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By the time you read this, I suspect the debt ceiling battle will have been mostly won by The Bandits and you can start turning out your pockets to pay for it. While this is all regrettable, we should not spend time fussing over it. We need to get on to the next battle. And, if we define that battle properly, I think we can quickly repair the damage caused by the last several years of retreat. I want to get things moving in a positive direction again.

In fact, it’s exactly because things look so bleak at this moment that we should have hope. Our opponents have overreached in ways that will be felt every day by Americans for years to come. As they suffer they will be right to remember that a very whacky variant of conservative ideology is at the source of their suffering.

And we should be there to remind them every step of the way.

But what then? What is the progressive plan for getting us out of this mess?

It’s clear our opponents have executed a winning strategy. Their strategy consists of:

  • Establishing an ideological base.
  • Creating a simple(-minded) proposal that fits their ideological model.
  • Getting susceptible politicians to adopt this proposal as the defining issue of their campaigns.
  • Using every mechanism of government to force the majority of officials to adopt their proposal by leveraging this minority of politicians.

There’s no reason at all why progressives could not do the exact same thing. We already have an ideological base. And, apparently, based on the results of the last three years, many progressive-leaning politicians are weak and susceptible to lobbying. What’s missing is only the selection of a key political plank and the execution needed to force that through Congress.

In a presidential election year, it’s easy to get caught up in winning the White House. But that’s a distraction. The real power is now in Congress. If we play our cards right it won’t matter if there’s a Republican elected President because he won’t be able to govern as a Republican.

What’s important is to capture the other house, The House, to take it back from our opponents, while dominating enough Democrats in the Senate to ensure a filibuster of any bill Republicans put up there, even if the White House supports it. That’s the winning tactics to employ, as demonstrated by our opponents, and we should play to win, as well.

We must focus on Congress. That’s where progressives should be putting their time and money in the coming elections. That’s half the strategy. The other half is selecting and rallying behind a very limited proposal for change.

Here’s my proposal for change, and I think it should be adopted by all progressives. I call it The Fair and Balanced Proposal. This proposal is brought to you by fiscally-responsible progressives. It’s designed to balance the federal budget using sound economic principles. As a progressive, I’m asking you to sign up for a call to balance Republican cuts with revenue increases, and replace voodoo economics with a comprehensive and workable economic plan for both the government and the economy. The primary aim of this proposal is to balance all spending cuts with equal but opposite revenue increases. That means the next round of deficit reduction should be 100% revenue increases.

Now, that’s really a mouthful, so let me walk you through it a bit more slowly. What does all this mean?

The Fair and Balanced Proposal: My proposal creates a balanced budget and pays down the debt by sharing the burden of doing so fairly across society. This is in contrast to Republican actions over the last N years that have pushed more and more of the burden onto the poor.

Fiscally-responsible progressives: Media hacks tell us conservatives are fiscally-responsible and progressives always blow the budget. Nothing could be further from the truth. Every time the American people have given “conservatives” the reins we’ve seen out-of-control spending, usually on the nation’s credit card. We need to confront this directly, and so I’ve created a new group—the fiscally-responsible progressives—to replace the idea that only conservatives are responsible. By repeating the phrase “fiscally-responsible progressives” over and over, we establish in the public’s mind that progressives are more responsible than conservatives, and that’s what gives us the running room to get them elected.

Balance the federal budget: The federal budget is about $1.9 trillion. I know you’ve heard bloated figures that are twice that, but they lump Social Security and Medicare in with it, and that’s not legitimate (for reasons I’ll come to shortly). I’ve been through the 2010 federal budget, as passed by Congress, line by line, and I can tell you based on the actual document* that the total is around $1.9 trillion. In a $14 trillion economy, this amounts to about 14% of GDP.

We often hear that half our economy goes to the government; and that may be true if you consider all money filtered through all levels of government and include transfer payments like Social Security. But by this measure, the U.S. ranks behind most advanced countries in government expenditures.

