The Fallacy of the Republican Budget

            After writing the note about Michael Moore’s speech in Wisconsin, I realized it would be a good idea to explain in more detail why the Republican budget is exactly the wrong approach for economic recovery and deficit reduction.  It’s important to remember that as the economy improves and incomes rise, the government collects more income tax revenues, reducing deficits  and their consequent additions to federal debt. 

            So let’s take a look, from an economic perspective, at some of the things in the Republican budget that are drawing opposition from progressive groups, as described by The budget would (my comments are in parentheses): 

          1. Eliminate federal funding for National Public Radio and public television. (Economically, that would cause a decline in economic activity and jobs, as some stations fold or cut back.);

          2. Cut $1.3 billion from community health centers, depriving more than 3 million low-income people of health care over the next few months.  (Economic activity is reduced whenever healthcare is inadequate, both in terms of employment and spending.);

          3. Cut nearly a billion dollars in food and health care assistance to pregnant women, new moms, and children.  (This would reduce in work and spending on the part of the new women and moms, and the loss of jobs for those working in the programs.);

          4. Kick more than 200,000 children out of pre-school by cutting funds for Head Start.  (Economically, this reduces the employment and income of affected parents, and costs jobs within the Head Start and pre-schools.  As pre-school costs increase, other spending within the economy is reduced.); 

          5. Force states to fire 65,000 teachers and aides, dramatically increasing class sizes, thanks to education cuts.  (This is a direct job loss, and it imposes additional costs on schools coping with larger classes.);

          6. Cut some or all financial aid for 9.4 million low- and middle-income college students. (This has numerous short- and long-term economic repercussions, as students drop out of school.  Spending declines, faculty and other jobs are lost, and future jobs and job creation are impacted.);

          7. Slash $1.6 billion from the National Institutes of Health, a cut that experts say would “send shockwaves” through cancer research, likely result in cuts to Alzheimer’s and Parkinson’s research, and cause job losses. (Economically, this has all the negative impacts of declining health.);

          8. End the only federal family planning program, including cutting all federal funding that goes to Planned Parenthood to support cancer screenings and other women’s health care. (Here again, all the economic implications of declining health are attendant, and there are direct job losses as well.);

9. Send 10,000 low-income veterans into homelessness by cutting in half the number of veterans who get housing vouchers this year. (This will mean job losses both inside and outside of the program.);

          These are just some of the proposed cuts, and this is not a thorough review of their economic consequences.  It is important to remember that each negative impact will have ripple effects that extend throughout the economy and extend through time.  According to MoveOn, an independent survey predicts the loss of 700,000 to a million jobs this year from this budget.  At $40,000 per job, that’s a decline in income of nearly $30-40 billion, before any further compounding effects.

          Whatever this budget is, it is not a program for job creation, nor does it invest in the future of the American people.  Nor will it, in the end, reduce deficits or the national debt.  It will simply result in a smaller, weaker economy and standard of living for Americans.  These are exactly the kinds of cuts President Obama has vowed to veto should they arrive at his desk.  As he said in his State of the Union address this year:

          “I’m willing to eliminate whatever we can honestly afford to do without. But let’s make sure that we’re not doing it on the backs of our most vulnerable citizens. And let’s make sure that what we’re cutting is really excess weight. Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine.”

          In this, the President is standing up for the American people, and their future.  If, as Michael Moore argued in his speech, the wealthy elite are already pretty much running the federal government today, it won’t be easy for Obama to hold his ground. 

          The wealthy elite keep telling Americans we have no choice but to accept a reduced standard of living.  Actually, there is an alternative that would avoid any reduction in the standard of living of the bottom 99%:  The wealthy could pay more taxes, and their tax levels would not be high by historical standards.

          That approach would not reduce job growth, despite their false Reaganomic argument to the contrary:  Regardless of the level of their taxes, the money in the accounts of the very wealthy will not be invested in America and American jobs unless such investments are deemed to provide the best possible earnings among alternatives. 

          And we have to ask this as well: Does their determination to diminish the American economy through the proposed budget reductions display any real interest in preserving or investing in America? 

JMH – 3/9/11

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