Revenue & Spending
Hang Together or Hang Separately: The Battle Against Austerity
by Nick Schwellenbach, 5/7/2013
Sequestration's automatic spending cuts were back in the news over the past few weeks. For a brief time, the Federal Aviation Administration (FAA) had to furlough employees, leading to nationwide flight delays. At roughly the same time, a researcher exposed major flaws in one of the key texts serving as an intellectual buttress to global austerity policies. While those fighting against economically damaging austerity measures received a boost from these events, many fiscal policy battles and pitfalls still lie ahead.
The Trouble with Austerity and Automatic Spending Cuts
One of the main criticisms of the sequester is its mindless, automatic cuts to programs that are not exempt. (Exempt programs include Social Security, Medicare, military compensation, and veteran's benefits, among others.) There are certainly better ways to save public funds, such as reducing agribusiness subsidies and eliminating wasteful defense projects, as well as giving Medicare the power to negotiate lower drug prices. However, austerity – the overall contraction of government spending during a time of economic distress – isn't smart in any form.
In February, before automatic cuts hit, the Congressional Budget Office estimated that sequestration will cost Americans 750,000 jobs by the end of the year and cut economic growth in half, to an anemic 1.4 percent. This is just a projection, and it remains to be seen how bad the impacts will be, but sequestration is already slowing the economy (although its full effects have yet to be felt).
The Current, Piecemeal Approach to Fighting Sequestration
Instead of addressing sequestration in a systematic way, some advocates are currently engaged in a piecemeal fight against the policy's negative, real-world effects. Organizations and coalitions may seek to emulate the FAA's recent "success" in eliminating its staff furloughs, as well as somewhat similar victories won by U.S Department of Agriculture (USDA) meat inspectors and by the military in restoring funding for tuition assistance.
However, fighting the cuts individually, while helping a particular program or agency in the short run, will come at the cost of other programs. For example, when the USDA restored meat inspectors, it took funding from the School Breakfast Grant Program – a cut that could have long-term nutritional and health impacts on poor kids. Similarly, the FAA furlough "fix" required a decrease in planned, long-term airport and aviation infrastructure improvements.
Because the piecemeal approach to fighting sequestration is a zero-sum game, it is still austerity, and it should be opposed as such.
Most Proposed Budget "Solutions" Are Anything But
President Obama's "austerity-lite" budget proposal is far better than the House Republicans' proffered austerity plan, but even his proposal falls far short of what the nation needs. For instance, the president proposes a modest $50 billion in infrastructure spending to boost the economy and job creation. However, Harvard economist Larry Summers, Obama's former National Economic Council chairman, told The New York Times Magazine that he believes there should be a "10-year commitment by the government to spend $1 trillion on infrastructure" to spur job growth. This mirrors a report by the American Society of Civil Engineers that finds America's infrastructure – bridges, roads, dams, water systems, aviation systems, and more – to be deteriorating with an estimated $1.1 trillion shortfall in planned spending over the next decade to deal with these problems. The only major federal budget proposal that seeks to meet this challenge is the House Congressional Progressive Caucus plan (the next closest is the Congressional Black Caucus plan that spends $500 billion over three years on a jobs and infrastructure program).
However, the biggest obstacle to overcoming policymakers' austerity fixation is the Republican-dominated House. Congress has the power of the purse, which means we won't get a pro-jobs budget and investments to make America more competitive unless Congress passes such policies, which requires both the House and the Senate to agree. Unfortunately, the political math isn't there. House Republicans are dead-set against more government spending except in defense – which does not create as many jobs per dollar as investing in education or infrastructure.
And things could get worse. First, midterm elections don't historically go well for the president's party, and they're coming up next year. Second, more conservative, elderly white voters usually disproportionately comprise the midterm electorate, which could further shift the political balance away from constructive policymaking. This could be especially true next year given Obama's proposed long-term decreases in Social Security benefits. Even though the White House has tried to distance itself from its chained Consumer Price Index ("chained CPI") proposal for Social Security, some Republicans are already trying to spin the idea that the president wants to cut Social Security to court voters.
Austerity Exposed, but Is Anyone Paying Attention?
But what about the discovery of numerous, fundamental flaws in the work of Harvard economists Kenneth Rogoff and Carmen Reinhart, which has been used to justify austerity policies the world over? Does this help convince policymakers that austerity is not a path to prosperity?
At least in the short term, this reality hasn't mattered much to most deficit-obsessed lawmakers. Even before Rogoff and Reinhart's paper came out, these policymakers largely did not see a contradiction between their opposition to Keynesian economics (government spending as a way out of economic downturns) and their support for defense spending that creates and keeps jobs in their districts, known by some as "military Keynesianism." Simply put, many conservatives don't like government as an ideological stance, except for the parts of government that politically benefit them.
Sequestration should be seen in a larger context: it is the latest salvo in the decades-long war conservatives have waged against government spending. They've starved the government of revenue in order to manufacture fiscal crises – which become acute during times of economic weakness as tax revenue drops – and to create opportunities to further slash spending. These policy decisions have exacerbated income inequality, shrunk the middle class, reduced social mobility, and erased the gains made by previous generations that created a strong, prosperous America for decades. As a nation, we're not broke, but some legislators have tried their best to make it seem that way.
Systemic Problems Call for Comprehensive Solutions
So what can be done? Sequestration should be canceled and public investments in education, infrastructure, and scientific research should be expanded. Assistance for our nation's most vulnerable needs to be preserved. Defense spending needs to be appropriate for our national security needs, and we need to maximize the bang for our buck there and in other areas of spending.
To achieve these goals, the political math in Congress needs to change with a shift toward lawmakers who will pass legislation and approve federal funding that helps everyday Americans, not just a few wealthy special interests.
Activists working against sequestration, against austerity more generally, and for more revenue from the wealthy and corporations need to stay focused on the goal – implementing an equitable economic growth agenda – and the strategy for how to get there – putting pressure on policymakers to pass such an agenda and represent the priorities of the American people. An array of tactics could be deployed in support of the strategy, from writing letters to the editor and more traditional media work, to Occupy Wall Street-style direct action and protests, to supporting political campaigns.
The piecemeal fight against shrink-the-government policies is unworkable; we need comprehensive solutions to achieve prosperity for all. To make such an agenda a reality, the American people will need to stick together in pursuit of a Congress, government, and economy that effectively represent and benefit them.
As Benjamin Franklin said at the signing of the Declaration of Independence on July 4, 1776, "We must all hang together, or assuredly we shall all hang separately."