Washington should be worrying about education, infrastructure and health care: Earlier today I tweeted, “If we got education, health care and infrastructure right, a lot of our other economic problems would take care of themselves.”… It’s a tall order, I admit. But Washington is spending all its time right now pursuing a “grand bargain” between the two parties, and that’s an even taller, and perhaps even impossible, order….
The partisan differences on education and infrastructure are smaller than they are on taxes and spending. As for health care, we’ve actually kept costs under control in recent years, we’ve already passed the Affordable Care Act, and we’re seeing movement among Republican governors to engage constructively with the law…. And it’s not as if emphasizing education, infrastructure and health care is some kind of second-best to another deficit-reduction deal. Another deficit-reduction deal is a distant second-best to improving the education system and infrastructure and bringing down health-care costs — all of which would both reduce the budget deficit and make people’s lives better.
And, for the record, I’d love to add energy legislation to this list…
House Progressives have the best answer to Paul Ryan: The correct counterpart to the unbridled ambition of the Ryan budget isn’t the cautious plan released by the Senate Democrats. It’s the “Back to Work” budget released by the House Progressives. The “Back to Work” budget is about… putting Americans back to work…. The budget begins with a stimulus program that makes the American Recovery and Reinvestment Act look tepid. It includes $2.1 trillion in stimulus and investment from 2013-2015. The main policies there are a $425 billion infrastructure program, a $340 billion middle-class tax cut, a $450 billion public-works initiative, and $179 billion in state and local aid. This is a lot of stimulus. The liberal Economic Policy Institute estimates that would be sufficient to “boost gross domestic product (GDP) by 5.7 percent and employment by 6.9 million jobs at its peak level of effectiveness (within one year of implementation).”…
Investment on this scale will add trillions to the deficit. But the House Progressives have an answer for that: Higher taxes. About $4.2 trillion in higher taxes over the next decade, to be exact. The revenues come from raising marginal tax rates on high-income individuals and corporations, but also from closing a raft of deductions as well as adding a financial transactions tax and a carbon tax. They also set up a slew of super-high tax rates for the very rich, including a top rate of 49 percent on incomes over $1 billion…. [T]hese taxes aren’t just about reducing the deficit — though they do set debt-to-GDP on a declining path. They’re also about reducing inequality and cutting carbon emissions and slowing down the financial sector. They’re not just raising revenues, but trying to solve other problems….
As for the spending side, there’s more than $900 billion in defense cuts, as well as a public option that can bargain down prices alongside Medicare. But this budget isn’t about cutting spending. Indeed, the House Progressives add far more spending than they cut…
Ezra Klein Gives Real Coverage to the Progressive Caucus Budget: This is what reporters/columnists are supposed to do. His column is not an endorsement, it just lays out the benefiits and downsides of a serious budget. What a novel idea.
After the Flimflam: It has been a big week for budget documents. In fact, members of Congress have presented not one but two full-fledged, serious proposals for spending and taxes over the next decade.
Before I get to that, however, let me talk briefly about the third proposal presented this week — the one that isn’t serious, that’s essentially a cruel joke.
Way back in 2010, when everybody in Washington seemed determined to anoint Representative Paul Ryan as the ultimate Serious, Honest Conservative, I pronounced him a flimflam man. Even then, his proposals were obviously fraudulent: huge cuts in aid to the poor, but even bigger tax cuts for the rich, with all the assertions of fiscal responsibility resting on claims that he would raise trillions of dollars by closing tax loopholes (which he refused to specify) and cutting discretionary spending (in ways he refused to specify). Since then, his budgets have gotten even flimflammier. For example, at this point, Mr. Ryan is claiming that he can slash the top tax rate from 39.6 percent to 25 percent, yet somehow raise 19.1 percent of G.D.P. in revenues — a number we haven’t come close to seeing since the dot-com bubble burst a dozen years ago.
The good news is that Mr. Ryan’s thoroughly unconvincing policy-wonk act seems, finally, to have worn out its welcome….
