The Alternative Budget Plan No One’s Telling You About

by on April 27, 2011 · 14 comments

in Economy, Popular

By now you’ve probably heard of the official Republican budget plan, written and presented by Rep. Paul Ryan of Wisconsin.  You may have even heard of President Barack Obama’s budget plan—a plan he gave a major speech about nearly two weeks ago.  But there’s a third plan out there that hasn’t received much attention.

The Congressional Progressive Caucus (progressive Congressional Democrats) released a budget plan to none of the fanfare that Paul Ryan received, and very little of the national media attention.  It’s a budget plan that projects a budget surplus of $30 billion by 2021, unlike the Ryan plan which according to the CBO projects to run budget deficits until 2030 and beyond.

The CPC plan, titled “The People’s Budget” (an unfortunate and misguided choice of names if I ever saw one), takes the opposite approach to promoting the economic viability of the United States than do the Republicans.  The Republicans approach economic growth and development with a strict adherence to the trickle-down theory of economics that holds that it is the rich and powerful that drive the economy.  The theory tells its followers that by cutting taxes and providing advantages to the already wealthy, the money they make will “trickle down” into the pockets of everyone else.  They are the job generators, and the wealthier they become, the more jobs they will create, and the more prosperous everyone else will become.

The problem is that over the past 30 years this theory has been proven to be a complete canard.  It’s a myth.  It doesn’t work.  The rich get richer, the poor get poorer, and the middle class withers away, and the overall economy falls off a cliff.

Bolster the Middle Class

The CPC takes the opposite viewpoint.  In order for America to compete, the CPC says, “we need every American to be productive, and in order to be productive, we need to raise the skill level of every American and meet the base needs of every working family”

Their approach holds that only by cultivating a strong middle class, and by providing avenues to help lift the poorer class, can our economy thrive and grow.  By creating a stronger, more vibrant workforce that has more purchasing power—in other words, by “spreading the wealth” more evenly—demand for goods and services will rise, benefitting everyone, rich and not so rich alike.  It’s a Keynesian model that follows a bottom up philosophy to economic development and puts power into the hands of the many rather than a top down philosophy that concentrates power into the hands of a few.

Ends Bush Tax Cuts

“The People’s Budget” takes the step of immediately eliminating the Bush tax cuts on those currently earning over $250,000 per year (i.e. ending the deal President Obama made last December), which is very popular in the polls right now.  It also calls for allowing all of the Bush tax cuts to expire, as scheduled, at the end of 2012 (although it does make some provisions for middle and lower class earners to hold on to at least some of those breaks, by permanently eliminating the “marriage tax,” expanding child tax credits, and preserving education incentives, adoption credits, and dependent care credits).

The CPC plan also modifies the estate tax.  Instead of the first $5 million being untaxed ($10 million for couples) the CPC budget will exempt the first $3.5 million ($7 million for couples).  It then calls for a progressive rate, starting at 45% for inheritances of up to $10 million, and up to a 65% tax rate for inheritances of $500 million or more.

While “The People’s Budget” is nowhere near as controversial as the Republican “Path to Prosperity,” it does have some elements that are sure to ruffle some feathers.  The CPC proposal calls for a progressive income tax rate beginning in 2012, taxing high earners at a rate of up to 49% for those making $1 billion or more per year (remember that this is a progressive tax rate, and not a tax on all earnings.  Only income over a certain level will be taxed at the higher rates.  I know, it’s confusing, but it’s not quite as bad as it sounds).

They also call for capital gains to be taxed as normal income rather than a special category that they fall under now (for example, all income derived from a hedge fund is currently considered a capital gain, and only taxed at 20%, up from 15% under Bush).  That 45%-65% rate for estate taxes won’t exactly be welcomed with open arms, either.

And although these provisions are sure to be incredibly unpopular, they’re no less “bold” than the Paul Ryan plan to turn Medicare into a voucher program and turn seniors out into the private insurance market to find medical coverage–at an additional out-of-pocket cost of $6,400 per year or more.

Social Security, Infrastructure, Health Care, Defense

Long overdue is the proposal to raise the amount that can be taxed for the purposes of Social Security.  Currently only the first $106,800 can taxed for Social Security purposes.  The CPC would raise that limit to $170,000 beginning in 2012, significantly extending the current surplus and ensuring the health of the Social Security program for decades more.

