The Alternative Budget Plan No One’s Telling You About

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.”)

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

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