Last week, Reps. Michael Honda, Keith Ellison, Raul Grijalva, Jan Schakowsky, John Conyers, Barbara Lee and Lynn Woolsey stalwarts of the Congressional Progressive Caucus (CPC) begged for mercy from “the Gang of Eight” in a letter.
Here’s what they said and my commentary on their “loser liberalism.”
”Thank you for your work – past and present – towards solving one of the greatest policy challenges facing us today: the unsustainable path of our national debt. We appreciate the bipartisan and collaborative spirit with which you’ve approached your negotiations. . . .”
Thanks vanguard progressives for embracing the major premise of the austerity ideology, namely that the national debt is on an unsustainable path. I’m here to tell you that this idea is false and also terribly harmful to progressive aspirations to end economic stagnation and get everyone, who wants to be, employed at a living wage. You can’t win an argument if you start by agreeing with your opponent’s false premise.
The US has a non-convertible fiat currency which it allows to freely float on international markets. It also has no debts in any currency not its own. It also has the constitutional authority to issue currency and coins in unlimited amounts to pay any debt obligations when they fall due. It also has a central bank, the Fed, that can determine the interest rates paid on new debt issuance unilaterally and in spite of any desire on the part of private markets to raise those rates. So, it should be obvious to you and everyone else that it doesn’t matter how high our national debt, or our debt-to-GDP ratio is, the US always has the capacity to deficit spend what it needs to in order to buy any goods and services for sale in USD, including the services of all the currently unemployed or under-employed who would like full-time jobs at a living wage.
So, why are they agreeing with the austerity mongers? Why are they validating what the deficit hawks have to say? Why are they engaging in “loser liberalism?” How many times do they have to be told that they’ll never persuade anyone that they’re in the right when they reinforce the framing of people who want to impoverish the poor and the middle class?
The right way to do this is to send a letter to the Gang of Eight denying that there is any debt/deficit crisis at all and pointing out that the US has many problems, the most important of which is high unemployment; but that the unsustainability of the debt path is not among them. And you should demand that they quit wasting everyone’s time and report back to the Congress that there is no debt problem; but that there are many other problems that Congress needs to solve.
”. . . .Given reports that a “down payment” is being considered to allow time to negotiate a broader budget deal, we write today to urge you to set a more balanced path and use only revenue for such a down payment in light of the billions in spending cuts agreed to so far.”
The down payment, of course, isn’t necessary because there should be no effort at deficit reduction, but rather a larger deficit than we have now to compensate for the aggregate demand leakage to domestic savings and foreign imports. You need here to point out that the full employment deficit should be more like $1.6 Trillion annually spent on the right things, rather than $1.2 Trillion incurred as a result of doing nothing to get to full employment. There are good and bad deficits. And right now the US is running bad deficits whose fiscal multipliers are relatively small. We need, instead, larger deficits spent on programs that will get people employed.
As far as using only revenue to make that down payment is concerned, it isn’t honest to deny that raising revenue from taxes, absent compensating deficit spending, won’t cost jobs. It will. If the taxes involve ending the Bush tax cuts for the rich, then the impact on the economy will be only $.30 per dollar taxed, while if it’s on the middle class and the poor it will be more like $1.25 subtracted from GDP for every dollar taxed. So clearly, it’s preferable to tax the rich, if one has to choose.
But we don’t have to choose. We don’t need to raise taxes to get money to deficit spend. The government can just create the money in the act of deficit spending. That is what it should do if one is interested in growing GDP and creating jobs.
It does make sense to have higher taxes on the wealthy, if one wants to level the paying field of economic inequality. And I am all for raising taxes on the wealthy for that purpose, since extremes of wealth are destroying our democracy. However, having said that, the issue here isn’t one of deficit/debt sustainability. And we should not pretend that it is.
There are two issues. One is getting to full-time employment for everyone, and the other is getting to greater economic equality so that the very rich can’t afford to influence politics and buy elections so easily that what most of us want becomes superfluous. Let us address both issues, but let us not conflate them by trying to raise revenue on the rich, while costing jobs for those who need them, because we legislate no compensating deficit spending for those tax increases.
