Generation Gap
Coney Island remains one of the worst affected areas in New York City. CIGG has a goal of distributing 2,000 turkeys to residents of this area.
Please help Wednesday, November 21st by:
1) Donating turkeys at 2904 Neptune Avenue, Brooklyn, NY 11224 from noon – 2pm;
2) Distributing turkeys from noon-3pm; OR
3) Dropping off warming/heating pads or blankets at above address.
Transit Forward Coalition
Volunteers will be serving over 500 meals on Thanksgiving, Thursday, November 22nd to those impacted by Hurricane Sandy. For more info, please visit www.transitforward.org or email firstname.lastname@example.org.
For a general list of ways to help out in the five boroughs, please visit WNYC.
Join the New York State Senate Democratic Conference for Sandy Relief Happy Hour at Local 138, located at 138 Ludlow between Stanton and Rivington Streets, on Tuesday, November 20th from 7 to 9 PM. There will be $3 well drinks, wine, and beer.
Please bring any of the following donations to help the relief effort: canned food, cleaning supplies (brooms, mops, gloves, heavy garbage bags, bleach, cleaning sprays, paper towels, and sponges), flashlights and batteries, baby supplies (diapers, formula, and accessories), and medicines (cough medicine, BAND-AIDS, Neosporin, Ace bandages, Advil, Tylenol). Gift cards (for supermarkets, Home Depot, etc.) are also in high demand.
New Yorkers have provided food and hope to thousands in need, but our neighbors are still missing vitally important resources, including warm shelter and much-needed access to medical care. Please sign our petition currently featured on change.org so we can push our elected officials to demand resources for the 29,000 people, including families, who are still waiting for these necessary and life-saving supplies! It only takes two minutes to participate in something powerful, so please SIGN ON! More than 10,000 people have already signed on. Help us to make it 15,000.
And don’t forget to use your social media skills to encourage your friends and family to do the same. Check out the following tips:
Post articles, media, and images related to what’s going on in the Rockaways and link to the petition in those.
Tweet why you think this campaign is important. You can target your tweets to decision makers such as @DRichards13 (staffer to City Councilman Sander), @nycoem (NYC Office of Emergency Management), @NYGovCuomo, @MikeBloomberg, @FEMASandy, @BilldeBlasio (Public Advocate) or celebrities like Kelly Ripa. For example, “@kellyripa Thanks for raising $$ for storm survivors with no heat. We’re trying to protect them from hypothermia, will you help by RTing our petition? http://chn.ge/XMDUBD”
Join Hurricane Sandy Clean-up Day this Sunday November 25th from 10am-4pm. Volunteers will be asked to do a variety of tasks including canvassing the neighborhood to assess need, cleaning up homes (may involve some heavy lifting), distributing food and cooking,
For more information and to RSVP please contact: Michelle Masone at email@example.com or 516-353-4239. There will be a bus leaving from Manhattan, so please email Deanna Bitetti or Jordan Reisner if you would like to reserve a space on the bus. Seating is limited.
Thank you for your continued commitment to change.
Aliya Quraishi and the Greater NYC for Change team