So, let’s just be clear about what we are balancing, because any proposal that balances the “federal budget” by messing around with Medicare or Social Security isn’t a legitimate proposal. When I say “balance the federal budget” I’m talking about real expenditures. And here’s a picture of those real expenditures:

Color      Purpose                 Percentage
Dark Blue  Defense Related         50.79%
Orange     Essential Services       4.50%
Green      National Protection     27.57%
Purple     Education                5.64%
Light Blue Welfare                 11.50%

(Blow it up and really look at it)

In this, I’ve lumped things like “overseas deployments” and “veterans benefits” into the defense area, and I’ve put things like “general government” and “administration of justice” into Essential Services. I put “health” in National Protection because it is protecting the nation from disease. If you want to see this in context of how the government breaks down these areas, you can look here:

(Blow it up and really look at it)

What about Social Security? Isn’t it breaking the budget?

Social Security and Medicare are transfer payments. They are part of the private sector, and they are requirements on employers (in the aggregate) to pay for the actual costs of their workers. Workers don’t just disappear when they stop working. They still need income to survive, and these programs require employers to pay the total costs of their workforce, thereby providing that income.

These programs make sure employers can’t exploit workers by paying them only enough to survive while they are actually working, and then offloading their costs on their families and society when they aren’t. The federal government administers the programs, but that doesn’t change the nature of the money.

This is money paid by employers to workers, and the workers that receive it spend it on the same things they would if it were paid to them when they were younger and employed: food, clothing, housing, transportation, medical care—you know, the necessities of life. Real government spending changes the nature of the money. If you tax someone a dollar and spend it on the military they are no longer spending it on consumer items. Government spending changes the nature of the money, but Social Security and Medicare do not. They are not government spending, and they are therefore not part of the federal budget.

So, let’s be clear on what we mean when we say we are balancing the federal budget. We are talking about the $1.9 trillion that is part of that budget, not extraneous items like Social Security.

Sound economic principles: The federal budget is just a small part of the problem. The real problem is a weak economy with terrible job numbers. Anyone focused on fixes to the federal budget that hasn’t embedded that proposal in a broader one to fix the economy doesn’t understand the problem and has no hope of fixing it.

Let’s first dispel the myth that government doesn’t create jobs. Sound economic principle says that government borrowing always creates jobs (as the money gets spent). This is a mathematical certainty because any increase in the amount of money spent by the government must do one of two things:

(A) It means the government hires an employee, which creates a job, or

(B) It means the government pays a private entity for goods or services, which creates private-sector jobs.

Any additional money paid to a private entity for services means that the company must hire someone to provide the service, and any money paid for goods means that someone must be hired to replenish the goods.

By the same token, the government paying off debt means the destruction of jobs. If these job losses are not offset by increased hiring in the private sector, total employment goes down. Cutting government borrowing, as the Republicans insist on doing, automatically means job losses. That’s just the mathematics of the economy, and there is no avoiding it.

Now which problem is bigger: the federal deficit or lack of jobs and low wages?

The truth is that a huge increase in the number of people employed and a large increase in their wages would eliminate most of the federal deficit. Conversely, eliminating the federal deficit will harm job numbers and may lead to a downward spiral. You might be able to solve the deficit problem by fixing the jobs situation, but just fixing the deficit alone will increase the jobs problem. This is part of my principle that:

The natural result of cutting is that eventually you have nothing.

But a more important question about creating jobs is: Which kinds of jobs? Economic policy set by Congress determines what kinds of jobs we get.

For example, our current policy is to export wealth-producing jobs. We do this by maintaining low tariffs and allowing companies to profit from wage arbitrage, where they get money by producing products where labor is cheap and selling them where labor is expensive. This economic policy, signed onto by both Republicans and Democrats for decades, has had ruinous effect on the nation’s wealth.

As a result, wages have fallen, jobs have disappeared, and therefore it’s no mystery why the government is running in the red. This is the natural, and predictable, result of poor economic policy. Since the 1970s (when manufacturing peaked) the U.S. has lost about a quarter of its manufacturing capacity (despite population growth) and wages have fallen by about 8% in real terms. Unemployment is 0.9% higher over the 30 years since 1978 than it was in the 30 years previous. That means that 1.4 million Americans are out of work right now due to bad trade policy and the resulting economic decline.

