T-2 to Austerity

The Washington Post
February 26, 2013

Sequestering common sense

By Katrina vanden Heuvel

The media is going sequester 24-7. Anyone who hasn’t been paying attention to the across-the-board spending cuts about to hit this Friday is about to have little choice. The brouhaha about the austerity bomb is drowning out any attention to what is actually going on in the economy — which is supposedly the point of the whole debate.

The stark reality is the economy is still in trouble and Americans are still hurting. The economy contracted last quarter, even before Americans got hit with the end of the payroll tax holiday, which will take $1,000 out of the typical family’s annual paycheck. The Congressional Budget Office projects that growth will inch along at about 1.5 percent this year. That translates into continued mass unemployment — with more than 20 million people in need of full-time work — and falling wages. The richest 1 percent captured an unimaginable 121 percent of all income growth in 2009 and 2010, coming out of the Great Recession. They pocketed all of the growth in income, while 99 percent of Americans actually lost ground. That trend is likely to get worse rather than better.

Federal Reserve Governor Janet L. Yellen described the tragic human costs of widespread, long-term unemployment in an important speech this month. Families lose their homes; divorce and depression rise; children are scarred; skills are lost. A young generation is leaving school to sit on the couch.

Yet most of Washington — from the newly reelected Democratic president to the self-described insurgent Tea Party Republicans — is ignoring this reality to focus on cutting deficits.

The Republican Congress seems intent on letting the “sequester” take place — the idiotic across the board cuts that were explicitly designed to be anathema to both parties. Senate Democrats call not for repealing these cuts, but for “paying for” delaying them for a few more months.

Why this fixation? Deficits aren’t careering out of control. In fact, as the Congressional Budget Office reports, in relation to the economy, the deficit has fallen faster over the past three years than at any time since the demobilization after World War II. Calls for cutting Medicare benefits ignore the reality that the slowing rise in Medicare costs has already cut about $500 billion from its projected costs over 10 years compared to estimates made two years ago.

In fact, the too-rapid and premature decline in deficits in a weak economy is hindering any recovery, as Yellen noted.

Sadly, none of the supposed free-market ideologues in Congress are listening to the markets. With interest rates near zero, investors are sending the United States a flashing green light: Go borrow money to rebuild our decrepit and deteriorating infrastructure, investments that would put people back to work and make the country far more competitive.

So why this obsession with deficits and debt? There are many factors, but central to it is a widespread elite consensus that this crisis provides a unique opportunity to “fix” — exact benefit cuts from — Social Security, Medicare and Medicaid, despite the opposition of broad majorities across the political spectrum.

No one has done more to propagate and consolidate this consensus than the Wall Street billionaire Pete Peterson, who has been railing about the threat posed by the “paid vacation” provided by Social Security and Medicare for over three decades. As a special feature in this week’s Nation (which I edit) and a valuable report by the Center for Media and Democracy demonstrate, Peterson has devoted nearly half a billion dollars to this quest since 2008.

Only last week, Fix the Debt, one of the many groups funded by Peterson, trotted out its co-founders, Erskine Bowles and Alan Simpson, to lay out yet another plan. Echoing Peterson’s views, they called for cuts in Medicare and Social Security, tax reform that would lower top rates but close loopholes (including middle-class tax breaks such as that for employer-based health care), and curbs on all other government spending.

This elite consensus ignores how we got into the fix we are in. The deficit was under 2 percent of gross domestic product in 2007 and the debt under 40 percent of GDP when Wall Street’s wilding blew up the housing bubble and drove the economy into the Great Recession. Wall Street got bailed out, but the deficit soared to 11 percent of GDP and Americans lost nearly 40 percent of their wealth. You’d think anyone so fixated on avoiding another Pearl Harbor moment would focus on making certain Wall Street was properly shackled, and the too-big-to-fail banks broken up.

But the elite bipartisan consensus is focused on sending the bill for Wall Street’s mess to an already battered middle class, by weakening the basic pillars of a family’s economic security — Social Security, Medicare and Medicaid. And they are a lot closer than anyone thinks. The sequester is just the first of a series of austerity bombs that the Republican Congress will use to extort cuts in these benefits.

