Reject the Fiscal Cliff, Tax the Rich,
Invest in Infrastructure and Services
DSA (Democratic Socialists of America) rejects the “fiscal cliff” hysteria of the corporate establishment and the pressure for a “Grand Bargain” that would cut Social Security, Medicare and Medicaid. While unemployment remains high and economic growth slow, the government should not impose austerity measures that reduce essential programs that benefit the middle and working classes and that further shred the safety net for the most vulnerable. Rather, government policy should prioritize investments in job creation, public education and healthcare reform, while raising essential revenues by taxing the large corporations and wealthiest citizens who can afford to pay.
Immediately after the election, Wall Street-backed foundations such as Third Way and the Concord Coalition organized a “Campaign to Fix the Debt” to spin the election results as a mandate for a “bi-partisan” focus on reducing the deficit as the highest national priority. For decades the billionaire Pete Peterson has funded groups that claim that the universal entitlement programs Social Security and Medicare are bankrupting the nation and that their future growth must thus be drastically trimmed. These neoliberals scored an initial success in 2011 when the Simpson-Bowles commission recommended three times as much in budget cuts than in tax increases. But despite President Obama’s evident willingness to reach such a one-sided compromise, Tea Party insistence on no tax increases, even on the wealthiest, scuttled the deal. The “resolution” of the crisis was to postpone a decision on deficit reduction until the end of 2012, hence the contrived “fiscal cliff.”
What is the fiscal cliff? If Congress makes no changes to the Budget Control Act of 2011, the Bush tax cuts will expire on January 1, 2013. This restoration of $250 billion in tax revenue will create a significant fiscal drag on the economy, as would $110 billion in “automatic cuts” or “sequestration” in 2013 ($55 billion in defense and $55 billion in ‘non-discretionary domestic” spending). The 2% FICA payroll tax cut will also expire (another $95 billion of clawed-back purchasing power), as will $26 billion of spending on extended unemployment benefits. If all these parts of the “fiscal cliff” come to fruition, the annual budget deficit will fall from over $1 trillion in 2012 to $500 billion dollars in calendar year 2013. However these cuts in federal spending and increases in tax revenue would undoubtedly result in a double-dip recession.
Like other progressive groups, DSA rejects the notion that some “unified” fiscal cliff must be addressed in the lame-duck session of Congress. It is in fact a “fiscal slope” that Congress should address without panic in 2013, while heeding the election results. A progressive resolution to the “fiscal slope” should include restoring all automatic domestic cuts, while making more strategic and deeper cuts in defense procurement spending. The revenue for expanding domestic social welfare spending can be raised by ending the Bush tax cuts for the top 2% and corporate tax-giveaways, while instituting a modest financial transaction tax on stock and bond transactions.
Specifically, DSA advocates that Congress pass legislation to:
1. Restore all the automatic cuts to the domestic discretionary budget. These cuts would deny WIC nutrition to 750,000 mothers and children, eliminate Title I funding for 1.8 million low-income school children and would deny 734,000 households home heating assistance. In addition, it would cut financing of all federal regulatory agencies by 10%.
2. Reauthorize federal funding of extended unemployment insurance. Otherwise, on January 1, 1.5 million unemployed workers and their dependents will lose their unemployment benefits.
3. Restore the improvements to the Earned Income Tax Credit and the Child Care Credit that have reduced the tax burden on the middle and working classes. Restore the purchasing power lost to working families via the end of 2% FICA payroll tax cuts. Instead of extending the FICA payroll tax cut (which threatens to decrease funding of the Social Security and Medicare trust funds), reintroduce the 2009 Recovery Act refundable tax credit of $500 for individuals and $1,000 for families earning under $110,000.
4. Abolish the Bush tax cuts on the top 2%, while increasing effective corporate taxation through the elimination of corporate tax loopholes and corporate “tax expenditures.” These two actions would bring in an additional $250 billion in annual revenue. In addition, instituting a “Robin Hood Tax” (0.25% on all financial transactions) could net another $300 billion in annual revenues. Raising the tax on capital gains and stock dividends to the same rate as earned income would raise another $24 billion annually.
5. Make major cuts in our bloated defense budget, while creating a public jobs program that trains the unemployed to rebuild infrastructure, creates an alternative energy grid and expands mass transit.
6. Extend and strengthen Social Security for future generations, funding enhancements by progressively lifting the cap on earned income subject to the FICA tax and extending it to income derived from capital.
7. Progressively extend and strengthen Medicare/Medicaid, until it covers U.S. residents of all ages, while installing effective cost controls.
DSA welcomes and will work with broad national coalitions that are forming to fight cuts in Social Security, Medicare and Medicaid; to preserve programs that benefit the working poor and most vulnerable; to promote greater investment in public education and healthcare and to raise revenues by taxing the rich and corporations. We will work with national organizations including the Coalition on Human Needs; DSA’s locals and YDS campus chapters will join local coalitions of community organizations, social service providers and trade unions fighting for these goals.