The Fiscal Showdown: Just Say No to Economic Extortion

Institute for America's Future Smart Talk
NUMBER 7 | NOVEMBER 27, 2012
The Fiscal Showdown: Just Say No to Economic Extortion

The Challenge

This economy isn’t working for most Americans. The faltering recovery has begun creating jobs and lowering deficits, but more than 20 million are in need of full-time work. Those finding jobs struggle with lower wages and less security. The richest 1 percent is capturing virtually all of the nation’s income growth, while the middle class is getting crushed.

We need to fix the economy so it works for working people. Instead Washington is focused not on jobs and growth, but on an extortionist threat concocted by the Tea Party-dominated Republican Congress. Cut the benefits in vital family security programs – Social Security, Medicare and Medicaid – 10 years from now, they threaten, or they’ll blow up the recovery next year with an “austerity bomb,” a mix of tax hikes and across-the-board spending cuts that will throw people out of work and the economy into recession.

This dangerous extortion is no way to make sensible policy. You can’t make sensible reforms with a gun at your head. You can’t “fix the debt” 10 years from now without fixing the economy so that it is generating good jobs again. And cutting Social Security, Medicare, and Medicaid has nothing to do with that imperative.

We need to build a new foundation for growth that will generate good jobs again. Invest in areas vital to our future – a modern, efficient infrastructure, education from pre-school to college, research and innovation. Change our ruinous corporate trade policies that reward companies for shipping jobs abroad, and challenge nations like China that trample the rules. Lift the minimum wage and empower workers to gain a fair share of the profits they help to produce.

Growth has already reduced our annual deficits by 25 percent since 2009 in relation to the size of our economy. Putting more people back to work should be the priority. The Congress should just say no to extortion. Extend the middle-class tax cuts, the payroll tax cut and extended unemployment insurance, while ending the tax breaks for the richest Americans. Use that money and resources saved from ending the war in Afghanistan to make the investments vital to rebuilding the country and putting people back to work. Say no to benefit cuts in Social Security and Medicaid, while continuing to work on reforming our broken health care system. Cut waste and abuse, not programs vital to infants, children and the vulnerable.

We can get our books in order with reforms that are essential to making the economy work. No economy will generate good jobs if the wealthiest 1 percent is capturing 90 percent of the income growth, so raise taxes on the rich, tax investors the same rate as workers, and shut down corporate tax havens.

We can’t afford investments we need if entrenched corporate lobbies prey on the budget, so focus cuts on the subsidies and tax breaks afforded big oil; the drug companies; agribusiness; and the astounding waste, fraud and abuse of military contractors.

We can’t allow Wall Street speculation to blow up the economy again, so levy a speculation tax on Wall Street to slow computerized gambling. Cutting benefits of Social Security, Medicare and Medicaid will only burden working people and weaken the economy.

Make the Case

Don’t get snookered. We don’t face a natural peril like a “cliff”; we face political extortion. Backed by a multimillion dollar campaign funded by Wall Street billionaire Pete Peterson and corporate CEOs, conservatives in Washington are threatening to blow up the recovery unless Congress agrees to cut benefits in Medicare, Medicaid and Social Security, starting a decade from now.

Don’t fall for it. Cuts in Medicare, Medicaid and Social Security will neither put people to work nor reduce our current deficits. Stop the extortion and focus on generating good jobs and getting the economy on track. Extend the tax cuts for 98 percent of Americans, while ending them for the wealthiest Americans. Use that money to help pay for investments vital to our future – rebuilding our infrastructure, investing in education from pre-K to college – that will also put people to work. End the threat of across-the-board spending cuts, stop picking on the vulnerable and get our books in order by taking on the entrenched interests that are robbing us blind. The subsidies to big oil. The giveaways to the drug companies. The tax havens that let companies like GE earn billions in profits and pay no taxes at all.

The only way they can pull off this extortion scheme is to scare the devil out of everyone. Tell them: This time, we’re not going to fall for it.

Case in Point

The Threat is Political Extortion, not Natural Peril

What we face isn’t a fiscal cliff; it’s political extortion. A series of agreements exacted by Tea Party Republicans would trigger automatic spending cuts plus the expiration of the Bush tax cuts, extended unemployment insurance and the payroll tax cut at the end of this year. This austerity potion threatens to poison the recovery over the next year, leading to rising layoffs and spreading misery. Congress can and should decide simply not to drink the poison.

