Overlooked in the coverage of Paul Ryan’s budget and the budget released by Senate Democrats was the one crafted and presented by members of the Congressional Progressive Caucus. Called the “Back to Work” budget, it’s focused on solving the country’s actual fiscal crisis — mass unemployment. And for good reason; not only is it the right thing to do, but without growth and lower unemployment, debt reduction requires pain for a large number of Americans. As such, congressional progressives have taken a Keynesian approach to the debt: Spend money now — taking advantage of low interest rates on Treasury bonds — and position the United States for long-term debt reduction.
Overall, the Back to Work budget increases spending by more than $2.2 trillion over the next ten years. This includes more than $156 billion for clean energy efforts, over $230 billion for education, training and social services, $312 billion for income security programs like the Supplemental Nutritional Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), another $156 billion for health care programs, and $1 trillion in new infrastructure spending, meant to repair old structures (roads, pipes, bridges) and build new ones.
To pay for this, House Progressives propose a full overhaul of the federal tax code, with a new set of tax increases on the wealthiest Americans. For income over $250,000, taxes would revert to Bush-era rates (the Progressive Caucus maintains Bush rates for the remaining 98 percent of taxpayers).
From there, they call for several “millionaire and billionaire” tax rates: At $10 million, the marginal rate will increase to 45 percent, at $20 million, it increases to 46 percent, at $100 million it moves to 47 percent, from $100 million to $1 billion it goes to 48 percent, and for all income over $1 billion, it’s 49 percent. In addition, this budget caps itemized deductions, lowers the exemption for the estate tax (and raises the rate), closes loopholes in the corporate tax code, and institutes a “financial transactions tax” designed to discourage high-volume, high-speed trading.
To raise further revenue for these spending programs, the Back to Work budget institutes a cap and trade regime, and reduces subsidies for agricultural and fossil fuel companies.
Insofar that there are major spending cuts, they’re on the defense side: An end to funding for the wars in Iraq and Afghanistan, base closures, and fewer modernization projects for older weapons systems. In total, the Back to Work budget achieves $897 billion in savings from adjusting the Pentagon budget, and $939 billion from ending all spending on the wars.
Other savings come from adjusting health care programs. Medicare is permitted to use its size to negotiate prescription drug prices — saving $157 billion over ten years — and a public option is added to the Affordable Care Act, saving an additional $104 billion.
On the whole, the Back to Work budget projects a short-term spike in deficits and debt — reflecting new spending — but then public debt is expected to reach 68.7 percent of GDP by 2023, nine points lower than what it would be under current law, and significantly lower than what it would be under Paul Ryan’s plan. And as for long-term health care costs, the Back to Work budget allows Obamacare to run its course, and adjusts Medicare so that it can use its size and clout to negotiate cheaper prices.
None of this is to say there aren’t problems with this plan, political and otherwise. In the same way that Paul Ryan’s plans for a minimal state are anathema to most voters, the Progressive Caucus budget calls for a dramatic expansion of government that would never find support from the American public.
But unlike the Ryan plan — and more so than the plan produced by Senate Democrats — this plan deals with the real economic problems faced by millions of Americans. Unemployment under the Back to Work framework is projected to fall to 5 percent within three years — a swift return to pre-recession levels. Moreover, it achieves $4.4 trillion in deficit reduction, reaching (and surpassing) the target set by Alan Simpson and Erksine Bowles. Which is to say that by Washington’s standards, this should be seen as a “serious” document when it comes to deficit reduction.
Unfortunately, the Beltway’s appetite for debt reduction isn’t matched by a craving for full employment. Instead, there’s an overwhelming call for spending cuts and “shared pain.” As such, the arbiters of “seriousness” are unlikely to pay attention to a budget that goes a long way toward accomplishing their stated goals.