Saturday, July 28, 2018

There Is An Alternative To The GOP's Trickle-Down Policy

The Congressional Progressive Caucus (CPC) has released its budget for the 2019 fiscal year. It offers a reasonable, fair, and sustainable alternative to the corporate-loving "trickle-down" economic policies of Donald Trump and the Republican Congress.

The Economic Policy Institute has scored the CPC budget. Their article on the CPC budget is fairly lengthy, but I highly recommend reading it. Here is a fairly short summary of what they found:

The Congressional Progressive Caucus (CPC) has unveiled its fiscal year 2019 (FY2019) budget, titled The People’s Budget: A Progressive Path Forward. It builds on recent CPC budget alternatives in setting the following priorities: near-term job creation, financing public investments, strengthening low- and middle-income families’ economic security, raising adequate revenue to meet budgetary needs while restoring fairness to the tax code, strengthening social insurance programs, and ensuring long-run fiscal sustainability.
This paper details the budget baseline assumptions, policy changes, and budgetary modeling used in developing and scoring The People’s Budget, and it analyzes the budget’s cumulative fiscal and economic impacts, notably its near-term impacts on economic recovery and employment.
Figures A–C—which show the impact of The People’s Budget on debt, deficits, and nondefense discretionary funding compared with current law, the president’s budget, and historical averages . . .
We find that The People’s Budget would have significant, positive impacts. Specifically, it would:
  • Improve the economic well-being of low- and middle-income families by finally completing and locking in the economic recovery. To unambiguously close the persistent jobs gap that has plagued the U.S. economy since the start of the Great Recession, The People’s Budget provides an upfront economic stimulus large enough to close estimated output gaps—a measure of how far from potential the economy is operating—as well as restore employment-to-population ratios for prime-age workers to pre–Great Recession levels. The People’s Budget would boost gross domestic product (GDP) by 1.2 percent and employment by 1.8 million jobs in the near term.2 The budget would also ensure that the mixture of spending and revenue changes provides a net fiscal boost long enough to avoid a future fiscal cliff (i.e., a sharp drop in demand caused by budget deficits closing too quickly to sustain growth) that could throw recovery into reverse.3
  • Make necessary public investments. The budget finances roughly $209 billion in job-creation and public-investment measures in calendar year 2018 alone and roughly $610 billion over calendar years 2018–2019.4 This fiscal expansion more than provides the amount of fiscal support needed to rapidly reduce labor market slack and restore the economy to full health. Furthermore, The People’s Budget also aims to hit more ambitious long-term public investment targets by returning nondefense discretionary spending to its historical average as a percentage of GDP by 2023.
  • Facilitate economic opportunity for all. By expanding public investments, boosting public employment, and subsidizing affordable college, child care, and other programs for low- and middle-wage workers, The People’s Budget aims to boost economic opportunity for all segments of the population.
  • Strengthen the social safety net. The People’s Budget strengthens the social safety net and proposes no benefit reductions to social insurance programs—in other words, it does not rely on simple cost-shifting to reduce the budgetary strain of health and retirement programs. Instead, it uses government purchasing power to lower health care costs (health care costs are the largest threat to long-term fiscal sustainability) and builds upon efficiency savings from the Affordable Care Act. The budget also expands unemployment benefits and increases funding for education, training, employment, and social services as well as income security programs in the discretionary budget.5
  • Smartly cut spending. The budget focuses on modern security needs by repealing sequestration cuts and spending caps that affect the Defense Department but replacing them with similarly sized funding reductions that are less front-loaded and will allow more considered cuts. It ends emergency overseas contingency operation spending in FY2019 and beyond, and it ensures a slow rate of spending growth for the Defense Department for the remainder of the decade.
  • Increase tax progressivity and adequacy. The budget restores adequate revenue and pushes back against income inequality with a revenue target of $10.9 trillion over FY2019–2028 to be raised progressively. Possible progressive revenue raisers to reach the target include adding higher marginal tax rates for millionaires and billionaires, equalizing the tax treatment of capital income and labor income, restoring a more progressive estate tax, eliminating inefficient corporate tax loopholes, levying a tax on systemically important financial institutions, and enacting a financial transactions tax, among other tax policies.
  • Reduce the deficit in the medium term. The budget increases near-term deficits to boost job creation, but reduces the deficit in FY2019 and beyond relative to CBO’s current law baseline. After increasing near-term borrowing to restore full employment, the budget gradually reduces the debt ratio in the now-full-employment economy over time, reaching a key benchmark of sustainability (of a stable debt-to-GDP ratio during times of full employment). Relative to current law, the budget would reduce public debt by $6.8 trillion (22.9 percent of GDP) by FY2028.
For the eighth year in a row, the Economic Policy Institute Policy Center (EPIPC) has provided assistance to the Congressional Progressive Caucus (CPC) in analyzing and scoring the specific policy proposals in its alternative budget and in modeling its cumulative impact on the federal budget over the next decade. The policies in CPC’s fiscal year 2019 budget—The People’s Budget: A Progressive Path Forward—reflect the decisions of CPC leadership and staff, not those of EPIPC (although many of the policies included in the budget overlap with policies included in previous EPI budget plans). All policy proposals have been independently analyzed and scored by EPIPC based on a variety of sources, notably data from the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB).

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