”Over the past few years, the only lasting and substantial contribution we’ve made to deficit reduction has come from spending cuts. While Democrats have conceded nearly $800 billion in cuts as outlined in the spending caps of the Budget Control Act, this achievement has not been matched by any real commitment on revenue. Not a single cent of our recent efforts towards paying down the debt has come from the revenue side of the ledger. Additionally, because of the lack of specificity in the Budget Control Act, the spending reductions could fall largely to the non-defense discretionary categories. From infrastructure and education to research and small businesses, these investments are critical in keeping our nation economically competitive in the 21st century. Continuing down a course of misplaced cuts is destructive, unsustainable, and an impossible route to the long-term deficit reduction we all seek.”
Right! So since we did the wrong thing by making spending cuts earlier, now we should do the wrong thing again by raising taxes on people without compensating increases in deficit spending? Have the CPC stalwarts ever heard the expression: “two wrongs don’t make a right”?
They should never have agreed to the previous spending cuts and to the ridiculous idea of long-term deficit reduction come what may; and they should not now be supporting tax increases without insisting on compensating jobs programs. They should be calling for State Revenue Sharing of $1,000 per person, a Federal Job Guarantee, and a payroll tax holiday until full employment is reached. They should also be making this pledge for progressive candidates for office.
”Therefore, we urge you to send a signal that you are truly serious about brokering a balanced deal by breaking through the revenue stalemate. We believe any “down payment” should set the tone for the hard discussions to come by sidelining intractable pledges that are at odds with basic arithmetic. We believe you can send a strong message to the markets, to the credit rating agencies, and – most importantly – to the American people by adopting a down payment entirely of revenue. . . .”
They shouldn’t be doing any deals. Deals on deficit reduction are losers for liberals and progressives. We don’t need a deal on the revenue stalemate. What we need is no more deals that sacrifice the interests of poor people and the middle class. The CPC members are in Congress to represent them, not to beg for mercy from knuckle-dragging neanderthals who want to destroy the safety net.
As for the ratings agencies and the markets, don’t worry about them. They have nothing to say about interest rates. Order the Fed to keep those interest rates near zero. Get the ratings agencies investigated, indicted and prosecuted for continuing fraud and complicity in causing the crash of 2008, and also for blatantly and fraudulently downgrading the ratings of both the US and Japan when neither nation can ever be forced to go bankrupt. That’s what they should be writing letters to the Gang of Eight and doing press releases about, not begging “the Gang” for mercy in relation to further spending cuts.
The CPC letter then goes on to further implore the gang of eight to recognize previous spending cuts falling disproportionately on part of the polulation to take “. . . . into account the policies and priorities that have shouldered a disproportionate burden in the past.”
To that all I can say is fat chance! You don’t get anywhere by begging tea party folks for fairness and justice, or mercy. The only way you’ll get anywhere is to tell them that the whole CPC will vote against any further spending cuts whatsoever including and especially proposed safety net cuts.
”We look forward to working with you to pass a balanced, economically responsible deficit reduction plan.”
That’s been the problem from the beginning. They shouldn’t be working with the austerians at all on deficit reduction. The very idea of a long-term deficit reduction plan is stupid because government deficits are private sector savings to the penny, and as long we want to have both more imports than we export and private sector savings as well, we must run deficits or, alternatively, increase private sector debts, and why would anyone in the private economy want to see their debts increase.
Of course, there are times when we might want to decrease private sector savings to dampen demand-pull inflation caused by too much private sector demand. But we haven’t had a situation like that since the US was exporting much more than it imported more than 40 years ago; and it is unlikely that we will see that kind of situation for many years to come.
So, there is no long-term deficit reduction plan over the next 10 years that could possibly be “responsible.” Any such plan would tend to depress the economy or decrease private sector savings as long as we’re still importing 3-4% of GDP more than we export, and as long as private sector households retain their desire to repair the ~40% of the losses in their balance sheets that occurred during and after the crash of 2008.
And that’s why CPC members need to “just say no” to any proposals about long-term deficit reductions, whether those proposals come from Republicans, or whether they come from the President of the United States, himself.
Whoever suggests such a plan is being “irresponsible” and is also being anything but “progressive.” CPC members owe it to the people who elected them to refuse to cooperate, and to commit to that refusal right now, before the election!
(Cross-posted from New Economic Perspectives.)