7 Ways to End the Deficit (Without Throwing Grandma Under the Bus)
This fall, the U.S. Congress is going to wage a pitched, dragged-out battle over cutting roughly $120 billion a year to solve the so-called deficit crisis. Vital things like teachers’ jobs and Medicare could well get cut.
The Right is already launching new coalitions to push for an austerity budget, calling for cuts in “wasteful government spending,” including key safety-net programs like Medicare, Medicaid, Social Security, and food stamps. America has overspent, they say. America is broke. But at the same time, they are calling for an extension of the Bush tax cuts and ruling out cuts in military spending—both policies that will increase the deficit.
It doesn’t have to be this way. My colleagues at the Institute for Policy Studies (IPS) have identified seven steps that, together, more than eliminate the deficit while making the country more equitable, green, and secure.
These proposals, from the IPS study called “America is Not Broke,” would also address the two deficits that author David Korten says do more to erode our society than the fiscal deficit does: our social deficits (rising poverty and inequality) and environmental deficits (starting with the climate crisis).
More Fairness, Less Deficit
Our first three proposals could bring in $329 billion a year; this alone would solve the deficit problem while helping to close the yawning inequality gap.
- 1. Tax Wall Street: $150 billion per year. A tiny tax on stock and derivatives transactions, which several European countries are on track to adopt, would discourage Wall Street speculation, fill the hole in the deficit left by the Bush tax cuts, and leave plenty left over to fund lots of programs. The National Nurses Union and many other allies are fighting hard for this.
- 2. Tax Corporations and Stop Tax Haven Abuse: $100 billion per year. The Financial Accountability and Corporate Transparency coalition has pointed out that one of the main ways that corporations avoid paying taxes is by declaring their profits in overseas tax havens like the Cayman Islands.
- 3. Tax the Wealthy Fairly: $79 billion per year. Our rigged tax code lets CEOs pay a lower tax rate than their secretaries do (as Warren Buffett keeps pointing out). The proposed Fairness in Taxation Act (HR 1124) would address this by adding five additional tax brackets for incomes over $1 million.
These three policy changes would go a long way toward making our society more equal, and that means better health, too. There is a terrific body of global evidence, a lot of it compiled by British researchers Richard Wilkinson and Kate Pickett, that more equal societies are much healthier. People at all income levels live longer; they are more fulfilled; and there is less violence. The United States, a relatively equal society as recently as the 1970s, is now off the charts in terms of wealth and income inequality. It doesn’t have to be that way. Just as we created a more just and vibrant economy and a strong middle class through fair taxes between 1940 and 1980, we can do it again through progressive taxation.
More Green, Less Pollution
The second source of revenue would make the economy more green, a key imperative in a world where the environmental crisis is now as deep as the economic one. We found two simple ways to raise revenues and help save the environment.
- 4. Tax Pollution: $75 billion per year. A
tax on the carbon content of fossil fuels would reduce our dependence on oil
while cutting air pollution and emissions of greenhouse gases. And, as economist
Robert Frank pointed out on August 25 in The
New York Times, “News that a carbon tax was coming would create a stampede
to develop energy-saving technologies.”
- 5. End Fossil Fuel Subsidies: $12 billion per year. This call should unite left and right. Why would anyone want to maintain a giant government subsidy to an industry that is the world’s major contributor to fossil-fuel emissions? 350.org has made this a centerpiece of their work. We should be able to win this.
More Savings, Less War
Finally, there are simple ways to cut the military while making the country and the world more secure. More than half of government discretionary spending now goes to the military. Congress has long avoided cuts, in part because they equate military spending with jobs, but IPS has pointed out that almost every other industry employs more workers per dollar than the military. Plus, there is now bipartisan support for two sets of significant cuts.
- 6. End Military Waste: $109 billion
per year. A broad spectrum of experts has found over $100 billion a year in
waste that could be eliminated with no sacrifice in security. Three recent
commissions, two of them bi-partisan, have recommended roughly $1 trillion in
military cuts over 10 years.
- 7. Close a third of our overseas bases and our Iraq operations: $21 billion per year. Over two decades after the Cold War ended, the United States still maintains roughly 1,000 military installations in other countries. A majority of the President’s own deficit commission, which includes three Republican senators—the National Commission on Financial Responsibility and Reform—backed a proposal to close one third of our overseas military bases.
These seven simple steps would raise close to $550 billion a year. They would quickly erase the fiscal deficit and return the country to a healthy budget surplus. There would be hundreds of billions left to invest in key sectors that could make the country more secure, more green, and more equitable: care jobs, green jobs, infrastructure jobs.
In other words, this plan could help erase the nation’s dangerous social and environmental deficits.
Many groups—from Jobs with Justice to National People’s Action to the AFL-CIO—are organizing to counter a push by the Right to use the deficit crisis to shred social programs and our nation’s safety net. Let’s up the ante and spread the message. America is not broke. We have plenty of resources to rebuild shared prosperity in the U.S.
John Cavanagh wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas and practical actions. John is director of the Washington-based Institute for Policy Studies, co-chair of the New Economy Working Group, and a co-author of IPS’s study: America Is Not Broke, where citations for this article can be found.
- America’s Deficit Attention Disorder
Money is the least of our problems. It’s time to pay attention to the real deficits that are killing us.
- Does Inequality Make Us Unhappy?
A new study suggests Americans' happiness declines when there’s a wider gap between rich and poor.
- The Real Reason the Military is Going Green
Big Oil is a big risk for national security. Can our military—the world's No. 1 oil guzzler—change the politics of climate change?
That means, we rely on support from our readers.
Independent. Nonprofit. Subscriber-supported.