The deficit brouhaha was, in many ways, intended to distract us from the real problem: really, really bad economic policy. So, the message has to be that the only way this country is going to get back on track is with a Congress that (1) knows what good economic policy looks like and (2) implements it.

I could write (and have written) volumes on economic policy. But the only major thing that we need to know for good strategy is that government economic policy has a huge impact on jobs. Good policy results in a healthy, stable economy with plenty of jobs; bad policy results in a dysfunctional economy with starving children. Progressive policy is sound economic policy. To have our government taken over by our opponents necessarily leads to economic problems. The current situation is a result of letting them have control. This is the message we need to get out to the American people.

Equal but opposite revenue increases: This means that every cut that’s been made by Congress in spending on social issues since 2000 must now be balanced by a revenue increase. This is the simple plank we need to drive through Congress. Make politicians sign up for just this one thing. Put pledges in front of them to sign. Ask them at every turn, “Are you going to make revenue increases the only basis for the next round of deficit reduction?” Label them fiscally irresponsible if they say no. Or, more accurately and painfully, label them economically ignorant if they refuse. The question should be put to them:

Are you ignorant, or possibly stupid, or is it just that you hate the American people?

Okay, that’s a little over the top, but not by much.

This is how we make balancing the federal budget fair to society. The cuts have all come at the expense of the poor. So, that means that for every dollar cut so far there must be a tax increase on the rich.

This is the policy I want to see implemented: Not another dollar of cuts to social programs without a dollar from new taxes. Well, I’m a reasonable guy. I would also accept real spending cuts in the military budget, down to the 5X level, as the same as revenue increases, for the purposes of matching cuts dollar-for-dollar.

That’s the Fair and Balanced Proposal. We balance all the cutting so far with revenue increases. Then we balance all new cuts to social programs with revenue increases. Cutting defense spending is a bonus. Cutting Social Security or Medicare doesn’t count.


I got a call from an earnest campaign worker for the Al Franken campaign. I might mention that I donated to Franken on several occasions as he fought to win and then get the government to recognize that he won his senate race. I am, in fact, likely to give to his re-election campaign over the next year or so. But I have to tell you that I’m on the fence about that because I saw that even though he’s pushed hard for liberal causes, when it came to the national healthcare debate he still signed onto a package that didn’t include the public option.

Now, I know that the White House has vilified progressives as being petty about that issue. They claim that we are sore losers or that we just don’t understand or that we are upset that we didn’t “win” on this issue.

But the truth is that there are actual national problems and there are actual solutions to the country’s problems. Progressives, by and large, have solutions. So, when someone picks something that is not a progressive proposal, they are very likely not solving the problem. Problems are not solved by compromises. They are solved by picking a solution and getting that solution through the political maze.

I’m a big boy and I can accept defeat. What I cannot accept is for our politicians to go in exactly the opposite direction from solving critical problems. The healthcare crisis is a fiscal crisis. We are spending over 17% of GDP on healthcare while our competitors in advanced countries pay only 10% and places like India and China (which are also our competitors) pay only 5%. The bare minimum necessary to solve this problem is the public option, and trading it away represents making the problem harder to solve, not easier. It is a failure. I’m not unhappy as a liberal about losing (any more than anyone else), but I’m incensed as an American that they failed to solve the problem and now I (along with 300 million of my closest friends) am going to have to pay for it.

The campaign worker was young and I’m afraid I unloaded on her. I told her that I was absolutely furious that Sen. Franken had signed on to this. And, I told her, they are now in the process of giving away your retirement. I’m old enough and have enough accumulated wealth that I will probably not be much affected by the damage The Bandits and their Republican employees are doing to Social Security. But, this poor campaign worker and many, many others like her are being robbed of their birthright as an American citizen to a decent life with a respectable retirement. I told her that the point was that progressives have to go back on the offensive. We are losing, and we will continue to lose as long as our only goal is to defend what the Roosevelts got us.

The only way we will change this is for progressives to get their act together and take over Congress. We have to make our mark. Our opponents have given us an opportunity by putting in place such measures as will rub the American people raw over the next few years. This is our opportunity to turn them to our ideology and make that the dominant force in American politics. Help by spreading the word.

