Finally, a Pro-Growth Budget Proposal
The most maddening thing about politics today is how often rational analysis gets pushed aside by ideology. Exhibit A right now is the economy. Logic and history dictates that only government has the capacity to offset big shortfalls in demand during deep economic slumps, and any number of leading economists have been pressing Washington to act on that obvious fact. Instead, though, Congress has been doing the opposite by cutting spending -- most dramatically with sequestration.
Mainstream Democrats like President Obama haven't helped matters by legitimizing deficit reduction as a near-term goal. And too often, Democratic budgeteers try to have their cake and eat it too -- calling for more stimulus even as they propose spending cuts to reduce the deficit. Also, most Democrats have long ago backed away from stimulus proposals on a scale that could make a serious difference. A case in point is the recent Senate budget put forth by Patty Murray, which proposes an inadequate $100 billion jobs and infrastructure program even as it calls for a long-term downsizing of government invesments, with nondefense domestic discretionary spending falling under Murray's plan from 3.7 percent of GDP this year to 2.5 percent in 2023.
Fortunately there are a few real Democrats left in Washington, including members of the Congressional Progressive Caucus, which just released its own ten-year budget. As far I can see, this is the only major budget floating around that embraces the view of many economists that -- five years after the financial crisis -- government still needs to step up spending to address a persistent shortfall in demand, even if that means running bigger deficits for a while.
The CPC's budget proposes $2.5 trillion in new job creation programs over the next decade. And it targets this serious money in all the right ways. By far the largest chunk of funds, just over $1 trillion, would go for infrastructure, with that money largely frontloaded over the next few years. This makes good sense on many levels, since infrastructure delivers a big bang for every stimulus dollar spent in the the short-term but also lays the foundation for long-term prosperity by facilitating the movement of goods, people, and information
The next biggest chunk of change goes to immediate public works job programs starting this year and going for the next few years. Again, right on: We have an immediate employment crisis, especially among young people, that needs to be addressed through direct emergency job creation measures. The CPC plan would put people to work doing things like improving our national parks, cleaning up communities, and helping seniors and students.
The CPC would also devote substantial funds to helping states and localities stop firing, and start rehiring, public sector workers. We've written here repeatedly that it's crazy for government to be laying people off when government is supposed to be fixing the unemployment problem. Tens of thousands of public workers have been laid off in just the past year. This has to stop, and the CPC budget recognizes that.
Putting more people to work is not rocket science, but it does take political courage to buck today's bipartisan obsession with deficit reduction. So it's nice to have the CPC around.
What's more, though, the CPC's plan actually would reduce the budget deficit over the next decade through raising substantial new revenue. Unlike Murray's plan, which calls for just a tad more revenue than Paul Ryan's budget while reducing domestic spending, the CPC proposes the kind of new taxes we need to both avoid such cuts and reduce the deficit. The CPC proposal "raises $5.7 trillion in additional revenue relative to current law. Revenue levels in the budget average 21.5 percent of GDP over FY2014–2023."
For comparison purposes, that's about $4.7 trillion more in new revenue than what Murray proposes with a budget that would average revenues of 19.3 percent of GDP over the next decade. Paul Ryan's budget proposes revenues of 18.3 percent of GDP.
Now, before saying another word, let's just stop for a moment and reflect that the most right-wing and left-wing members of Congress are divided by a mere 3.2 percentage points of GDP when it comes to the all-important matter of revenue. In truth, the entire bunch of these folks would be on the right in Sweden.
In 2000, taxes hit an all-time high point of 20 percent as a percentage of GDP. The CPC proposal would put the U.S. at 1.5 percent higher than that over the next decade. This hardly sounds radical to me when you consider that over 20 million Americans who want full-time work can't find it and the United States faces both rising global competition and a fast aging population. We need big spending to get past the present emergency and also make sure that we aren't left behind economically and can create enough prosperity to pay for the retirement of the Boomers.
Those are just the facts of life right now: the U.S. needs to spend more and tax more. The CPC is doing us all a favor by laying those facts on the table without flinching.
