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What Congress Needs to Do

NOBODY IN AMERICAN PUBLIC LIFE is more focused than the labor movement on offering solutions to the most serious challenges facing America: wage stagnation, economic inequality, full employment, economic insecurity, the transition to a 21st century economy and restoring our democracy. Solving these problems also would stabilize the national debt over the long term.

We need to address the real causes of our long-term budget imbalance—wasteful tax cuts for the wealthy and rising costs throughout our health care system—and not use the deficit as a pretext to pursue unrelated agendas.

What Congress Should Do

  • The first thing we have to do is stop lowering tax rates for the wealthiest Americans and Wall Street. When the Bush tax cuts expire at the end of this year, the top individual tax rate will rise to 39.6%, where it was under President Clinton. We simply cannot afford to lower the top individual rate below 39.6%, or reduce the corporate income tax rate, or eliminate taxes on overseas corporate income. It makes no sense to balloon the deficit by lowering tax rates for Wall Street and the wealthiest Americans and then turn around and demand more sacrifice from the middle class because the deficit is ballooning.
  • The second thing we have to do is rein in health care cost growth, which is the main driver of projected long-term deficits. But shifting costs to workers and retirees is not the solution. The key to reining in cost growth throughout our private and public health care system is to get providers (pharmaceutical companies, hospitals and physicians) to deliver care in more cost-effective ways.
  • We can start making our entire health care system more cost-effective, without shifting costs to individuals or cutting their benefits, by (1) allowing Medicare to negotiate lower drug prices with drug companies; (2) creating a robust public option that offers lower premiums to the non-Medicare population, reduces the deficit and partners with Medicare to implement cost-saving reforms; (3) requiring Medicare to “bundle” payments to hospitals for post-acute care so Medicare will pay for results rather than the volume of services provided; (4) ending pay-for-delay agreements between brand name and generic drug manufacturers; and (5) expanding Medicare competitive bidding to all durable medical equipment and supplies throughout the country.
  • There is no urgent debt crisis that requires us to make bad decisions. Markets around the world are signaling more confidence in the U.S. dollar than in any other currency, and U.S. interest rates have seldom been lower. And there is absolutely no need to reduce the deficit by $4 trillion over the next 10 years in order to stabilize the national debt. Since this target was established two years ago, the projected national debt in 2022 has fallen by $3.2 trillion.
  • However, for those who seek to “go big,” we have identified five additional ways to raise significant new revenues without demanding any more sacrifice from the middle class: (1) eliminate all tax incentives for exporting jobs overseas ($583 billion over 10 years); (2) impose a 0.03% tax on Wall Street speculation ($353 billion over nine years); (3) let estate and gift tax cuts expire at the end of this year ($253 billion over 10 years); (4) increase income tax rates for millionaires and billionaires ($800 billion over 10 years); and (5) end special low tax rates on income from stocks and bonds ($533 billion over 10 years).
  • Social Security has never added a penny to the deficit and should not be part of any deficit reduction negotiations. However, the labor movement does support “scrapping the cap” ($110,100 in 2012) so that all earnings are subject to the Social Security payroll tax. High earners should contribute the same percentage of their income to Social Security as everyone else.
  • Whatever else we do, we still have to fix what is wrong with our economy. Deficits are the result—not the cause—of our economic crisis. The real problem is weak middle class buying power, which is caused by high unemployment, lingering household debt, stagnant wages and a towering trade deficit. These are our most urgent problems, and budget cuts can make them worse.
  • The AFL-CIO’s approach to fixing the economy is to replace the failed low-wage economic strategy of the past 30 years with a high-wage strategy for shared prosperity. The four pillars of a high wage strategy are (1) achieving full employment; (2) restoring workers’ ability to bargain collectively so we can raise wages, reduce economic inequality, fuel consumer demand and help rebuild the middle class; (3) making things in America again; and (4) shrinking our bloated financial sector and making it serve the real economy again.
  • The AFL-CIO has also endorsed “Prosperity Economics,” a long-term economic blueprint written by Jacob Hacker and Nate Loewentheil of Yale University. Among other things, “Prosperity Economics” calls for stronger investment in infrastructure to grow the economy; enhanced economic security for working families to make markets work better; and reforms to reinvigorate our democracy.

What You Should Do

Across the country, working people are telling Congress to put working families first and protect our future. Join them. Call your members of Congress now at 888-659-9401 and tell them:

  1. NO tax cuts for the richest 2% of Americans.
  2. NO benefit cuts to Social Security, Medicare or Medicaid.

Key Dates

  • Budget Conference Committee deadline to reach agreement on budget deal
  • Bill to fund federal government expires
  • Next round of sequestration cuts to be ordered for 2014
  • Debt limit extension ends
  • Debt limit to be reached

How Did We Get Here?

Congressional Republicans held the economy hostage in the summer of 2011 with a manufactured crisis. They threatened to tank the U.S. economy and allow America to default on its obligations—and they're doing it again.

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