Revenue & Spending
House Budget Plans Do Not Reflect Americans' Views on Public Investments
by Nick Schwellenbach, 4/8/2013
Job Creation and Protecting Societal Protections Should Be Priority Now, Not Deficits
Sequestration's automatic cuts to federal spending are beginning to sting in communities across the country, and two of the four major congressional budget plans put forth this year are at odds with public opinion on specific areas of public investments, according to a Center for Effective Government analysis. As the Pew Research Center found in a pre-sequestration poll in February, most Americans say they support maintaining or increasing funding for specific federal programs, including education, Social Security, and Medicare.
Two of the congressional plans, both offered by House Republicans, would cut spending even more deeply than it has already been. Two other plans, from Senate Budget Committee Chair Patty Murray (D-WA) and the Congressional Progressive Caucus (CPC), track more closely with the views of the American people.
- Education. While 89 percent of Americans polled support maintaining or increasing spending on education, both Rep. Paul Ryan's (R-WI) and the Republican Study Committee's (RSC) budget blueprints cut the purchasing power of Pell Grants to pay for tuition and slash funding for improving teacher quality and student achievement. By contrast, the Murray and Congressional Progressive Caucus plans would expand support for education.
- Social Security is extremely popular with 87 percent of Americans who support maintaining or increasing spending in this area. Most of the plans do not propose changing it in any way, except for the Republican Study Committee's plan, which proposes decreasing benefits.
- Transportation and infrastructure spending to maintain, repair, and build roads, bridges, and other public infrastructure – critical to the broad economic success of the nation – is another area of spending with significant popular support, with some 81 percent polled stating that they want spending maintained or increased. The two Democratic plans increase spending here, with especially large increases in the Congressional Progressive Caucus plan. The Ryan and RSC plans cut this part of the budget.
- Defense is among the most "popular" major budget categories that Americans think should be cut back. But even then, defense spending is still seen by a majority as an area that should be shielded from spending reductions. Only 24 percent of Americans polled by Pew say defense should be cut. Defense is the only major area where the Ryan and RSC budgets appear to line up with the public's views, as they would essentially do nothing to cut defense spending. Murray's plan seeks only modest amounts of savings in defense. The sole plan that seeks relatively deep cuts to defense is the Congressional Progressive Caucus's.
- Aid for the poor. A majority of Americans – 71 percent – also want to increase or maintain aid for the needy here in the U.S. Slightly more Americans (27 percent) want this aid increased than those that want it cut (24 percent). The Ryan and RSC budgets deeply cut food assistance programs and Medicaid. The Murray plan maintains them, whereas the Congressional Progressive Caucus plan greatly expands spending.
Although Americans consistently state that reducing the deficit should be a priority, repeated polling by Pew and others have shown that the majority of Americans reject reductions in the vast majority of specific areas of spending. A plurality of Americans supports maintaining most programs at their current levels, according to Pew's poll.
Why Americans Say They Are So Concerned About the Deficit Right Now
One of the greatest paradoxes in American politics is the conflation Americans have made between the state of the economy and government deficits. There is a relationship between the two, but the seemingly intuitive understanding many Americans have of their connection is backwards. A campaign by conservatives over several decades, coupled with a media that hasn't been willing to aggressively challenge savvy public relation efforts enough, have contributed to this confusion.
When economic times are good with strong employment and growing wages, tax revenue increases because there is greater income, assuming everything else such as tax rates remain the same. At the same time, these taxes generally feel like less of a burden. Meanwhile, expenditures on unemployment insurance and other types of assistance to the needy, such as the Supplemental Nutrition Assistance Program (SNAP), drop. Combined, these revenue and expenditure changes make it easier to shrink the annual deficit and even generate surpluses as the U.S. government had in the late 1990s.
During times of economic distress, expenditures on unemployment insurance, SNAP, and other programs increase and tax revenue drops – this tends to exacerbate deficit spending.