One of the more interesting proposals in the CPC plan is the establishment of a National Infrastructure Bank, which would seek to create a perpetual funding source for building and maintaining our nation’s infrastructure (you know, little things like roads and bridges and such).  They also propose raising the fuel excise tax by 25 cents in order to replenish the Highway Trust Fund that helps pay for, oddly enough, highways and freeways—a move sure to meet with riotous protests given the current $4 price tag on a gallon of gas.

On health care, the CPC calls for the establishment of a public option to the private insurance market, something proponents have insisted all along will foster better competition and offer a less expensive alternative to private insurance.  It also calls for Medicare to be allowed “harness the purchasing power of the federal government” with pharmaceutical companies to secure lower drug prices for Medicare and Medicaid recipients, a move estimated to save $100 billion by 2018.

On defense spending–and in contrast to the Republican plan–the CPC proposes to not only end the wars in Iraq and Afghanistan, but to reduce the size of our military altogether (the Republicans want to increase defense spending).  They call for a reduction of active duty Army by 120,000 troops by 2014; a reduction in the Marine Corps by 62,000 troops; reduce the size of the Navy by 20% and the Air Force by 15%; reduce the size of the country’s nuclear arsenal; and backing away from missile and space defense programs.

Combined with the end of the Iraq and Afghanistan wars, the Economic Policy Institute projects an overall savings of $2.3 trillion.

I can hear the hoots and the hollers coming from the right already:  “How DARE you even THINK about cutting our military!!!  How else can we enforce peace around the world?”  or “Raising taxes will do nothing to solve our debt problem!  We have a spending problem, not a revenue problem!“  Because, after all, according to the Grover Norquist disciples it’s possible to cut taxes to zero and still balance the budget.  It’s as if the wars in Iraq and Afghanistan never existed at all, and the Medicare prescription drug act cost us nothing at all.

Overall the plan makes pretty good sense, save a few quirks.  Of course there’s no way in hell they’d get everything in this plan done, but it makes a pretty good case for most of it.  And in the end, it’s actually a pretty reasonable alternative.  That’s not the way it will be portrayed, though, particularly by the warmongers and the debtmongers.  But that’s where we are in this country today.

It’s just really sad when something reasonable is so radical.

Note:  Requests for comment from Congresswoman Susan Davis’ office went unanswered.  I’m still waiting to hear back from Congressman Bob Filner’s office as promised.

UPDATE: Statement from Congresswoman Susan Davis’ office:  “When it came to the budget proposals (there were 5 different proposal(s)), Susan focused on fighting the Ryan-Republican Budget, which would give tax breaks to the top 1 percent funded on the backs of middle class Americans, end Medicare and turn it into a voucher program leaving many of our seniors and people with disabilities with nowhere to turn, while ignoring crucial long-term investments in education and innovation.  She decided to just support the Democrat Budget to show Democrat unity.”

Also, see this interview with Grover Norquist of Americans for Tax Reform by MSNBC’s Lawrence O’Donnell and you’ll get a better sense of why it’s so difficult to get anything done.  (Notice how O’Donnell “slips” in the end and calls it “Americans for Tax Freedom.”)

Visit msnbc.com for breaking news, world news, and news about the economy

 

UPDATE: Here’s the Washington Posts Ezra Klein on “The People’s Budget:”

Visit msnbc.com for breaking news, world news, and news about the economy

{ 14 comments… read them below or add one }

avatar annagrace April 27, 2011 at 4:13 pm

Yay Andy for posting this! I actually like the term People’s Budget, because the people, as opposed to the denizens of the DC Beltway, have weighed in , poll after poll, that we want out of Afghanistan, not to touch Social Security and Medicare, and that we need to create jobs. The progressive caucus, which is btw the largest caucus in the House of Representatives, actually listened to the people. The People’s Budget is what we need.

I think it is smart of Senator Harry to Reid to call for a senate vote on the Ryan plan. Republicans will have the opportunity to shoot themselves in the foot in a memorable way. Unfortunately, it leaves the Obama budget plan as the only game in town. We must and can change that. Your post is important because so few people know about this budget. Thanks again.

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avatar Shane Finneran April 27, 2011 at 6:49 pm

Hear hear. Nicely done, Andy.

The People’s Budget and the Congressional Progressive Caucus need more high-quality coverage like this.

And I agree with annagrace – the People’s Budget name works for me. After all, it is the only budget proposal on the table that puts regular people’s interests first.

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avatar Andy Cohen April 27, 2011 at 8:29 pm

But can’t you both hear the wingers claiming that “The People’s Budget” sounds like some kind of Chinese Communist conspiracy? You just know that’s what they’re thinking…….I just hate to be handing them fodder on a silver platter.

