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Working In These Times

Tuesday, Feb 2, 2010, 8:59 am

AFL-CIO, Progressives Condemn ‘Timid’ Obama Budget, Push for Stronger Action

BY Art Levine

(Photo by Alex Wong/Getty Images)

It's the biggest budget on record, and already the conventional media spin is accepting the GOP myth that such deficit spending isn't acceptable, despite the recession's continuing devastating impact, with 27 million Americans out of work or working too few hours. 

"His budget draws a picture of a nation that like many American homeowners simply cannot get above water," a New York Times "news analysis" declares. "[T]here is virtually no room for new domestic initiatives for Mr. Obama or his successors."

So forget about massive new spending to help save American homeowners, jobless or even for the uninsured needing meaningful health reform. But as Isaiah Poole, an editor at Campaign for America's Future points out, the real story on the president's budget proposal isn't being told:

When it comes to the kind of game-changing, transformational leadership that the nation needs to get its economy on track—and to sensibly address the federal debt over the long term—this budget proposal only offers a shadow of what we actually need.

The budget, Poole writes, is afflicted by "timidity" that not only damages the economy but the political future of Democrats in Congress who must consider the package.

Obama's budget does include a $100 billion jobs package emphasizing tax incentives to small businesses, aid to community banks to promote lending, and infrastucture spending.

Yet, as I reported in Truthout this week, "There are serious doubts among progressive economists, independent analysts and even small businesses that could receive his proposed tax credits whether his jobs creation package will actually work."

Meanwhile, although backing some of the safety-net and infrastucture measures in a House jobs bill, but on smaller scale,  Obama is also attempting to pander to conservatives by imposing what critics see as a wrong-headed spending freeze on non-security discretionary spending. It will chop $25 billion a year over the next 10 years, starting in the fall of 2010. 

As Robert Borosage, co-director of the Campaign for America's Future, says of this "freeze" notion that one labor advocate told me was "insane":

Right now, we need a bold, big jobs program to put people back to work. One in five Americans are unemployed or underemployed. Foreclosures are up, and soon one in three homes with mortgages will be underwater. States and localities are facing crippling layoffs from budget shortfalls. The human costs -- in lost homes, lost hope, lost jobs, broken families, and frightened children -- are staggering.

Obama's initial recovery program has staunched the free fall of the economy, but it has not been big enough nor targeted enough to put people back to work. The slow and halting recovery that is in sight will do little to create the jobs we need...

But with Democrats apparently hysterical about independent voters going South on them, the president has chosen to duck and cover. He'll endorse -- I hope -- a jobs program this year, but simultaneously offer up the three year domestic spending freeze starting in 2011.

How can the president strengthen the spine of the Congress to do something real on jobs when he is catering to the panic on deficits?

 

Of course in the long run, reining in excessive deficits will be necessary. But in the short run, even the $100 billion Obama proposed for tax incentives, infrastucture spending and aid to community banks to promote lending won't be enough, experts and business leaders say,  to make up even the 10 million jobs needed to bring down unemployment to pre-recession levels.

"I don't really see this having much impact," economist Dean Baker, co-director of the Center for Economic and Policy Research, told Truthout about the new cornerstones of the president's plan. These are tax credits worth $33 billion to spur small business hiring, and $30 billion in TARP funds to give to community banks to promote more lending.

Worse, all this fear-mongering over deficits is coming from Republicans whose leaders created the problem in the first place by not raising funds to pay for two wars—and looting the Treasury to pay for huge tax cuts to corporations and the rich. As James Kwak, the economic expert who co-founded the Baseline Scenario blog, notes in a recent Huffington Post column:

As a result, when deficits go up, we get lots of short-term politicking about the deficit-in Paul Krugman's words, the "march of the deficit peacocks." On these two themes, the Democrats' message is that (a) they are fixing the economy (growth is back, they are doing something about jobs) and (b) they are serious about the deficit (bank tax, three-year freeze, health care reform, etc.). The Republicans' message is that (a) the Democrats have failed to fix the economy (unemployment is still high) and (b) the deficit is the Democrats' fault due to runaway government spending...

