Budget debate is pure distraction

  • Article by: ROBERT B. REICH , Tribune Content Agency
  • Updated: October 22, 2013 - 3:23 PM

The slowing job market and swelling inequality are what count.

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First came the drama over the government shutdown. Then the showdown over the debt ceiling. Now another round of negotiations on the budget deficit.

Pardon me for asking, but when exactly will Washington begin to deal with the crisis of jobs, wages and widening inequality?

Job growth is slowing perilously. The Labor Department reported Tuesday that only 148,000 jobs were created in September — way down from the average of 207,000 new jobs a month in the first quarter of the year.

Many Americans have stopped looking for work. The official unemployment rate of 7.2 percent reflects only those who are still looking. If the same percentage of Americans were working today as when Barack Obama took office, today’s unemployment rate would be 10.8 percent.

And inequality keeps widening. Ninety-five percent of the economic gains since the recovery began in 2009 have gone to the top 1 percent. The real median household income continues to drop, and the number of Americans in poverty continues to rise.

So what’s Washington doing? Less than nothing.

Hovering over the upcoming budget negotiations is the so-called “sequester” — automatic, across-the-board spending cuts that were passed in 2011 as a result of Congress’s last failure to agree on a budget.

These automatic cuts get tighter and tighter, year by year — squeezing almost everything the federal government does except for Social Security and Medicare. (The recent deal to keep the government open until mid-January stops the squeeze temporarily.)

While about half the cuts come out of the defense budget, much of the rest come out of programs designed to help Americans in need: extended unemployment benefits; supplemental nutrition for women, infants and children; educational funding schools in poor communities; Head Start; special education for students with learning disabilities; child-care subsidies for working families; heating assistance for poor families.

The list goes on.

So if there’s no budget agreement by mid-January, we’re back to major cuts in America’s already-tattered safety net.

On the other hand, if there is a budget agreement, what will it look like?

Republicans oppose anything resembling a tax increase on the wealthy. They aren’t even willing to close tax loopholes like the “carried interest” rule that allows hedge-fund and private-equity managers to treat their incomes as capital gains. They don’t even want to limit deductions such as the one that allows wealthy homeowners to deduct hundreds of thousands of dollars in mortgage interest from their taxable incomes.

Democrats want more spending on education and infrastructure and may want to restore some of the cuts in programs directed at poor and working Americans. But where will the Democrats find the money if Republicans continue to refuse tax hikes on the wealthy? The likely answer is Social Security and Medicare.

The president has already put on the table a proposal to reduce future Social Security payments by altering the way cost-of-living adjustments are made — using the so-called “chained” consumer price index, which assumes that when prices rise, people economize by switching to cheaper alternatives.

But this makes no sense for seniors, who already spend a disproportionate share of their income on health care — the price of which has been rising faster than inflation. Besides, Social Security isn’t responsible for our budget deficits. Quite the opposite: For years its surpluses have been used to fund everything else the government does.

The president has also suggested trimming Medicare. But Medicare isn’t responsible for the large budget deficits projected a decade or more from now. They’re due to the rising costs of health care. And the best way to control them, short of a single-payer system, is to use Medicare’s bargaining power to pay providers for healthy outcomes rather than for ever more tests and procedures.

But the deficit isn’t even the nation’s central economic problem. Our real problem continues to be a dearth of good jobs, and widening inequality.

Cutting the budget deficit anytime soon will make both worse — by reducing total demand for goods and services, and by eliminating programs that lower and middle-income Americans depend on.

It’s all about jobs, wages and widening inequality. Everything else — the government shutdown, the fight over the debt ceiling and the continuing negotiations over the budget deficit — is a dangerous distraction.

 

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of “Beyond Outrage,” now available in paperback. His new film, “Inequality for All,” was released last month. He blogs at www.robertreich.org. (c) 2013 BY ROBERT REICH; DISTRIBUTED BY TRIBUNE CONTENT AGENCY, LLC.

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