David Brooks jumped the shark in his March 18 New York Times column, when he attacked the only budget proposed in Congress this year that would rapidly improve the economy, restore full employment, but reduce the ratio of the national debt to the GDP, without cuts in Medicare or Social Security. Remarkably, the “Back to Work Budget” of the Congressional Progressive Caucus, also would restore sequester cuts in the defense budget and provide for a more rational reduction in military spending.
Brooks attacked the $2.1 trillion in stimulus spending in the budget as unnecessary because the economy is “finally beginning to take off,” and argued that the raising of revenue from increasing the top marginal tax rates, closing loopholes, taxing capital gains like ordinary income, and imposing a tax on some of Wall Street’s risky financial transactions will unfairly punish the wealthy and discourage the mythical “job creators.”
In its analysis of the “Back to Work” budget, The Economic Policy Institute says the current rate of growth is too slow to restore full employment, which is considered the pre-Great Recession level of 5 per cent. However, the “Back to Work” budget increases the growth of the GDP to more than 5 per cent, which EPI says will restore full employment by the end of 2014. EPI’s study says “the Back to Work budget will both accelerate and guarantee an economic recovery that at the moment is coming too slowly, and too many policymakers are assuming to be inevitable and imminent,” and also says that, “(A)fter increasing near-term borrowing to restore full employment, the budget gradually reduces the debt ratio to a fully sustainable 68.7 percent of GDP by FY2023.”
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Mr. Brooks’ sympathy for the wealthier people who might have to pay more taxes is stomach-turning if one considers that the leading study of income and wealth disparity in the United States shows that in the first two years of the recovery, 2009-2010, the top 1 per cent took 121 per cent of all gains in income. In other words, they not only got all of the increases in national income, everyone else earned less. So income and wealth disparity in the United States, already at record heights, are now even worse. How much more of the nation’s wealth and income does Mr. Brooks think the 1 per cent should have?
Mr. Brooks accuses the Progressive Caucus of replacing private enterprise with government spending, without explaining how private enterprise ever has built or repaired the highways and bridges of the nation, which are in rapidly declining condition, or has provided the funds to hire more teachers to improve our troubled educational system, or to rehire first responders laid off by cash-strapped state and local governments. The bulk of that $2.1 trillion stimulus would be used for these purposes, not for massive expansion of federal bureaucracy, or government employment, at the expense of the private sector. Furthermore, he seems shocked at the amount of the proposed stimulus, which is less than one-eighth of the GDP. We have done much more than that in the past, with incredible results.
In less than four years, during World War II, the federal government invested $100 billion to retool and modernize American industry. By today’s standards that amount does not seem very significant, but it was equal to 100 per cent of the entire GDP of the United States in 1940. That expenditure drove the national debt to 125 per cent of GDP, a figure we never have approached since, but also turned out not to be a problem because the economy grew dramatically. As a result of this enormous expenditure by the government, American industrial capacity expanded during the war to more than 20 times what it was in 1940. That positioned United States business and industry – private enterprise – to dominate the post-war global economy, to be the industrial engine for the rebuilding of Europe and Japan, and to create the American middle class. Sixty per cent of Americans were propelled out of the desperation of the Great Depression of the 1930s to middle class security in the 1950s.
While a top marginal income tax rate of 93 per cent prevailed from 1940 to 1964, income and wealth disparity was at a historically low level, but great fortunes continued to be made. The “job creators” actually created jobs, and those jobs provided a fairer share of the wealth that resulted from that work than we are seeing in many of today’s new jobs.
Imagine the impact if the federal government invested $16 trillion – an amount relative in real value to that $100 billion in 1941 – in the expansion of American private enterprise over the next four years, or even the next ten years. Do we have any leadership today comparable to those in government and in private industry who courageously led the country to greatness in the 1940s?
This time of economic malaise, and high unemployment, is exactly the wrong time for government austerity. Government budgets should be expanding, not contracting. The vast majority of the people have no excess income. Millions are struggling to meet basic expenses, many millions more than a few years ago. Because the people do not have enough money, there is not the consumer demand we need to grow the economy. Businesses will not expand unless there is an increase in demand. That demand can only be generated in the foreseeable future through an expansion of government investment that helps to create new jobs, and increase income. Austerity cannot do that, and never has. There is no historical record of austerity ever causing economic growth and expansion of employment. For proof, one has to look no further than to the situation in the United Kingdom today, where austerity virtually has become a religion because only blind faith can support something that has had no demonstrable proof of success.
Mr. Brooks tries to make us worry that expenditures such as those proposed in the Progressive Caucus budget will cause the national debt to double over the next 30 years. Yes, it may do that, but if we have even a fraction of the boldness, courage and foresight of the World War II generation, our GDP will be much more than twice its present level, and that debt will be no problem. It will be the proof that, like our parents and grandparents, we also had the courage and foresight to act boldly when the nation was in peril.