So there is a relationship between the economy and the deficit, but it's an inverse one. As the American Prospect noted, "Voters associate high deficits with poor economic performance—the public might say that it wants more action to lower the deficit, but what it means is that it wants Washington to improve the economy."
Part of this is due to confusion that has been carefully cultivated by conservatives and business leaders, such as Peter G. Peterson through his numerous organizations like "Fix the Debt," in a decades-long campaign to strangle the government. As Robert Reich, labor secretary in the Clinton administration, recently wrote, "The piles of money spent by billionaire Pete Peterson to persuade Americans that the budget deficit is the nation's most urgent economic problem is now paying off. Recent polls show greater concern about the deficit now than was expressed a few years ago when the deficit represented a much larger percentage of the total economy."
With effective tax rates on major corporations at record lows and a larger share of the tax burden being placed on wages, even as corporations rake in record profits and average wages are lagging, lower overall tax revenue – especially in our country's weak economic situation – means there will be greater deficits, assuming spending stays the same. Conservatives, in turn, use this as an opportunity to argue more strenuously for cutting spending even more.
This is what anti-tax crusader Grover Norquist meant when he famously said, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." He wants to starve government of revenue, creating deficits and hysteria over debt, in order to further cut the size and role of government.
Why We Want the Government to Make More Public Investments in Economic Hard Times
When the economy is bad and people are uncertain about their future employment prospects, they tend to save more and consume less. This is completely rational. Similarly, when a businessperson assesses whether she should hire more workers and sees weak consumer demand, she is unlikely to hire more employees – whom she may have to lay off – and otherwise expand her operations. That businessperson is more likely to try to get more out of the workers she has until there is enough reason to believe she needs to hire more.
Multiply these dynamics across the economy, and it's easy to see how an economic shock can be hard to recover from. Why would anyone want to be the first business to expand during uncertain times when there's a high risk of losing money because everyone is pulling back on their spending? Similarly, why would a bank want to take a risk with loans to unproven businesses – or even proven ones?
Enter government spending. Often, government is the only major player that can move the economy up and out of this otherwise mutually reinforcing morass of slow growth and high unemployment – this undoubtedly happened during the massive expansion of government spending in World War II. The key is government can make up for, or at least mitigate, the drop in demand in the economy when most everyone else is retracting, such as individuals paying off their credit card debt instead of spending and banks sitting on large pools of money that they are loathe to loan out.
This is why folksy but misleadingly dangerous attempts to compare the federal budget to family budgets should be ignored. Even President Obama has fallen into this trap, saying, "Small businesses and families are tightening their belts. Their government should, too." As University of Oregon economist Mark Thoma wrote in response, "Reducing the deficit in a recession – Obama's belt-tightening analogy – reinforces the decline in private sector demand instead and makes an already bad situation worse."
The government should expand public investments when economic times are bad generally (and work on paying down the debt when things are good).
Government can do this by investing in projects that lay the groundwork for growth in the private sector: repairing and building infrastructure, such as roads, bridges, and high-speed Internet connectivity, and funding basic research that allows the U.S. to maintain its technological lead in fields such as aerospace, biotechnology, medicine, robotics, defense, and computers.
Spending in general will create jobs. That does not mean there are not legitimate concerns about what actually gets funded – spending that predominantly benefits the wealthy and powerful corporations is not very justifiable – and about potential waste and fraud – public dollars should be used effectively on projects that are successful. After all, funding for a bridge that gets wasted by contractors isn't of much use. Yet those challenges can be overcome with vigorous oversight, competent front-end planning, and appropriate resources. Unfortunately, there have been numerous examples of waste and fraud, which the media rightfully reports on, that have been seized by anti-government ideologues as arguments against government spending. However, the larger story is that these societal investments mostly have been successful in laying the groundwork for a healthy, growing economy. While there is some disagreement about what kinds of spending are worthwhile, there is a broad understanding among Americans of the need to invest in ourselves and country to help America compete as a nation.
An effective government can play a large role in improving the state of the middle class and helping the private sector get back on its feet. To do that, the government needs to maintain a key role in nursing the economy back to health.