Instead, there are politicians in both parties who want to use the threat to extort benefit cuts in Social Security, Medicare and Medicaid that would otherwise be unacceptable#.

Don’t fall for it. This isn’t about reducing current deficits. As the economy recovers and people go back to work, our annual deficits are already falling, down 25% as percentage of the economy since 2009. And the cuts in Social Security and Medicare they want won’t kick in for a decade. They are fanning short-term hysteria over deficits to attack programs they have opposed from their beginning.

Good Jobs First

With 20 million people in need of full-time work, the wealthiest 1 percent capturing more than 90 percent of the income growth, and the middle class getting crushed, we need to focus on generating good jobs first. Putting people back to work will speed the recovery and is the first and necessary step to reducing our deficits. The worst thing we can do –as we’ve seen from Europe – is to inflict mindless spending cuts that cripple the recovery. That will increase misery and increase our debt burden.

No Benefit Cuts to Social Security, Medicare, and Medicaid

Cutting these vital building blocks of family security will neither help the economy nor reduce our current deficits. We don’t have an entitlements problem. Our long-term projected deficits are entirely the result of our broken health care system. To solve that we need to continue reforms, taking on the insurance companies, drug companies and health complexes that drive up prices. If we were spending at the rate other industrial countries do, we’d project surpluses as far as the eye can see.

Curb the Powerful, Not the Vulnerable

We need to fix our economy so it works for working people – and that is the only way to fix our long-term debt.

To do that we have to take on the powerful, not the vulnerable. It isn’t seniors, the disabled, the ill or the dying that are destabilizing our economy and causing deficits. It’s Wall Street that blew up the economy and doubled the debt burden. It’s multinationals shipping jobs abroad that have racked up ruinous foreign trade deficits. It’s millionaires and billionaires paying lower tax rates than the cops that patrol their streets that make vital investments impossible. It’s a Pentagon spending almost as much as the rest of the world’s military budgets combined that is the biggest source of waste, fraud and abuse in the federal government. It’s the drug and insurance companies that drive up our health care costs.

Make that the measure of any deal. Does it start by raising tax rates on the wealthy and closing down corporate tax dodges? Does it start by cutting subsidies to powerful interests? If not, if it starts by cutting programs for poor children or benefits in family security, then just say no. It is only adding to our problems, not subtracting from them.

Listen to Investors, Not Hysterics

The hysterics say America’s deficits are about to destroy us. Investors treat America as a safe harbor for their money. Interest rates on U.S. Treasury notes are near record lows. With a decrepit and outmoded infrastructure that must be rebuilt, a construction industry that is flat on its back, and record low interest rates, we will never have a better opportunity to launch a major initiative to rebuild America. That will generate jobs now, make our economy more competitive and our lives safer. No business leader with a brain would pass up an opportunity like this.

Public Pulse

The common sense of Americans across the political spectrum gets this right.Overwhelming majorities of Americans want an agreement that:

  • Raises taxes on the rich and the corporations
  • Protects Social Security and Medicare
  • Protects programs for education, children and infants
  • Cuts subsidies to drug companies, oil companies, and agribusiness
  • Ends the war in Afghanistan and uses the money saved to reduce the deficit

Polls you can use to buttress this argument include:

Tweet This

Say no to extortion and to cuts to Social Security, Medicare, Medicaid #fiscalcliff via @OurFuture

#GrandBargain that protects the rich at the expense of the vulnerable is a grand betrayal via @OurFuture

Want to #FixtheDebt? Fix our economy so it works for working people. See how: via @OurFuture

Let’s have a #Smarttalk on deficits, spending and jobs. Resources: #p2

Learn More

“A ‘Grand Bargain’ on the Fiscal Cliff Could Be a Grand Betrayal,” Robert Borosage, The Nation.

“To the President and the Congress,” advertisement endorsed by 29 leaders, The Washington Post, November 8, 2012.

“Jobs and Growth, Not Austerity,” statement signed by 350 economists and economic experts, Institute for America’s Future, November 2012.

“Politics Is at the Root of the Problem,” Joseph Stiglitz, The European

“It’s Simple: Cutting the Deficit Will Kill Jobs and Hurt Growth; Taxing the Rich Won’t,”Robert Reich, AlterNet

“U.S. Deficit Shrinking At Fastest Pace Since WWII, Before Fiscal Cliff,” Jed Graham, Investor’s Business Daily, November 20, 2012

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