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Austerity And The Budget Wars

Damon Silvers of AFl-CIO: We support Obama’s policy objectives, but will he fight for them, will his austerity narrative undermine that fight?

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. And in Washington, President Obama introduced his proposal for what the new budget for the United States should be. The Republicans are introducing theirs. And to discuss it and enter into the debate that’s raging across the country right now is Damon Silvers. Damon is a director of policy at the AFL-CIO. Thanks for joining us.

DAMON SILVERS, ASSOC. GEN. COUNSEL, AFL-CIO: Thank you, Paul.

JAY: So let’s talk big picture here. You were into Toronto G-20, and so were we, and there was a document issued there that the G-20 countries all signed on to cut the deficit by 2013 by half. And the whole rhetoric of the document, and now much of the–most of the rhetoric coming out of Washington, is all about cutting and austerity is the primary objective. In other words, there seems to be more fear of debt than depression. And President Obama seems to have based his argument on that, although there’s this big debate about quantity of cuts. But let’s start with President Obama, and then we can talk about the Republicans. Has he not facilitated or opened up space for the Republicans? ‘Cause he seems to buy the same argument that the real problem is the deficit.

SILVERS: Well, this is, I think, a critical question in American politics right now. We have a[n] unemployment rate that’s officially 9 percent. The real employment rate is, most economists think, around 16 percent. This is a deep recession, if not a quasi-sort of depression-level unemployment. And we have economic growth in the United States that is modest. It’s not high enough to really create the jobs that would solve our unemployment problem. And in places like Washington and Manhattan it may be a little hard to see this, but in the rest of the country it’s very obvious. And our politics are completely shaped by this. The 2010 elections were all about voters’ anger at joblessness and economic insecurity, and at the voters’ perception–the voters’ anger at their sense that Wall Street had been rescued and everyone else had not been. The Republican message around the state of our economy is that what we really need to do is have fiscal austerity, is cut government budgets. Of course, this is absolutely the worst possible thing one can do in a situation like this. Cutting–with a weak economy and high unemployment, cutting government spending, fiscal austerity, will not only produce more joblessness, more unemployment; it will actually dig the fiscal hole deeper, because with more joblessness, more unemployment, will come lower tax revenues and more expenditures. It’s, I think, well understood by economists that you cannot cut your way out of a recession-driven fiscal problem. And I should tell you that people who’ve looked at the Republican budget proposals say they will cost a million jobs. Now, you asked about President Obama. So President Obama has put forward, first in the State of the Union and then in his budget proposals for next year’s budget, which is what he’s talking about, a budget that would involve a substantial investment in America’s infrastructure, create a lot of jobs, more than $500 billion over a multiyear period, but some offsetting cuts as well, and a plan that suggests a significant reduction in deficits over a multiyear time frame, similar to the G-20 one that you described. And the question is, you know, has he bought into the completely mistaken notion that somehow cutting budgets will create jobs rather than destroy them, create economic growth rather than impair it? And it’s hard to know the answer to that question.

JAY: He kind of did answer in a sense. He’s talking all about the cuts. You–I mean, you could get rid of an enormous piece of the debt and the deficit very quickly if you actually tax some of the wealth in the country. So I know he was against extending the Bush tax cuts, but he went along with it. Like, what I’m getting at is, if he actually believes that the issue is that the debt is not more a danger than the depression, and believes that the need for massive investment in infrastructure building and all of that, he has to draw a line in the sand. And that would have potentially been a line in the sand: no, we can cut the deficit and invest if we tax the wealthy. But there was no line in the sand.

SILVERS: Well, in truth, the government–the deficit that the federal government has been running in the United States is pretty much entirely the product of three things. One of them is our continued expenditures on the wars in Iraq and Afghanistan. The second is the Bush tax cuts, particularly tax cuts for the wealthy that you were mentioning. And the third is the effects of the economic crisis itself, the loss of revenue due to mass unemployment and the increase in expenditures due to things like unemployment benefits and health care for the unemployed. That’s–those are the causes of the deficit as a medium-term phenomenon, and they need to be addressed by the sort of obvious things one needs to address them with, not by defunding public television and food safety and things like that, which are what’s in the Republican budget, or–

JAY: Or some of the cuts in the [inaudible]

SILVERS: –or defunding fuel aid to the poor, which is in the Obama budget. Now, the question that’s unclear about this moment is that when–is is that the president has caught flak from advocates of fiscal austerity at all times, because they say, when they look, when you sort of open up his book and look at it closely, they say that in fact he hasn’t made that deep cuts, really, at all, and that where he has, he’s substituted job-creating infrastructure spending for them. The debate here–the question you’re posing was one about–of rhetoric, right? Has the president embraced a rhetoric that is at odds with his policy objectives?

JAY: If in fact these aren’t his policy objectives. Like, I’m–well, giving my personal opinion here–I’m not so persuaded that he’s so committed to those policy objectives. He seems to give up on some of these policy objectives rather easily.