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avatar dave rice April 27, 2011 at 9:39 pm

Brilliantly reported once again, Andy! Especially useful to me because I wasn’t aware of this proposal – like any other, there are sticking points with me – but far fewer than with the other proposals I’ve heard to date.

I agree with Anna and Shane – I have no problem with the “people’s” budget (in another life wasn’t the Rag properly called the People’s Rag?). But I also agree with Andy – in our sound-byte culture, anything with the word ‘people’ in it gets smeared as subversive and anti-American. I’m certainly not offended by the term, but it’s not people like me you’ve got to sell this thing to – I’m ready to place a non-refundable deposit right now!

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avatar Gary Ghirardi April 27, 2011 at 10:22 pm

The Peoples Budget
is a nice vision for a just society but lacks any real mechanism for increased job creation. Infrastructural based employment projects may create native job growth but are likely to be fueled by government funding, something that is drying up under the two party stalemate in congress and the senate, and would not reduce our deficit. The proposal makes no statement how it can induce private investment out of the markets and into bricks and mortar. It seems like a New Deal revisited without the advantage of a president with special powers to push it through. If we had a public referendum form of government to realize such a proposal maybe it could garner the support of “The People” but we do not. It certainly prioritizes benefits that should be embraced by the majority of the voting aged public but the acrimonious politics between Dems and Republicans offers no clear view of competing proposals. The CPC can claim to eliminate the deficit and deliver a relatively modest Thirty Billion budget surplus is based on nothing intervening upon it in ten long years. I think the CPC proposal serves more as a platform for Progressive Democrats to form a voice in front of a largely disengaged public and to attempt to gain some momentum inside the Democratic Party. The twist on American Exceptionalism is a grand gesture in hand.

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avatar Andy Cohen April 27, 2011 at 10:29 pm

I was remiss in not pointing out that the CPC budget was scored by the Economic Policy Institute. It has not (yet) received the scrutiny of the CBO. I spoke to a guy in Raul Grijalva’s office this morning and he said that they might present it to the CBO, but they’re not certain whether or not they would report on it since it’s not a proposal that will likely be brought up for a vote in Congress.

The numbers I cited in this article come from the EPI report, which can be accessed by the link I provided in the third paragraph of the story.

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avatar Gary Ghirardi April 27, 2011 at 11:29 pm

The key departure of this proposal from the past is abandoning the post-war economy and a proposed economic modernization. Is this something viable without reversing decades of public conditioning to support war time economies? Does the American public need to come to terms with their own prosperity relative to a large middle-class and how beholding it was to militarization before adjusting to such a philosophical change in government? Or is is timing-out the cold war generation? The entire proposal seems a blueprint for redirecting business and public benefits through tax reforms and closing corporate loopholes. But is this a veiled proposal for de-militarizing the U.S. foreign policy as well?

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avatar Andy Cohen April 28, 2011 at 9:12 am

Updated to include a statement from Congresswoman Susan Davis’ office.

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avatar dave rice April 28, 2011 at 10:31 am

“She decided to just support the Democrat Budget to show Democrat unity.”

Sounds like a woman of strong convictions.

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avatar Shane Finneran April 28, 2011 at 2:12 pm

Her response is so telling. Notice how she changes the discussion to how she does not support the Ryan budget. This is how our own side dupes us, folks.

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avatar Rick Ward aka mr.rick April 28, 2011 at 12:31 pm

When ever anyone discusses this stuff with their friends and associates it would behove us to inadvertantly add the word American to the title of this “bill”. The (American ) People’s Budget. It’s that theory of if you say it enough it will be taken as truth. Really it’s just an old door to door salesmans trick. You know,like,it’s not the cheapest you can get,it’s the least expensive. Semantics are a big deal.

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avatar Shane Finneran April 28, 2011 at 2:10 pm

I like that idea a lot – “The American People’s Budget” does sound good. I wouldn’t be surprised if more people would be drawn to that name.

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avatar annagrace April 28, 2011 at 2:34 pm

Yeah- and hand it out with a flag pin.

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avatar jacksmith May 5, 2011 at 7:54 pm

REALITY!!

( Gov. Peter Shumlin: Real Healthcare reform — http://www.youtube.com/watch?v=8yFUbkVCsZ4 )

( Health Care Budget Deficit Calculator — http://www.cepr.net/calculators/hc/hc-calculator.html )

( Briefing: Dean Baker on Boosting the Economy by Saving Healthcare http://t.co/fmVz8nM )

START NOW!

