Pete Peterson

By Dean Baker, appeared originally at TruthOut

Last spring, Wall Street investment banker Peter Peterson hosted a lavish, daylong conference devoted to the budget deficit. One of the highlights was an appearance by President Clinton. Clinton boasted of how he had wanted to cut Social Security back in the mid-90s but Congressional leaders from both parties wouldn’t let him.

The cut he had wanted would have reduced the annual cost of living adjustment by 1 percentage point annually. This would have left seniors in their 70s, 80s and 90s with Social Security benefits today that are about 15 percent lower than their current level. How great would that have been?

Peterson is back with Round II this week, another lavish affair devoted to the deficit. President Clinton will again be playing a starring role, although it is not clear whether he will still be boasting about his wish to cut Social Security benefits.

What is clear is that Peterson is using his vast fortune to push an agenda that has little to do with deficit reduction, and everything to do with cutting Social Security, Medicare, and other programs that are vital to ordinary working people.

This fact is apparent from the list of attendees. This is supposed to be a group seriously committed to deficit reduction, yet one of the highlights will be a talk by Rep. Paul Ryan, the Republican chairman of the Budget Committee.

Mr. Ryan is best known for a budget proposal that calls for $3 trillion in individual and corporate tax cuts over the next decade. These cuts are supposed to be offset by the elimination of tax deductions, except Ryan does not identify a single tax deduction that he wants to eliminate.

All he identified is $3 trillion in tax cuts, most of them going to the wealthy, that he wants to eliminate. In Peterson’s world, giving up $3 trillion in revenue is deficit reduction.

The remarkable part of this story is that there are people who are talking about the budget deficit in a serious way. They are proposing solutions that enjoy the support of the American people and they are right in front of Peterson’s nose, but he is doing his best to ignore them.

While Ryan will be touting his plan for adding another $3 trillion to the debt with more tax cuts for the wealthy, and increasing the cost of Medicare to the American people by $34 trillion, at least one of the groups at the conference will be presenting a budget plan that is much more in accordance with the views of the American people.

The Economic Policy Institute (EPI) will be presenting a plan at the conference that Peterson’s group has scored as achieving sustainable budget targets in ways that are broadly consistently with polling data. (Two other groups presenting at the conference, the Center for American Progress and the Roosevelt Institute Campus Network are likely to present plans sharing many of the same themes, but their proposals are not yet public.)

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Sen. Bob Corker discusses the “CAP Act,” a bipartisan bill that would put a binding cap on all federal spending. (AP Photo/Manuel Balce Ceneta)

By Heather McGhee originally published at The American Prospect

Congress returns from a two-week recess today. But for legislators who spent the time championing the House Republicans’ extreme agenda to slash federal spending, the break was more like detention. Town hall meetings across the country erupted into bedlam as members came face-to-face with the actual beneficiaries of public spending on health care, retirement, college, food supports, and more.

In Orlando, Rep. Daniel Webster was shouted down by furious constituents. “Florida has had this policy for the last 12 years,” said one town-hall attendee, referring to the state’s low taxes and meager public benefits. “We don’t have money to take care of the poor, and unemployment is at 11 percent!”

Everyone in Washington wants big spending cuts, particularly as a concession for raising the debt limit. But few people outside Washington want spending on them to be cut. So what is a conservative Congress member to do? Enter the new Capitol Hill bipartisan policy darling, the innocuous-sounding “global spending cap.” Last Tuesday, Sen. Joe Manchin, a Democrat from West Virginia, became the latest lawmaker to sign on to the most prominent spending-cap proposal, the Corker-McCaskill Commitment to American Prosperity Act.

The CAP Act, unlike the detailed House GOP budget, could play well in a town hall. It mentions no specific programs. A cap doesn’t even sound like a cut — it sounds like more of the same. But[h1] in reality, it’s just a massive budget cut by another name. The bill would simply place an automatic cap on the amount Congress can spend. It’s not as draconian a cap as the Hatch Balanced Budget Amendment, which all 47 Senate Republicans signed on to in March because it would send spending back to pre-Great Society levels and require a supermajority to raise any additional revenue. Against that economic inanity, the Corker-McCaskill cap might seem reasonable (as spending-only fixes for a primarily revenue problem go). Corker-McCaskill would limit total government spending — including on Medicare and Social Security — to a fixed percentage of gross domestic product. Last year, spending was at 23.8 percent of GDP; starting in 2013, the CAP Act would curb spending to 22.25 percent, lowering it until it reached a permanent limit of 20.6 percent in 2023.

If spending exceeds the cap, automatic cuts to the fastest-growing categories of spending would kick in (though Congress can override the rule with a two-thirds majority vote). Why 20.6 percent? Well, that was the historical average over the past 30 years. But beyond the question of why the last three decades, during which we’ve witnessed a historic decline of the middle- and working-class, should be our economic benchmark, there are some very real reasons to reject this new bipartisan solution.

