Lucas,
Three items, two quick and one a little less so:
First, thank you.
Thousands of you contributed to our year-end fund drive. We meant what we said in those messages about how crucial your financial support is to the work we do together. Thank you for making Public Citizen so strong.
Second, we have an inauspicious anniversary to "celebrate."
January 21 is the third anniversary of the Supreme Court’s heinous Citizens United v. Federal Election Commission ruling. (It’s also Inauguration Day and Martin Luther King, Jr. Day.) Public Citizen is helping lead an initiative —
Money Out / Voters In — to mark the anniversary with demonstrations across the country. You’ll hear a lot more from us about this campaign, which joins advocacy around money-in-politics and voting rights, in the coming weeks.
Third, let’s go cliff diving.
The negotiations to resolve the misnamed fiscal cliff makes it clear that tax and budget issues will dominate headlines for the next many months, and likely the next couple years. In that context, I wanted to let you know how Public Citizen is thinking about these issues.
The unseemly political process is surely discouraging. But far worse from our perspective is the underlying substance.
We think the focus on the budget deficit is a distraction from the very serious problems facing the country.
We think that high short-term deficits are helpful not harmful, that efforts to cut Social Security and Medicare are misguided and must be defeated, and that important and obvious sources of savings and new revenues are receiving nowhere near enough attention.
Let me elaborate a bit on those points:
A. The United States does not have an acute budget deficit problem.
At a time of very high unemployment, the nation should be running large deficits. Those deficits are keeping the economy running; without them, unemployment would be even higher. Moreover, the economic crisis is the direct cause of the temporarily high budget deficits of recent years. When economic activity is depressed, tax receipts go down. If tax revenues were at pre-Great Recession levels, the deficit would be low. If steps are taken to kick-start the economy and put people back to work, revenues will rise and the temporarily high deficits will disappear.
Here’s some sensible talk from Businessweek: "In the present, with the economy still operating 6 percent below its potential, it emphatically does not need a big dose of deficit reduction. … It pains deficit hawks to hear this, but ever since the 2008 financial crisis, government red ink has been an elixir for the U.S. economy."
That’s not to say there aren’t major examples of wasteful spending or major opportunities for increased revenue (see below). But any discussion of potential savings or revenue increases must start by recognizing that there is no acute crisis and, moreover, that currently high deficits are helpful, not harmful.
B. There is no reason to tamper with Social Security, our most important and most successful anti-poverty program.
There is no Social Security fiscal crisis. As currently structured, with current benefit levels, Social Security is fully able to pay beneficiaries through 2033. If two decades hence there are problems, small adjustments on the revenue side would enable the program to continue current benefit levels indefinitely.
In the fiscal cliff negotiations, President Obama reportedly offered to accept a change in the way Social Security cost-of-living inflation adjustments are made (so-called "chained CPI"). That would amount to a stealth cut in Social Security, which would, over time, very considerably reduce benefit payments.
There’s another reason Social Security shouldn’t be part of deficit-reduction talks: It is funded from a designated tax, wholly separate from general governmental revenues. By law, Social Security benefits are paid from Social Security revenues, nothing else. Cuts to Social Security will have no impact on the overall federal budget deficit.
C. We need to fix Medicare by strengthening it, not weakening it.
Unlike Social Security, Medicare does face a medium-term fiscal problem, a direct consequence of spiraling health care costs.
So, steps need to be taken to better align Medicare costs and revenues. The way forward is to strengthen Medicare — by cutting out profiteering by drug companies, insurance companies and others. Negotiating prices with drug companies could, conservatively, save $150 billion over 10 years; more aggressive measures to deal with obscenely high drug prices could save much more.
It is true that raising the Medicare eligibility age or imposing other reductions in benefits would reduce Medicare costs. But it’s important to understand that — in contrast to measures to reduce drug and insurance company profiteering — this won’t do anything to cut health care costs, it will simply transfer costs from the government to individuals.
In the months and years ahead, Public Citizen is going to fight hard to strengthen Medicare by reducing private profiteering and to block proposals to slash benefits for the elderly and leave older Americans at the mercy of the for-profit insurance giants.
D. Big budget savings are available.
Aside from major health care savings that could be achieved, there are a number of things the government could do to save hundreds of billions of dollars over the next decade.
Atop the list is reining in out-of-control military spending. As our friends at the Project On Government Oversight and Taxpayers for Common Sense calculate, just eliminating unneeded weapons, undoing wasteful privatization arrangements, and slowing investments in nuclear weapons could save on the order of $700 billion over 10 years. This is without even challenging the fundamental overmilitarization of our foreign policy or calling for making tough choices between varying budget priorities; it’s just by eliminating wasteful or needless programs and weapons.
There are huge savings, though not at the same scale, from eliminating subsidies for dirty fuel industries — a long-running and ongoing Public Citizen priority. As our allies at Oil Change International report, these would total at least $100 billion over the next decade, and much more by some accounts.
And according to the Green Scissors campaign, taxpayers could see savings of billions of dollars by eliminating other corporate welfare. Cutting timber subsidies alone could save $10 billion over the next decade.
E. Raising revenue.
The January 1 tax deal notwithstanding, there’s still far more that could and should be done to make the tax code fairer and more progressive.
And much, much more attention should be given to corporate tax payments. Corporate tax as a share of GDP is at record lows, just a quarter of the level from the 1950s. Citizens for Tax Justice has identified more than two dozen corporations that paid a total of zero in federal tax each year from 2008 to 2011. (Actually, most of them received rebates.) If those companies — plus four others that paid very little tax from 2008 to 2011 — had paid the statutory corporate tax rate of 35 percent, they would have paid more than $78 billion. The simple solution is to close loopholes.
One vital revenue raising step is to make Wall Street — the giant financial firms that plunged the country (and the world) into the Great Recession — pay more. A modest tax on Wall Street speculation could raise a minimum of $350 billion over the next decade, potentially far more. You’re going to hear a lot more from Public Citizen about a speculation tax over the next year.
As fiscal cliff frustrations beget debt ceiling debacles and then sequestration shenanigans, Public Citizen will keep you informed.
In the meantime, thank you again for supporting Public Citizen, and stay tuned for those upcoming messages about our Money Out / Voters In organizing for the third anniversary of Citizens United.
Onward,
Robert Weissman
President, Public Citizen