It’s time to stop such extortionists from holding our country’s economic future hostage.

Katrina vanden Heuvel is the editor and publisher of The Nation.

Read at

http://www.washingtonpost.com/opinions/katrina-vanden-heuvel-sequestering-common-sense/2013/02/26/1eb2c70a-7f68-11e2-b99e-6baf4ebe42df_story.html

Romney-Ryan's promise of austerity for small businesses

With Congressman Paul Ryan on the ticket with Mitt Romney, it is clear that a Romney-Ryan administration would choose eliminating the federal deficit over creating jobs as their economic plan. 

So what does this mean for small businesses if $6 trillion was cut from federal spending over the next 10 years as proposed by Mr. Ryan and supported by Mr. Romney? 

I’ve warned about such an austerity approach.  It is the road Europe chose during the Great Recession and the economic results have been disastrous.  Last Friday I told you about the dramatic rise in abandoned babies and children by families in Europe that can’t afford to feed and clothe them.

In today’s editorial the New York Times writes,

More than three-fifths of the cuts proposed by Mr. Ryan come from programs for low-income Americans. These cuts are so severe that the nation’s Catholic bishops protested the proposal as failing to meet society’s moral obligations, saying the plans “will hurt hungry children, poor families, vulnerable seniors.”

But aside from our concern for the less fortunate, what happens when government stops supporting the vulnerable in our society or helping states and local governments with education and first responder financing or investing in roads and bridges?  The answer is a dramatic drop in money on Main Street. 

The funds for these programs aren’t being spent on European vacations or the buying of more stocks or paying for big bonuses for corporate executives.  That is what the wealthy and big corporations will do with their $4 trillion in tax cuts if the Romney-Ryan plan is enacted. 

The money targeted for the austerity budget is being spent today in your local communities.

Main Street will suffer as it has in Europe and especially in Greece and Italy.  And for what?  Even the Ryan budget plan wouldn’t balance the federal budget for 30 years. 

Government austerity is a failed model.  While there will be no austerity for the wealthy and multinational corporations, there will be plenty for small businesses.

The upcoming crisis in non-defense spending cuts

On CNN’s “State of the Nation” yesterday, South Carolina Senator Lindsey Graham set aside his self-preservation tack to the political right to encourage bi-partisan cooperation.  The issue was sequestration that will result in $600 billion in automatic cuts to the defense budget over the next 10 years because the Congressional supercommittee failed to reach an agreement on a deficit reduction plan. 

“Congress does dumb things.  This sequestering idea was the dumbest thing,” said Graham. 

Not only did he not try to blame the President for Congress’s failure to act, he also talked about something that is getting very little attention if the sequester budget cuts start on January 1, 2013—$500 billion in automatic budget cuts to non-defense federal spending.

Senator Graham mentioned special education and the National Cancer Institute as programs that will be negatively impacted by sequestration.  But what should really get Congress and the public’s attention is all the federal, non-defense jobs that will be impacted.

Scott Lilly, a senior fellow at the Center for American Progress, analyzed the non-defense sequester cuts and came to some very dire conclusions about just one federal agency, the Federal Aviation Administration (FAA). 

According to Mr. Lilly, the FAA would lose nearly 10% of its budget.  As a result, he predicted that the agency would have to furlough up to 2,000 air traffic controllers at the nation’s smaller regional airports in order to maintain regular operations at less than 100 of the airports that account for 95% of all boarding passengers. The result would be the closing of the smaller airports that have fewer than 600,000 enplanements a year.  South Carolina’s busiest airport in Columbia would be one of those. 

If this should happen, in my opinion, the impact on the nation’s economy would dwarf the economic impact of the predicted defense spending cuts getting all the attention. 

Mr. Lilly, who supports Senator Graham’s concerns about defense budget cut, told me Friday on my radio show that the public needs to be more aware of the impact of non-defense cuts.  In addition to the FAA, the public should also worry about food safety and drug approvals among other things.

“There’s a lot more to the government, just every day stuff that you count on and take for granted and don’t really think of as being the government.  But you stop the flow of federal dollars you’ll see a lot of changes in what you can do and can’t do,” said Mr. Lilly.