As you all know. Had congress passed a single-payer or government-run robust Public Option CHOICE! available to everyone on day one, our economy and jobs would have taken off like a rocket. And still will. Single-payer would be best. But a government-run robust Public Option CHOICE! that can lead to a single-payer system is the least you can accept. It’s not about competing with for-profit healthcare and for-profit health insurance. It’s about replacing it with Universal Healthcare Assurance. Everyone knows this now.

The message from the midterm elections was clear. The American people want real healthcare reform. They want that individual mandate requiring them to buy private health insurance abolished. And they want a government-run robust public option CHOICE! available to everyone on day one. And they want it now.

They want Drug re-importation, and abolishment, or strong restrictions on patents for biologic and prescription drugs. And government controlled and negotiated drug and medical cost. They want back control of their healthcare system from the Medical Industrial Complex. And they want it NOW!

THE AMERICAN PEOPLE WILL NOT, AND MUST NOT, ALLOW AN INDIVIDUAL MANDATE TO STAND WITHOUT A STRONG GOVERNMENT-RUN PUBLIC OPTION CHOICE! AVAILABLE TO EVERYONE.

For profit health insurance is extremely unethical, and morally repugnant. It’s as morally repugnant as slavery was. And few if any decent Americans are going to allow them-self to be compelled to support such an unethical and immoral crime against humanity.

This is a matter of National and Global security. There can be NO MORE EXCUSES.

Further, we want that corrupt, undemocratic filibuster abolished. Whats the point of an election if one corrupt member of congress can block the will of the people, and any legislation the majority wants. And do it in secret. Give me a break people.

Also, unemployment healthcare benefits are critically needed. But they should be provided through the Medicare program at cost, less the 65% government premium subsidy provided now to private for profit health insurance.

Congress should stop wasting hundreds of millions of dollars of taxpayer money on private for profit health insurance subsidies. Subsidies that cost the taxpayer 10x as much or more than Medicare does. Private for profit health insurance plans cost more. But provide dangerous and poorer quality patient care.

Republicans: GET RID OF THE INDIVIDUAL MANDATE.

Democrats: ADD A ROBUST GOVERNMENT-RUN PUBLIC OPTION TO HEALTHCARE REFORM.

This is what the American people are shouting at you. Both parties have just enough power now to do what the American people want. GET! IT! DONE! NOW!

If congress does not abolish the individual mandate. And establish a government-run public option CHOICE! before the end of 2011. EVERY! member of congress up for reelection in 2012 will face strong progressive pro public option, and anti-individual mandate replacement candidates.

Strong progressive pro “PUBLIC OPTION” CHOICE! and anti-individual mandate volunteer candidates should begin now. And start the process of replacing any and all members of congress that obstruct, or fail to add a government-run robust PUBLIC OPTION CHOICE! before the end of 2011.

We need two or three very strong progressive volunteer candidates for every member of congress that will be up for reelection in 2012. You should be fully prepared to politically EVISCERATE EVERY INCUMBENT that fails or obstructs “THE PUBLIC OPTION”. And you should be willing to step aside and support the strongest pro “PUBLIC OPTION” candidate if the need arises.

ASSUME CONGRESS WILL FAIL and SELLOUT again. So start preparing now to CUT THEIR POLITICAL THROATS. You can always step aside if they succeed. But only if they succeed. We didn’t have much time to prepare before these past midterm elections. So the American people had to use a political shotgun approach. But by 2012 you will have a scalpel.

Congress could have pass a robust government-run public option during it’s lame duck session. They knew what the American people wanted. They already had several bills on record. And the house had already passed a public option. Departing members could have left with a truly great accomplishment. And the rest of you could have solidified your job before the 2012 elections.

President Obama, you promised the American people a strong public option available to everyone. And the American people overwhelmingly supported you for it. Maybe it just wasn’t possible before. But it is now.

Knock heads. Threaten people. Or do whatever you have to. We will support you. But get us that robust public option CHOICE! available to everyone on day one before the end of 2011. Or We The People Of The United States will make the midterm election look like a cake walk in 2012. And it will include you.

We still have a healthcare crisis in America. With hundreds of thousands dieing needlessly every year in America. And a for profit medical industrial complex that threatens the security and health of the entire world. They have already attacked the world with H1N1 killing thousands, and injuring millions. And more attacks are planned for profit, and to feed their greed.

Spread the word people.

Progressives, prepare the American peoples scalpels. It’s time to remove some politically diseased tissues.

God Bless You my fellow human beings. I’m proud to be one of you. You did good.

See you on the battle field.

Sincerely

jacksmith – WorkingClass :-)

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