And, with that, let’s turn to the serious proposals.
Unless you’re a very careful news reader, you’ve probably heard about only one of these proposals, the one released by Senate Democrats. And let’s be clear: By comparison with the Ryan plan, and for that matter with a lot of what passes for wisdom in our nation’s capital, this is a very reasonable plan indeed…. [But] the Senate Democratic plan is conservative with a small “c”: It avoids any drastic policy changes. In particular, it steers away from draconian austerity, which is simply not needed given ultralow U.S. borrowing costs and relatively benign medium-term fiscal projections…. So we could definitely do worse than the Senate Democratic plan, and we probably will. It… however… doesn’t follow through on its own analysis. After all, if sharp spending cuts are a bad thing in a depressed economy — which they are — then the plan really should be calling for substantial though temporary spending increases. It doesn’t.
But there’s a plan that does: the proposal from the Congressional Progressive Caucus, titled “Back to Work,” which calls for substantial new spending now, temporarily widening the deficit, offset by major deficit reduction later in the next decade, largely though not entirely through higher taxes on the wealthy, corporations and pollution. I’ve seen some people describe the caucus proposal as a “Ryan plan of the left,” but that’s unfair. There are no Ryan-style magic asterisks, trillion-dollar savings that are assumed to come from unspecified sources; this is an honest proposal. And “Back to Work” rests on solid macroeconomic analysis, not the fantasy “expansionary austerity” economics…. [I]t’s refreshing to see someone break with the usual Washington notion that political “courage” means proposing that we hurt the poor while sparing the rich. No doubt the caucus plan is too audacious to have any chance of becoming law; but the same can be said of the Ryan plan…
Back to Work Budget: There's an unfortunate tendency in the media to define the poles of the debate as being between the median member of the high-discipline Republican caucus and the right-most members of the low-discipline Democratic caucus. But that's an observation about the structure of internal caucus dynamics, not the real ideological landscape. So if you want a taste of what a liberal alternative to conservative budgeting really looks like, I'd skip past the Senate Budget Committee Democrats' plan and take a gander at the "Back to Work" (PDF) budget from the progressive caucus in the House….
It restores Clinton-era marginal income tax rates starting at the $250,000 threshold. It establishes new income tax brackets—45 percent at $1 million, 46 percent at $10 million, 47 percent at $20 million, 48 percent at $100 million, and 49 percent at $1 billion. Capital gains and dividends will be taxed as ordinary income. The deductibility of all itemized deductions will be capped at the 28 percent rate. The estate tax will have a $2.5 million exemption and then a series of progressive marginal rates from 55 to 65 percent. The mortgage interest tax deduction for second homes is eliminated. There's a financial transactions tax. A couple of corporate income tax deductions are eliminated. There's a kind of too-big-too-fail tax on banks with over $50 billion in assets. There's a $25 per ton carbon tax.
There are also a lot of spending-side measures here. Medicare will reduce its payment rates to pharmaceutical companies down to the Medicaid level. A strong public option will bring down spending on Affordable Care Act exchange subsidies. The use of bundled payment procedures is going to be accelerated as will the Affordable Care Act state waiver process. Base Pentagon spending is reduced to 2006 levels, and farm subsidies for commodity crops are reduced.
This is all counterbalanced by some new fiscal stimulus spending in the short-term, and by a medium-term vision that entails a level of non-military discretionary spending that's close to the historical level….
[P]eople should take it seriously. The CPC envisions America becoming a country that has higher taxes, commits a much smaller share of national output to its military, and compensates its health care providers less generously. That's not everyone's cup of tea, but it's not a wild and crazy dream. It means America would look more like the United Kingdom. Most of all it shows that the passion for reducing eligibility for Social Security and Medicare isn't driven by the laws of mathematics. It's driven by a desire to protect the military budget, keep taxes low, and keep provider payment rates high. Those are all reasonable things to want to do and you can see why people would want to do them, but you can also see why people don't want to be forced into a zero sum choice between welfare state programs for the elderly and education and infrastructure programs for the future.