The People’s Budget Gets a Boomlet of Praise
Predictably, the budget framework that Barack Obama outlined quickly became used as the leftward pole in the debate. After all, Obama gave a partisan speech! He criticized Paul Ryan! So with the Obama plan on the left and the Ryan plan on the right, the range of debate had been narrowed artificially.
But there is an actual budget plan on the left; several, to be precise. But one has legislative language and got 77 votes in the House. That would be the People’s Budget from the Congressional Progressive Caucus. This plan brings the budget into balance by 2021, with primary balance by 2014, without any cuts to social programs and even a modest but sustained stimulus package to create US jobs. It does so through progressive taxation, an end to two unnecessary wars in Iraq and Afghanistan and further cuts to the defense budget.
More specifically, it ends most of the Bush tax cuts and adds millionaire’s brackets. It taxes capital gains and dividends as ordinary income. It adds additional brackets to the estate tax to progressively tax the largest estates. It limits itemized deductions for high earners. It eliminates corporate welfare and adds a financial speculation tax on derivatives and foreign currency swaps. It includes the financial crisis responsibility fee proposed by the Obama Administration in early 2010. It adds a public option and institutes negotiation of prescription drug prices in Medicare and Medicaid. It increases the payroll tax cap to collect 90% of earnings on the employee side and eliminates it on the employer side. It ends the wars, producing a savings of $1.8 trillion in the process. It makes deeper cuts in defense by reducing procurement and conventional forces. This provides all the money needed to institute a 10-year doc fix, patch the Alternative Minimum Tax so it doesn’t dip into the middle class, increase Social Security benefits, and invest $1.45 trillion in job creation through education, infrastructure and R&D.
If we’re going to have this talk about budgets, then, this is a pretty good place to start. It reflects the priorities of job creation and peace with a heavy dose of tax fairness. Whether or not official Washington calls it “responsible” or “courageous” is really besides the point, but at least some observers are, including no less than The Economist.
(Paul) Ryan’s plan adds (by its own claims) $6 trillion to the national debt over the next decade, but promises to balance the budget by sometime in the 2030s by cutting programmes for the poor and the elderly. The Progressive Caucus’s plan would (by its own claims) balance the budget by 2021 by cutting defence spending and raising taxes, mainly on rich people. Mr Ryan has been fulsomely praised for his courage. The Progressive Caucus has not.
I’m not really sure what “courage” is supposed to mean here, but this seems precisely backwards. For 30 years, certainly since Walter Mondale got creamed by Ronald Reagan, the most dangerous thing a politician can do has been to call for tax hikes. Politicians who call for higher taxes are punished, which is why they don’t do it. I’m curious to see what adjectives people would apply to the Progressive Congressional Caucus’s budget proposal. But it’s hard for me to imagine the media calling a proposal to raise taxes “courageous” and “honest”. And my sense is that the disparate treatment here is a structural bias rooted in class.
Absolutely. Official Washington generally sees something like The People’s Budget as an assault on them, something to mock and point at. Therefore it goes down the memory hole. Instead, Paul Ryan is “courageous” because his proposal makes poor people pay for the sins of the rich.
There’s a school of thought that this is the wrong conversation to be having right now, and I have said that repeatedly. The public wants jobs, and all they’re getting is deficit reduction. But you can talk yourself hoarse about that, or enter the debate by proposing a budget plan that both creates jobs and eliminates the deficit at the same time. It’s possible, and The People’s Budget shows the way.
…I missed this superlative idea in The People’s Budget:
Replace the tax exclusion for interest on state and local bonds with a subsidy for the issuer. The budget would replace the tax exclusion for interest income on state and local government bonds with a direct subsidy to borrowers (i.e., state and local governments), which would be a more cost-effective way of reducing their borrowing costs. Under this policy, state and local governments would make taxable interest payments to borrowers and receive a 15% subsidy from the federal government for the interest paid on those bonds. This would simplify the tax code, increase budgeting transparency, and more cost-effectively subsidize borrowing by state and local governments.
This is a great example of how fears of socialism lead to ineffective outcomes. We want state and local bonds to have a market. Under current law, we encourage that through the tax code by subsidizing investors. Instead we could just hand the money to the states and localities, reduce their borrowing costs and do little damage to the market itself (borrowers would still get their above-average interest payments). We don’t do this because it sounds like a handout. But we’re already handing out money, just to investors. We have socialism for the rich. The People’s Budget puts this back in balance.