How did we get into this deficit mess in the first place...?

The fiscal situation is actually very simple. The budget was in surplus when President Clinton left office, although there was already the prospect of budget-busting Medicare deficits in the long-term future. The 2001 and 2003 Bush tax cuts and the unfunded Medicare prescription drug benefit created the large deficits of the Bush era. (The Iraq and Afghanistan wars didn't help, but it's not fair to blame those entirely on the Republicans; plenty of Democrats went along.) Then the financial crisis and the resulting recession blew a huge hole in government tax revenues, creating the current spike in deficits; that spike was exacerbated by the stimulus package, which most but not all economists would consider a sensible response to a major recession...

Yet somehow the Republicans have tried -- successfully! -- to spin our current and projected deficits as the result of "more government spending," putting the Democrats on the defensive. And unfortunately, the result is the Obama administration buying into the Republican attack line: that government spending must be reduced. How else to explain the three-year spending freeze, which is mainly symbolic and a little bit destructive?

A smarter, more cost-effective approach to saving jobs and the economy was taken by the AFL-CIO president Richard Trumka when talking to Bill Moyers this weekend. Some highlights:

I think [President Obama's] starting to understand and feel the anger. And I think he's willing to work his way through. Now, the question becomes, will he do it on a scale that's necessary or essential to solve the problem.

It has to be a large scale. We lost eight million jobs, plus we have two million that we needed for growth. So, we're 10 million jobs in the hole. In order to do that, it's going to take more than a little stimulus package or a little job bill. Because if all we do is the same thing that Japan did in the early '90s. They would spend a little, look like they're coming out of recession. And then stop and it would drop back down.

They did that for a whole decade. They lost a decade. And our country just can't stand that. So, our job is to make sure that his understanding of the anger, translates out into a jobs program of sufficient size to solve the problem...

He's trying to fight for jobs. We're going to fight with him. Our job, all of us, as Americans, is to make sure that we push the Congress and the White House to do a jobs program that's of sufficient size to fix the problem. Not just dribble at it. But to fix the problem. And that's what we're hoping to do.

To that end, the AFL-CIO is part of a grassroots coalition, Jobs for America Now, fighting for a strong jobs package in a Senate resistant to doing much more big spending. It's not at all clear they'll get Congress to listen to their call for action (although some of their proposed measures have been adopted by the House on a smaller scale, and some safety-net provisions and more tax credits to businesses are likely to be approved by the Senate):

Generating millions more jobs in 2010 is an urgent need, but doing so alone will not fix an economy that has failed working people for at least three decades. New policies should aim to maximize job creation and lead us to the new economy that we need...

A first step is to provide relief through continued and expanded unemployment benefits, COBRA, and supplemental nutrition assistance. Safety net spending not only sustains needy families, it also helps the economy by circulating cash into local communities, helping businesses avert further job cuts.

Second, extending substantial fiscal relief to state and local governments will not only preserve needed services, but will also provide millions of jobs in both the public and private sectors (as many private firms deliver public services from health to infrastructure).

Third, we can directly create jobs that put people to work helping communities meet pressing needs, including in distressed communities facing severe unemployment. These initiatives must be designed so they maintain existing wage and benefit standards and do not displace existing jobs or simply exchange one group of unemployed workers for another.

Fourth, there are opportunities to invest in infrastructure improvements in schools, transportation, and energy efficiency that can provide jobs in the short run and productivity enhancements in the longer run.

Last, we should explore spurring private-sector job growth through innovative incentives and providing credit to small and medium-sized businesses.

These initiatives will cost money, and we will need to tolerate higher deficits in the next few years. However, a jobs initiative can be coupled with a revenue stream, such as a financial transactions tax, that can take effect in the third year and more than pay for these efforts over a 10-year period.

Art Levine, a contributing editor of The Washington Monthly, has written for Mother Jones, The American Prospect, The New Republic, The Atlantic, Slate.com, Salon.com and numerous other publications.

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