Dear Penners:
I delivered this Commentary over WAMC radio (the NPR station in Albany, NY)
Friday the 18th.
If anyone thinks it will be valuable, you are welcome to share it --- Just
please note that it was delivered over that station. That's the only
restriction they placed on my circulating it. THanks, Mike
THE FOLLOWING COMMETARY WAS DELIVERED OVER WAMC-FM RADIO (Albany NY) ON
FRIDAY FEBRUARY 18 BY MICHAEL MEEROPOL, VISITING PROFSSOR OF ECONOMICS AT
JOHN JAY COLLEGE OF THE CITY UNIVERSITY OF NEW YORK.
WHY THE MEAN SEASON OF BUDGET CUTTING IS CONTRARY TO OUR DEEPEST NATIONAL
VALUES – AS EXEMPLIFIED IN THE PREAMBLE TO OUR CONSTITUTION
I recently attended a speech delivered by one of the giants of
the American Civil Rights Movement, Dr. Bob Moses.
[For those who do not know, Bob Moses was a graduate of Harvard University
who went to Mississippi in the early 1960s to organize sharecroppers and
other African Americans to demand the right to vote. He risked his life to
organize. He was for a time the head of the Student Non-Violent
Coordinating Committee (SNCC). He had such a commanding presence that he
recoiled from what he feared would be a new “cult of personality” within the
“Movement.” He briefly changed his name to Bob Parris (his middle name) and
in fact left the country to teach in Tanzania for many years. After
returning to the United States he took a doctorate in Philosophy at Harvard
and then set about creating THE ALGEBRA PROJECT – an organization dedicated
to teaching algebra (and general numeracy) to under-served youth. For
information, write to his assistant Benjamin Moynihan at [email protected].]
He asked the audience to repeat with him, the PREAMBLE to the
Constitution. The words are relevant to the content of this commentary:
We the People of the United States, in Order to form a more perfect Union,
establish Justice, insure domestic
Tranquility<http://www.usconstitution.net/glossary.html#DOMTRAN>,
provide for the common defence<http://www.usconstitution.net/constmiss.html>,
promote the general
Welfare<http://www.usconstitution.net/glossary.html#WELFARE>,
and secure the Blessings of Liberty to ourselves and our
Posterity<http://www.usconstitution.net/glossary.html#POSTERITY>,
do ordain <http://www.usconstitution.net/glossary.html#ORDAIN> and establish
this Constitution for the United States of America.
When Presidents, Governors and legislators propose budgets, they are
actually making statements about their vision of the priorities of
government. During my last commentary, I spent a significant amount of
time dissecting the nature of the arguments for shrinking government
spending as a way to increase private sector spending. I hope I showed that
the argument is ludicrous.
[A quick summary: Cutting government spending reduces incomes of some
people. They will respond by reducing their spending. Private sector
investment will not revive without a belief that consumer demand is
INCREASING. Thus, cutting government spending in the middle of a fragile
recovery will slow the recovery even further and might even lead to a second
“dip” in the recession. This is exactly what happened in 1937 when the
Roosevelt Administration thought the depression had been defeated and cut
the government budget. This caused an increase in unemployment and the
depression did not end until 1940 when the European war led to a surge in US
exports. The full return of very low unemployment occurred after the US
entered World War II.]
Yet even in President Obama’s proposed budget are a five year freeze in
domestic discretionary spending – this in a time that cries out for
increased spending on education, aid to the unemployed, green
infrastructure. A strikingly bad example is a proposed 50% reduction in
fuel assistance to needy citizens. And as a recent editorial in the *New
York Times* pointed out, the Republicans in Congress are much worse. They
demand much deeper cuts -- to everything but the military budget – while
refusing to support any tax increases – even on the top 2% richest
Americans.
[This editorial appeared on Monday, February 14.]
Meanwhile, much worse in the way of austerity is promised at the State and
Local level. This includes cutting wages and pensions of public employees.
