The difficult negotiations that occurred prior to the fiscal cliff issues being resolved make it absolutely clear that tax and budget issues will dominate headlines for the next several months. In fact, some economists say the fiscal cliff was misnamed because we really weren’t facing a fall from a fiscal cliff. In that context, Public Citizen has taken some strong positions relating to the fiscal issues. I find myself in agreement with much of what Public Citizen has to say. For a start, let’s look at four basic premises. Public Citizen says that:
• The unseemly political process is most discouraging and will likely get worse before it gets better;
• The focus on the budget deficit is a distraction from the much more serious problems facing our country;
• High short-term deficits are actually helpful and not harmful; and
• Important and obvious sources of savings and new revenues are not receiving the attention they deserve.
You may disagree with Public Citizen on some or all of what it believes, but let’s take things a little further and consider how Public Citizen arrives at its conclusions. First, I believe we can all agree on its first premise. The political division in our Nation’s Capitol is quite obvious and unfortunately very real. In fact, it’s the worst I have ever seen and I don’t see that changing anytime soon. But then Public Citizen says the United States does not have an acute budget deficit problem. It is on that premise where many, and perhaps most, of our readers may disagree.
Public Citizen says that at a time of very high unemployment, the nation should be running large deficits. It believes those deficits are keeping the economy running and that without them, U.S. unemployment would be even higher. Public Citizen also says that the economic crisis is the direct cause of the temporarily high budget deficits of recent years. I do agree with that assessment. When you consider that two wars were fought on credit, combined with the Bush-era tax cuts, our available revenues simply couldn’t keep pace with government spending.
It’s rather elementary that when economic activity is depressed, tax receipts go down. If tax revenues were at pre-Great Recession levels, the deficit would be low. When steps are taken to kick-start the economy, people are put back to work, and revenues then rise. That results in the temporarily high deficits declining and eventually disappearing.
That’s not to say there aren’t major examples of wasteful spending in government because there are. There are also many significant opportunities for increased revenues in government. But Public Citizen believes that any discussion of potential savings or revenue increases must start by recognizing that there really wasn’t an acute crisis that was wrongly labeled the “Fiscal Cliff.” Moreover, it says that currently high deficits are helpful, not harmful, to our “fiscal health.” Stated above, there will be many strong disagreements with that view. Personally, I am convinced that we need both new revenues and cuts in wasteful spending. The reduction in spending must be aimed at real waste and carried out in a reasonable and selective manner. An across-the-board approach, affecting all government programs, simply won’t work.
B. A BRIEF LOOK AT THE MEDICARE PROGRAM
The Medicare program is critically important and it must be protected from political attacks. There are certainly problems in the program. Public Citizen believes we need to fix Medicare by strengthening it, not weakening it. I totally agree with that view. Any problems in the Medicare program must be addressed and corrected. The following are Public Citizen’s views:
• Unlike Social Security, Medicare does face a medium-term fiscal problem, a direct consequence of spiraling health care costs. This is where changes must start.
• Steps need to be taken to better align Medicare costs and revenues. The way forward is to strengthen Medicare – by cutting out profiteering by drug companies, insurance companies and others. Negotiating prices with drug companies could, conservatively, save $150 billion over ten years. More aggressive measures to deal with obscenely high drug prices could save much more. The problem there is with the manufacturers and not the retail outlets.
• It’s true that raising the Medicare eligibility age or imposing other reductions in benefits would reduce Medicare costs. But it’s important to understand that – in contrast to measures to reduce drug and insurance company profiteering – this won’t do anything to cut health care costs. Instead, it will simply transfer costs from the government to individuals.
• Medicare must be strengthened by reducing private profiteering. Proposals to slash benefits for the elderly and leave older Americans at the mercy of the for-profit insurance giants must not happen.
C. BUDGET SAVINGS NEEDED IN GOVERNMENT
While it’s obvious that we need adequate revenues to operate our federal government, there can be no real dispute that huge budget savings in Washington are available and are needed. Aside from major health care savings that could be achieved, there are a number of things the federal government can do to save hundreds of billions of dollars over the next decade. The following are a few suggestions from Public Citizen:
• At the top of the list is reining in out-of-control military spending. The folks at Project On Government Oversight and Taxpayers for Common Sense calculate, just eliminating unneeded weapons, undoing wasteful privatization arrangements, and slowing investments in nuclear weapons could save in the neighborhood of $700 billion over ten years. This is without even challenging the fundamental over-militarization of our foreign policy or calling for making tough choices between varying budget priorities. It’s just by eliminating wasteful or needless programs and weapons. We must have a strong military and that can still be achieved. In fact, our military will be stronger once the wasteful spending cuts are made.
• There are huge savings, though not at the same scale, from eliminating subsidies for dirty fuel industries. This has been a long-running and ongoing Public Citizen priority. As Oil Change International reports, these would total at least $100 billion over the next decade, and much more by some accounts.
• According to the Green Scissors campaign, taxpayers could see savings of billions of dollars by eliminating other corporate welfare. For example, cutting timber subsidies alone could save $10 billion over the next decade.
Hopefully, Congress will see fit to work for the American people in a bi-partisan manner and tackle the budgeting issues that face our nation. We need a well-planned and carefully carried out approach when dealing with budget cuts. This will mean that nothing less than a bi-partisan approach will work.
D. NEW REVENUES ARE BADLY NEEDED
Raising revenue is something most politicians avoid even discussing in a rational manner. All too many play the political game and take pledges never to even consider voting for a tax increase. That’s not a good thing in my opinion. The January 1st tax deal notwithstanding, there’s still far more that could and should be done to make the tax code fairer and more progressive. Public Citizen has some meaningful suggestions on how to come up with needed revenues.
• Much more attention should be given to corporate tax payments. Corporate tax as a share of GDP is at record lows, just a quarter of the level from the 1950s. Citizens for Tax justice has identified more than two dozen corporations that paid a total of zero in federal tax each year from 2008 to 2011. Actually, most of them received rebates. If those companies – with the addition of four others that paid very little tax from 2008 to 2011 – had paid the statutory corporate tax rate of 35 percent, they would have paid more than $78 billion.
• The simple solution to the need-for-additional revenues is to close loopholes. That will take more political courage than some of our elected officials have shown.
• One vital revenue-raising step is to make Wall Street – the giant financial firms that plunged the country and actually the world into the Great Recession – pay more. A modest tax on Wall Street speculation could raise a minimum of $350 billion over the next decade, potentially far more. We will hear a lot more from Public Citizen about a speculation tax over the next year.
• As the fiscal cliff frustrations beget debt ceiling debacles, and then sequestration shenanigans, combined with the debt ceiling debate, the nation’s eyes will be on Congress.
I may be alone in my view that we need additional revenues, but I am convinced that we do. Failure to face this need by members of Congress will only cause more serious problems both immediate and long range.
E. SUPPORT PUBLIC CITIZEN
I encourage our readers to support Public Citizen. This group works hard for the American people and especially for all consumers. There will be more information upcoming about Public Citizen’s Money Out / Voters In organizing for the third anniversary of Citizens United. If you want more information on Public Citizen and all that it does, go to Citizen.org. I believe you will be impressed.
Source: Public Citizen News Release
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