SILVERS: Well, that raises a different question, which is how hard to–which is fighting hard for these things. Alright? One of the things that we have noticed in the American labor movement over the last two years is that President Obama has a well worked out and very thoughtful vision of America’s economic future. It’s one that we wholeheartedly agree with, an economic future where good jobs replace bad debts, an economic future driven by intensive investment in public infrastructure, reengineering the way our economy works in terms of energy usage and carbon emissions. He has–President Obama has articulated a program for America’s economic future, and the challenge has always been to fight for it, to fight for it against the people who are going to oppose it because it’s not in their narrow interest, those folks who think that having the wealthy pay their fair share of taxes is somehow an unforgivable sin. Right? If you want to move our country forward, you’ve got to fight those folks. People who think that climate change doesn’t exist, if you want to move our country forward, you’ve got to fight them. And–but that question’s on the table.

JAY: And the word "climate change" is not even mentioned in the State of the Union speech, the word "control carbon emissions" not mentioned in the State of the Union speech. You know, there’s investment in clean energy, but I see ads from BP and some of the oil companies on television saying, yes, let’s invest in clean energy, so that’s not such a controversial concept. The issue of carbon emissions is a pretty controversial concept.

SILVERS: And so one of the things that we are looking at right now is what is going to happen with the president’s proposals around infrastructure, which are central to the president’s State of the Union–you’re talking about the State of the Union address, right? The centerpiece of the State of the Union address is investing in America’s infrastructure, right? And the House Republicans seem clear that they just don’t want to do that, right? They want the potholes to fix themselves. They would prefer that the Chinese be the global leaders in high-speed rail and not the United States. They have a vision of the future that simply can’t be seen. So now the question is how–it’s not a question of whether the vision is right. The president has the right vision.

JAY: Had the right vision. It’s–I’m not–I have to say, I’m not sure what it is right now, but–.

SILVERS: No, I’m saying–I’m talking about the vision in the State of the Union address. The president had the right vision. But it will be simply that, words, unless it’s fought for politically by mobilizing the vast majority of Americans [inaudible]

JAY: But even in the State of the Union [inaudible] aren’t you concerned, the extent to which he takes up the austerity narrative? Like, I just want to make it clear. I’m not saying debt is a nonissue, but it’s a non-issue–if you taxed people, it wouldn’t be such a big issue.

SILVERS: Well, this is what I was saying to you a moment ago about messaging. As a matter of economics, right, we are–the notion that what the United States needs to do with a real unemployment rate that’s somewhere in the 16 percent range, right, with a job hole of 11 million jobs, with economic growth fluttering around between 2 and 3 percent, a level that will not generate enough jobs to meet our growing population, right, the notion that what the United States needs to do in that circumstance is to engage in contractionary fiscal policy is completely and utterly wrong.

JAY: So what’s the labor movement going to do?

SILVERS: And where it will lead, right, is to the Japan scenario, right, to a lost decade.

JAY: So what’s the labor movement going to do? ‘Cause you guys–there wouldn’t be a President Obama if it hadn’t been for the trade union movement. And I think that’s pretty obvious. And, you know, you’ve had access with this White House that you certainly didn’t have under the Bush administration. But some of your critical objectives, particularly health care reform that at least included a public option–and much of the labor union actually wanted, you know, more single-payer style–you didn’t get. EFCA was on the agenda as your other big–the Employee Fair Trade Act, which was to help make it easier to organize unions. I haven’t even heard the words mentioned in months and months. So what are you guys going to do with this administration? How do you–you slugged it out for him, and then what have you got?

SILVERS: Well, I think what–as I was saying a moment ago, what we are really looking to do right now, what we hope to be able to do, is to help the president fight for his agenda of investing in America. That is really where we are focused. It is clear that we are going to have to at the same time fight against the president’s agenda on repeating the Bush kind of template in trade with the Korea agreement. So these two things are clear. Alright? We hope–we want to fight for the president’s job-creating agenda and against those elements of his agenda which are job-destroying, and that would be the Korea agreement. We hope to be able to fight for a budget that is consistent with that job-creating message and against the kind of non-vision or the destructive vision that’s apparent in what the Republicans are doing on the Hill today. But I think I need to be very clear here, and we have been clear with everyone that we talk to, that whomever wishes to really take steps that would be harmful to our economy or attack the fundamental foundations of America’s middle class, cuts in Social Security or Medicare, completely necessary cuts in Social Security and Medicare, folks who attack working people’s right–what remains of working people’s right to form unions, that the American labor movement is going to take on those fights with a vengeance and without regard to what party brings up the idea. And we, I think, are–I think working people’s determination in this respect is evident today in Madison, Wisconsin.

JAY: Will AFI-CIO as the private sectors workers in Wisconsin to join?

SILVERS: If we asked them, they are joining.

JAY: No, I mean, in terms of strikes and in terms of other kinds of actions.

SILVERS: I think, those kinds of questions are being talked about in Wisconsin by workers in Wisconsin and the AFI-CIO is going to lend every possible aid to workers in Wisconsin. The entire resources of [inaudible] US is at their disposal and I think workers around the world are watching.

JAY: Thanks very much for joining us.

SILVERS: Thank you.

JAY: Thank you for joining us on The Real News Network.

End of Transcript

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