[It is disgusting that state governments are being encouraged to explore
declaring bankruptcy so they can renege on pension obligations to retirees
yet they have never once suggested that they might renege on interest
payments due to bondholders. The very same state governments which are
attempting to cut spending to close deficits are actually taking steps to
increase deficits by making tax concessions to businesses and refusing –
with the laudable exception of Illinois – to raise taxes on high income
people.]
Proposed spending cuts at the federal and state level, with the exception of
cuts in Defense, directly contradict many of the goals as set out in
Preamble.
We cannot promote the GENERAL welfare by continuing to focus our budget
decision-making on protecting the high incomes of millionaires and
billionaires even though their incomes have risen substantially since the
end of the recession while everyone else continues to struggle. We cannot
secure the blessings of liberty – or even of life itself -- to our
POSTERITY if we resist the effort to promote new green technologies –
particularly high-speed rail – and refuse to begin to wean ourselves off of
fossil fuels.
[The intense opposition to Cap and Trade legislation – even from previous
supporters like Senator John McCain – is a testament to the
short-sightedness and narrow self-interest of politicians. They would
rather lose the planet than lose millions in campaign contributions from the
coal, oil and gas industries.]
I suppose building prisons, threatening to call out the National Guard when
state workers demonstrate against Pension Cuts (as the Governor of Wisconsin
did recently) could be considered ENSURING DOMESTIC TRANQUILITY --- but I
think you can only repress an angry populace so long.
[I wrote and recorded this before the explosion of demonstrations in
Wisconsin. It should be clear by now that the Governor of Wisconsin was not
the least bit interested in closing a budget gap – the unions have already
agreed to the fiscal “give backs” in terms of increasing pension and other
contributions (in effect a wage cut), all they want is to retain the right
to collectively bargain. The Governor wants to destroy public sector
unions – even though that destruction will not save the State of Wisconsin a
single dollar. That destruction, will, however, make it much harder in the
future for Democrats to win elections. And by the way, police and fire
unions are exempt from the new rules in the proposed Wisconsin Budget.
Interestingly,
of course, these unions supported the Governor in his election
campaign. Obviously
it never was about money.]
All over the country, states threaten to break legally binding contracts
with their public retirees because “we don’t have the money.” But that is
because those governments refrained from making contributions to their
pension funds in the past, relying instead on rising stock values. When the
bubble burst and revenues fell, instead of going where the money is --- for
example, New York State could tax hedge fund managers --- they seek to take
it out of the hides of state workers.
To make matters worse, the demagogues among them, like New Jersey Governor
Christie, are attempting to convince workers in the Private Sector that
their problems as tax payers and citizens are the result of “overly
generous” pensions for public sector employees – cynically driving a wedge
between these workers.
[This is really important. The fact that many workers in the private sector
and ordinary citizens as well have rallied to the support of the Wisconsin
public sector workers is a heartening development. It is essential that all
people who work for a living recognize that the destruction of unions will
make it much harder for them to achieve and maintain a decent middle-class
lifestyle. The American Labor movement of the 1930s and 40s created the
Great American Middle class of the 1950s and 60s. As the US becomes more
like a Latin American kleptocracy, with a large incredibly rich upper class,
a growing poverty-stricken population and an increasingly insecure and
challenged middle class, the death of the labor movement may well signal the
decline of that Great American Middle Class.]
Increases in taxes on high income people will not hurt the economy. Federal,
State and Local Revenue as a percentage of Gross Domestic Product reached a
height of 37% at the end of the 1990s (and had averaged 35 percent from
1995-1999). Most people who remember the 1990s will know that those tax
rates did not damage incentives – that private investment was quite robust.
After falling to 31% of GDP in 2002 as the result of the recession of
2001-2002, revenue again climbed to 37% of GDP in 2007 only to fall down to
26% in 2009. (As a result of the much deeper recession.) There is no
question, that as the economy recovers, the private sector could afford to
contribute 35% of GDP to help the Federal Government meet its obligations as
summarized so succinctly in the PREAMBLE.
With revenue that high, there would not be the need for drastic budget cuts.
The question boils down to this – when will WE THE PEOPLE OF THE UNITED
STATES wake up and demand of our leaders that they get priorities right.
Making the super-rich even richer while everyone else suffers is a recipe
for disaster not prosperity.
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