Fiscal Follies: Watch the Conversation on Budget Surplus
Last week, the White House announced changes in projections for fiscal health. In June, the government will have a surplus and the projected deficit for this year will be $214 billion less than originally projected. That means the deficit will be 4.7% of GDP (the nation’s total income), down from the original forecast of 6%. Moreover, the deficit will be below 3% of GDP by 2017. Now it is time for the follies to begin.
First, the Republicans will be eyeing the upcoming fight to raise the federal debt limit with a new agenda. Clearly, they will argue, with all these rosy numbers, we have room for more tax cuts. They will see no need to argue for restoring tax fairness and progressivity to the system. Will they succeed in holding the president hostage because now the numbers are rosy? The same day the White House explained the deficit was a much smaller problem than believed, the House Republicans voted to slash spending on the Supplemental Nutrition Assistance Program ( SNAP) program to help children get enough to eat . Clearly, Republicans signaled that smaller deficits did not mean they were wrong on the need for austerity; the projections only proved they were right that the rich could have more tax cuts.
The deficit projection is smaller this year, in part, because of the sequestration. So, will the president be successful in arguing that these numbers show there is room to end sequestration because we are meeting the budget targets through economic growth?
This may go back and forth. Now, it is almost a ballet—a beautiful choreographed drama in pantomime. The Republicans are quickly losing ground to President Obama in that they first thought they would win in 2012 because of slow job growth, and then switched after the election to pin uncontrolled deficits on the president. Now we are having deficits smaller than the president promised, and at current mediocre rates of job growth, we will be back to 2007 levels of employment by June 2014, and private-sector employment will be back earlier.
Hopefully, instead of these follies and false premises, the discussion can turn to the real labor market issues. All this discussion of austerity has netted the budget deficit targets the deficit hawks wanted. Too many people became convinced that the discussion of the deficit hawks was related to the real labor market, and so have gone along with this show, assuming that it would drive down unemployment, lead to full employment and raise wages and incomes. Instead, we can now all see that the deficit is not related to the unemployment crisis.
The unemployment rate stays mired at near 7.5% because merely getting back to the number of jobs that existed in 2007 is only enough to keep up with the growth of the labor force—which is slowly shrinking from discouragement and exhaustion. Youth employment remains at historical lows. Beyond people without jobs, millions are mired in part-time work but want full-time work and millions more languish outside the unemployment numbers because they are too discouraged to look. Median family incomes continue to sag from lower wages and less employment, still below where they were in 2007.
So, rather than a discussion of differences in approaches to austerity—raise taxes to restore fairness and progressivity versus cut spending regardless of the value of the program—we can turn to hiring people. The sequestration is currently forcing federal agencies to furlough workers, reducing their hours, to hobble to the end of the fiscal year. But, if the sequester is allowed to continue, many federal agencies will be forced to cut positions. Already, public-sector employment continues to fall during this “recovery.” We have lost 36,000 federal workers since January 2009, 10,000 in public higher education and 311,800 in local public education. Our need for schools have not gone down in that period, and we still need people to respond to disasters like Hurricane Sandy and the fires of the Southwest.
To solve our multimillion jobs deficit, we will need to create jobs at twice the rate we have. Rather than argue about continuing sequestration, we must be arguing about how many teachers we can hire. Deficit reduction has not led to rapid job growth, but hiring public workers will. And, we cannot forget the deficit we are leaving our children by letting our infrastructure crumble. The deficit is smaller, in part, because the cost of servicing the federal debt is low because of the current low interest rates. If we force our children to pay inflated prices for restoring our bridges and sewer systems at high interest rates, we will be leaving them with more debt, not less debt, than if we make those fixes now. And, in the process, get people on the job building America.
Wall Street is back. Deficits are down. Now let’s get Main Street and Martin Luther King Avenue back up and running.
