The “Back to Work” budget is about exactly what the name implies: Putting Americans back to work. The first sentence lays it out clearly: “We’re in a jobs crisis that isn’t going away.” So that’s the budget’s top priority: fixing the jobs crisis.
It begins with a stimulus program that makes the American Recovery and Reinvestment Act look tepid: $2.1 trillion in stimulus and investment from 2013-2015, including a $425 billion infrastructure program, a $340 billion middle-class tax cut, a $450 billion public-works initiative, and $179 billion in state and local aid.
That’s…a lot of stimulus. More than Congress passed in 2009, in fact. The liberal Economic Policy Institute estimates that would be sufficient to “boost gross domestic product (GDP) by 5.7 percent and employment by 6.9 million jobs at its peak level of effectiveness (within one year of implementation).
That estimate is based, in part, off multipliers from Moody’s economist Mark Zandi. But over e-mail, Zandi told me he’s not comfortable with these results. “The April 2011 multipliers used in this analysis will overstate the economic benefit of a stimulus proposal, particularly of this size,” he wrote. “The size of the multipliers depend on the size of the output gap. The smaller the gap, the smaller the multipliers. The output gap has narrowed over the past 2 years.”
Zandi also questioned whether so much stimulus is still needed. “I’m uncomfortable with such a massive stimulus plan at this time. The private economy is kicking into a higher gear, and it’s time to let it do its thing.”
Whether the system could absorb that much stimulus is also a difficult question. In the December 2008 memo Larry Summers sent President-elect Barack Obama on the stimulus, he wrote, “it is important to recognize that we can only generate about $225 billion of actual spending on priority investments over next two years, and this is after making what some might argue are optimistic assumptions about the scale of investments in areas like Health IT that are feasible over this period.”
That was, again, back in 2008. Since then, many of the most obvious projects have been completed. So the House Progressives are proposing a much greater amount of infrastructure investment at a moment when there are likely fewer plausible projects. Many jobs will be created. But it’s also possible that many dollars will be wasted on poor projects.
Investment on this scale will add trillions to the deficit. But the House Progressives have an answer for that: Higher taxes. About $4.2 trillion in higher taxes over the next decade, to be exact. The revenues come from raising marginal tax rates on high-income individuals and corporations, but also from closing a raft of deductions as well as adding a financial transactions tax and a carbon tax. They also set up a slew of super-high tax rates for the very rich, including a top rate of 49 percent on incomes over $1 billion.
But to the House Progressives, these taxes aren’t just about reducing the deficit — though they do set debt-to-GDP on a declining path. They’re also about reducing inequality and cutting carbon emissions and slowing down the financial sector. They’re not just raising revenues, but trying to solve other problems. But they might create other problems, too. Adding this many taxes to the economy all at once is likely to slow economic growth.
As for the spending side, there’s more than $900 billion in defense cuts, as well as a public option that can bargain down prices alongside Medicare. But this budget isn’t about cutting spending. Indeed, the House Progressives add far more spending than they cut.
Is the House Progressives’ budget likely? Of course not. One involved staffer described it to me as a “wish list.” But that makes it the perfect analogue to Ryan’s budget.
Consider what Ryan’s budget asks President Obama to sign into law: the repeal of Obamacare, his signature law. A voucherization of Medicare. A plan that would cut deep into both food stamps and Medicaid and then convert those programs, perhaps the two most important components of the safety net, into block grants managed by the states. A revenue-neutral tax reform that would leave only two brackets — one at 10 percent, the other at 25 percent.
It’s a fantasy budget, completely untethered from real-world concerns about what could pass, or what will be acceptable to the party that got more votes in the last election and currently controls both the White House and the Senate. When Chris Wallace, the host of “Fox News Sunday,” pointed this out, Ryan replied, “Well, we believe it should [happen]. That’s the point. This is what budgeting is all about, Chris. It’s about making tough choices to fix our country’s problems.” It’s a vision, in other words, not a plan.
Ryan’s budget is a conservative wish list for solving the problems that animate today’s conservatives: The growth of the federal government’s domestic programs, the rising debt, the increasingly complex tax code, and the sluggish economy. The House Progressive Caucus’s “Back to Work” budget is the precise mirror image. It’s a liberal wish list for solving the problems that animate today’s liberals: High unemployment, entrenched economic inequality, and global warming. And just as Ryan’s budget not only eschews tax revenues, but also lowers tax rates, the House Progressives don’t just eschew net spending cuts, they actually increase spending.
That makes both budgets different than the efforts of Senate Democrats and the White House, who have proposed plans — though the White House’s full budget hasn’t yet been released — that attempt to build in a substantial amount of compromise. Both have proposed a mix of tax increases they like and spending cuts they don’t like. Both plans reflect the basic pitfalls of compromise in a polarized age: They sand off the most important insights of both parties, and make incremental progress on problems that need more radical solutions.
Comparatively, both Ryan and the House Progressives are offering much sharper, more bracing, and more ambitious efforts. They have identified what they consider the country’s core problems and laid out an uncompromising vision for how they would like to see them fixed. And that’s fine for the House Progressives. The House Progressives don’t need to govern. The House Republicans do.
While the House Progressives’ fantasyland, no-compromise effort is the illustrative position of a group of minority progressives, Ryan’s fantasyland, no-compromise effort is the official position of most every Republican. For there to be a deal, the House Progressives don’t need to learn how to compromise, though their voting record over the last couple of years shows they’re willing to do it anyway. But the House Republicans do need to learn to compromise, and there’s not much evidence they’re there yet.
Original article on The Washington Post