First things first: It’s not a measure to reduce the deficit. Absurdly, it would limit public expenditures to an arbitrary number even if the federal coffers were flush with cash. It also ignores revenues, which are at a record low due to a combination of the recession, widespread corporate tax-dodging, and low rates with wide loopholes. For these reasons, one can’t seriously claim that it is a prudent fiscal measure.

Washington DC – Today, House Budget Committee Chairman Paul Ryan (R-WI) unveiled a proposed budget designed to slash public investments that have been the cornerstone of civil society in the US, while leaving unaddressed and unspoken any plan to get Americans back to work. In response, Tamara Draut, Vice President of Policy and Programs at Demos, a national policy center that promotes economic prosperity and recovery-oriented fiscal priorities, issued the following statement:

“If there was any question about the values that animate modern conservatives in government, Rep. Paul Ryan today provides the answer. Seniors and working families, don’t be fooled. In a predictable and dangerous formula Republican’s call ‘courageous,’ tax cuts for the wealthy and corporations will be protected at the expense of the American middle class.

“On the chopping block are programs that for decades have kept America’s elderly out of poverty and provided America’s poor their only access to healthcare. If conservatives get their way and these cuts are implemented, the very fabric of our society and how we care for our citizens would be rendered unrecognizable.

“We believe Americans are animated by a different set of values and, given the opportunity, refuse to look at the challenges facing our country through a prism of fear. In a project we launched late last year, we laid out a budget blueprint that truly believes in American potential by protecting and enhancing investments that contribute to our greatness.

“’A Budget Blueprint for Economic Recovery and Fiscal Responsibility,’ published through OurFiscalSecurity.org—a collaborative effort of The Century Foundation, Demos and the Economic Policy Institute—prioritizes something Republicans refuse to address: jobs, jobs, jobs. We believe that the absolute best way to reduce the deficit is to get Americans back to work.

“The Blueprint’s budget path boosts funding for near-term job creation, achieves lower deficits in the medium-term and balances the federal budget in less than a decade. It does so with the recognition that we all must support the public structures that are vital to the American dream—our infrastructure, transportation, technology and education that are the foundations of growth and prosperity.

“While Republicans and Rep. Ryan use fear of the future to reach long-time conservative goals, like the destruction of essential social programs, ‘The Blueprint’ provides a real Path to Prosperity that does more than cut the deficit; it creates a stronger middle class and a fundamentally more robust American economy.”

The Chairman of the House Committee on the Budget, Republican Paul Ryan, released a proposed budget for fiscal year 2012 that rehashes failed economic thinking and the standard wish-list of right-wing policies. This budget is not a serious attempt to govern, but a warming over of long-dead economic proposals.

The budget, among other things, includes a plan to privatize Medicare by forcing recipients to buy insurance on the open market, to gut Medicaid by shifting costs to states and reducing funding, to cut taxes on corporations and wealthy individuals, and to reduce the nation’s ability to make needed investments by capping overall levels of federal spending. The plan would not only put the fragile recovery at risk, but it would also undermine economic growth and job creation for years.

This budget is impressive in its ability to not only inflict maximum harm on the economy, but to concentrate that harm on those most in need.  This will not only cost the economy hundreds of thousands (and perhaps millions) of jobs over the next five years, it will also destroy the social safety net and undermine policies that support the middle class.

Conservative Democrat Mike Ross of Arkansas (AP Photo/Alex Brandon)

By Robbie Hiltonsmith

The Blue Dog Coalition — a group of self-identified moderate Democrats in Congress — has become the latest group trying to establish its bona fides as “serious” about reducing the deficit. Echoing Republican calls for austerity as we face the worse economic recession since the Great Depression, earlier this week the coalition released its own proposal to rein in “out-of-control” federal spending. But as with Republican blueprints that also call for drastic cuts to discretionary spending, the Blue Dog plan offers little hope of ensuring real economic stability.

The coalition is proposing the “largest deficit cuts in history” by drawing down the yearly budget shortfall to 2.3 percent of GDP by 2014; two-thirds of this savings would come from spending cuts, and the rest from tax reform. If we continue on our current track, the CBO estimates that the 2014 deficit will be 4.4 percent of GDP. But the agency also projects real GDP growth of 3.4 percent that same year. Assuming that private corporations continue their post-recession tendency to stockpile profits, the Blue Dogs’ plan could reduce growth to an anemic 1 percent or lower, bringing the recovery to a grinding halt. Reducing the deficit so quickly and drastically might even turn the recession into a full-fledged depression: As L. Randall Wray has noted, each of the country’s previous depressions has been preceded by a rapid reduction in the deficit.