* You can find the actual federal budget by going to Thomas and searching for H.CON.RES.85.EH from the 111th Congress. Click through and click "Beginning" to get to text of bill.


Should the next round of deficit reduction be 100% revenue increases to balance the cuts being made?

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Comment Preferences

  •  Tip Jar (1+ / 0-)
    Recommended by:
  •  LiberalT - what is you plan for tax increases? (1+ / 0-)
    Recommended by:
    Liberal Thinking

    The problem with the top 2% is that there are only 2% of them. Repealing the Bush tax cuts on families with AGI's above $250,000 raises only $70 billion a year. Letting ALL the Bush tax cuts expire raises an additional $300 billion a year which is what we need to do if we want to be serious about increasing revenue.  If Congress passes Bernie Sanders "millionaires tax" it would raise an additional $50 billion a year, so if you add the Bush tax cut and the Sanders tax proposal you have a total of $120 billion a year on high income earners, or less than 10% of the current budget deficit.

    When you think about your tax proposal please research the Tax Reform Act of 1986. Top marginal rates prior to 1986 have no relation to top marginal rates after 1986. It is comparing apples and oranges. Prior to 1986 there were legal tax shelters that would allow you to lower your federal tax all the way to zero, if you so chose. So no one actually paid those 90%, 70%, or even 50% top marginal tax rates.  All of those tax shelters were ended in 1986.

    "let's talk about that"

    by VClib on Sun Jul 31, 2011 at 05:40:54 PM PDT

    •  Tax Rates (0+ / 0-)

      It's a good question, and I don't want to say that there is only one way to do this. However, I will give you the following guidelines.

      In the first place, the top 1% of incomes represents 43% of the nation's wealth. These people should be paying for over 40% of the cost of government. But they are paying less thank 20% and their effective tax rate (according to one expert, former Senator Alan Simpson) is only 16%.

      So, raising their share to what they ought to be paying, which would give them an effective tax rate of about 40% or more, would raise quite a lot more than many of these plans.

      Once you get the top tax rate right, then you can start to work on the other rates. If I were designing a tax system, I would look at establishing a tax that every person should be paying as their minimum contribution. And then I would build that into the minimum wage, along with the other essential expenses.

      After that, I would look at building up from there with essentially a flat tax until I got to about the 80% level. In the upper quintile the benefits of being an American citizen go up substantially. So, their tax rates should, too.

      The other factor is property. It used to be (pre-U.S.) that the landed contributed the bulk of the costs of running the government. In exchange for their title to land they pledged to serve in the army. When that became complex, it was simplified so that they just paid some amount each year and the king hired an army.

      We don't use property taxes to support the military. But the military defends both people and property. Those with more wealth should pay more. This is why a graduated income tax is fair. It means that those who have more wealth tend to pay more.

      I suspect that if you got the percentage right for the top tax earners in proportion to what others are paying that we would have practically no deficit. I think that would require going beyond doing away with the Bush tax cuts and going back to a system that was in place probably prior to Reagan.

      And one other thing. While the top 1% only represents about 400 families or so, they are inordinately wealthy and their income is astronomical. So, I would not discount how much impact this has on the budget.

      In addition, when we were taxing these people at higher rates, albeit with loopholes, they used those loopholes to avoid taxes. Many of those loopholes resulted in them hiring additional people. In other words, they avoided the taxes but they created jobs in doing so.

      And finally, when we tax them the government then spends that money. This injects it into the working part of the economy. One of the worst effects of the Bush tax cuts was that it allowed a lot more money to pool at the top. This is one of the things that caused the economy to seize up.

      Let's say you tax this group of people $1 billion this year and spend that money for government services. Every dollar you spend of that money goes to someone. And that person spends it. It takes time for them to spend it, but depending on how fast this happens you can have a multiplier effect of maybe ten times. In other words this $1 billion of addition government spending creates several billion dollars of additional economic activity. And guess what. The government takes a cut every time, which means that the government takes at least 15% of it each time around. So, the additional taxes paid by one rich person at maybe a 35% tax rate is then taxed again. You don't get just their 35%.

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