First of all, by proposing deep cuts to government spending, the Blue Dogs are relying on the private sector to lift us out of the recession, a foolhardy bet given corporations’ behavior since the recession began. Corporate profits skyrocketed an astounding 38 percent last year, but large firms have nonetheless shown a dogged reluctance to hire; last month, such firms accounted for only 8.5 percent of the job growth despite comprising nearly half of the private-sector workforce, a big reason why unemployment only recently fell below 10 percent. You could say the recession might be over in corporate America, but the vulnerable middle class continues to struggle. And reducing the deficit to the level the Blue Dogs suggest would likely require slashing programs, such as Social Security and Medicare, which during the recession have literally been the only things keeping millions of Americans afloat.

Fmr. Sen. Judd Gregg (R-NH), Sen. Tom Coburn (R-OK), Sen. Mike Crapo (R- ID)By Robbie Hiltonsmith

The Congressional Budget Office released on Friday its preliminary analysis of President Barack Obama’s 2012 budget proposal, and projected cumulative deficits of $9.5 trillion over the next decade. That was $2.7 trillion higher than the CBO’s pre-budget prediction and $2.3 trillion higher than the administration’s own estimate.

These budget projections underscore a simple accounting truth: the federal government needs to raise revenues through increased taxes or make politically impossible cuts to programs like Social Security or to Defense spending. But the truly shocking development of recent days, and one that’s been nearly completely ignored by the news media, is that several prominent Republicans are among the few willing to acknowledge that taxes must be raised. It’s the first break with the GOP’s guiding orthodoxy since the first President George H. W. Bush agreed to raise taxes 20 years ago.

Though other Republicans have hinted they’re willing to compromise in the current budget debate, the three on record are Senators Tom Coburn and Mike Crapo, and former Senator Judd Gregg. These were the three Republicans commissioners who voted in December for the Fiscal Commission’s final proposal, which proposed eliminating many individual tax breaks, treating capital gains as ordinary income, and raising the taxable income cap for Social Security. Though the Commission’s plan also lowered some marginal tax rates, many people would still have seen a net tax increase.

(AP Photo/Mel Evans)

By Robert Hiltonsmith

But other states have an even more radical proposal: Get rid of pensions, which guarantee benefits, and replace them with 401(k)-type savings-and-investment plans. Earlier this week, Kansas lawmakers held a hearing on a bill to switch state employees hired after 2012 to a 401(k) system — a move at least six states have already made and that Florida, Oklahoma, North Dakota, and Virginia are also considering. Kansas Republicans praised the bill, arguing that the state’s pension system, currently facing a $7.7 billion shortfall, is unaffordable and that public workers don’t deserve benefits unavailable to most private-sector employees.

The shortfall in Kansas’ pension, like those in most states, was largely the result of the worst decade in the history of the stock market. As recently as the year 2000, the state’s pension was 88 percent funded, a level that the Pew Center on the States, which tracks state pensions, considered adequate. The Center for Economic and Policy Research calculates that 85 percent of the pension shortfalls in states in the past decade were caused by this historically low economic performance. The rest of the hole in Kansas’ fund opened up after state legislators decided not to increase contributions when benefits were raised in the early 1990s. Clearly, state pensions, Kansas’ among them, are not unaffordable under normal economic conditions.

Robert Kuttner reiterated many of the same points he made in his article at the Huffington Post last week on this weekend’s edition of Your Money on CNN. Businesses are not going to start hiring American workers until our politicians start to care more about protecting American jobs than their corporate campaign donors.

Commission on Fiscal Responsibility and Reform co-chairmen Erskine Bowles, left, and Alan Simpson (AP Photo/Harry Hamburg)

By Robert Hiltonsmith

But while Washington and much of the media are still focused on the squabble over funding the federal government for the rest of the year — and hyping up the possibility of a government shutdown — in the end, this fight doesn’t amount to a momentous shift in priorities. Whether we end up cutting $10 billion from the federal budget, as Democrats suggest, or $61 billion, as Republicans want, the slash to discretionary spending will hardly be felt by most Americans (though the most vulnerable — students, children, and the poor — will feel it the most).

No, the real budget battle will be the one waged immediately after the current skirmish. House Speaker John Boehner has set his sights on Social Security and Medicare and plans to cut funding to those programs when he offers his proposal for next year’s budget this spring. These are cuts that will hurt millions of Americans and torpedo the country’s growth and prosperity.

PDF handouts from the briefing are found here.

Read the press coverage:

Dan Froomkin of Huffington Post: Obama’s Social Security Talk Is Turning Voters Off, Pollsters Say

The Hill: President, Dem lawmakers diverge on Social Security

The Wall Street Journal’s Washington Wire by John McKinnon: Democratic Pollsters: Social Security Overhaul Could Help — and Hurt

Humberto Sanchez in National Journal Daily (requires account or trial): Liberals Warn About Tinkering With Social Security

John Amato at Crooks and Liars: Polls show President Obama’s talk on Social Security is turning voters off to the Democratic Party’s handling of the program

Digby: Solidifying Our Losses

Joan McCarter at DailyKos: Progressive pollsters warn against Social Security cuts

Greg Sargent at The Washington Post: Dem pollsters plead with Obama: Don’t touch Social Security!