The Deficit Commission
Hickey: The Republican proposed deficit committee would be used to force through cuts in social programs
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network, coming to you again from Washington, DC. And joining us again is Roger Hickey. He is the codirector of Campaign for America’s future. Thanks for joining us.
ROGER HICKEY, CODIRECTOR, CAMPAIGN FOR AMERICA’S FUTURE: Thank you, Paul.
JAY: So there’s a committee is [inaudible] a couple of senators are trying to form a new committee to fight the deficit. Tell us what this is all about.
HICKEY: You know, the conservatives are always, always fixated on the deficit, and they are even in this period, where it’s the official policy of the United States government to expand the deficit in order to stimulate the economy and get us out of the deepest recession since the Great Depression. That’s the official policy. Obama’s even thinking of spending more money to create jobs. The conservatives, including conservative Democrats, are trying to pressure the Congress and the White House to lock the political system into an extreme focus on cutting the deficit.
JAY: So explain what they’re proposing.
HICKEY: Here’s what they’re proposing. They’re proposing that the Congress create a special commission, composed mainly of members of Congress, that would go off for a year and come up with a plan to significantly reduce the US federal deficit. That would include automatic cuts in Social Security and Medicare benefits. It would include cuts to other programs. They say they’re open to revenue taxes, but this is pushed by conservatives who don’t like taxes. So they would bring that back to Congress, and then the Congress would have very, very limited debate on this set of proposals. They would have to vote on the proposals on an up or down basis. It’s literally the Congress giving up its authority over the purse and allowing this—.
JAY: Well, they’d argue it’s taking control of the purse.
HICKEY: It is totally bypassing the structures of the Congress, the committees of the Congress that assess the need for spending and taxes, and give it over to this special committee.
JAY: Okay. So I’ll put on their hat. Their argument would be is the normal structures of Congress don’t like making cuts, ’cause everybody likes to go back with something for their district or their state, and nobody really wants to make any cuts. Everybody talks about it. So they say the normal mechanisms don’t work.
HICKEY: You know, the reality, of course, is that during the boom period of the Clinton administration, we were actually reducing the deficit on a regular basis—so much so that the Clinton people were, I think—incorrectly, in my opinion, but they were talking about getting rid of the entire federal debt, because they were devoting so much of the increased revenue from growth to reducing the federal deficit. They had it down to zero and well below zero. And the fact is that you get the deficit down when you have economic growth. The US had huge deficits and debt after World War II, ’cause we had bought up a lot of things and spent a lot of money. The robust growth after World War II and the investments that we made in the GI bill and other things actually grew the economy to the extent that we had a very stable debt situation very soon after the war.
JAY: The argument that this is happening on such a scale now, that the trillions of dollars both going out directly from the Treasury or via the Fed through the back door is just on a scale that they say could lead to inflation, a debasement of the American dollar.
HICKEY: The conservatives are trying to freak people out about the debt. They certainly are. They are trying to warn that there could be a run on the dollar, that our Chinese financiers will no longer buy American bonds. The fact is that we’re in a recession. We are financing our debt just fine from internal sources right now. And the major cause of the deficit is what Obama inherited, from the war in Iraq and Bush’s other expensive, unpaid-for spending, and the fact that a recession causes revenue to drop and taxes are down. And that’s primarily why the deficit is growing. Yes, he’s spending about $1 trillion on recovery efforts, but that will quickly be recouped if we have decent growth again.
JAY: In the terms of the people fighting the deficit fighters, there’s two areas that you don’t hear talked about very much, and they’re such obvious sources of enormous revenue. And the only reason I can understand it is because some of the Democrats don’t want us to talk about it. But number one is tax havens offshore, which many economists we’ve talked to say it could be as much as $1 trillion that should be being taxed from American companies and individuals that are going on regulated and taxed. A trillion dollars is enough to pay the whole health-care bill for a decade.
HICKEY: Yes, indeed.
JAY: And then the other piece is the disproportionate tax to unearned income, that earned income gets taxed at a higher rate than speculation. They’re such obvious two moves, but nobody talks about it. It’s like this debate goes on over here,—.
HICKEY: There’s another element, and that is cutting the military budget, which is the largest in the world.
JAY: Well, that’s obviously the biggest elephant in the room.
HICKEY: But nevertheless, this commission is a direct result of a coordinated campaign by conservatives funded by Pete Peterson, the former US secretary of Treasury under Republican presidents and big Wall Street financier. And Peterson and his foundation have done enormous agitation and education designed to make Americans and members of Congress be really freaked out about [inaudible]
JAY: And so the point of this legislation is on the campaign trail they’ll be able to say, "Well, we had a vote on this, up or down, and my opponent here voted not to cut." They just want to make—it’s essentially a kind of propaganda event, isn’t it?
HICKEY: Yeah. They really don’t have yet a plan to cut the deficit. They have a plan to create a structure that will eventually cut the deficit. And they will use the fact that people vote against this commission in political ads next time around. The other thing is that they’re attaching this legislation to the debt-limit legislation that the Congress has to pass in order to finance the government. So it’s a game of chicken. They’re trying to say: we are going to hold up the entire finances of the federal government of the United States unless you empower this commission to go forward. Frankly, I think they’re not going to get their way. I think both the leaders of the Senate, and especially Nancy Pelosi, don’t want to see this happening. I think that we’ve organized about 40 national organizations to protest this and to give a backbone to the Democrats in the Congress to resist it. And I’m hopeful that we can not only prevent it from happening but use it as an educational vehicle to show people, look, there’s alternative ways to go about cutting the deficit besides slashing peoples’ Medicare and Social Security benefits.
JAY: Well, it might be fun, actually, to pull a Republican tactic and say, okay, we’ll support this, ’cause I can’t believe they actually want it. They only want to be able to say they tried to pass this. But there’s too much boondoggle going on amongst Republicans and conservative Democrats. They might lose some of their own little favorite programs if people could just go up or down.
HICKEY: Yeah. I think these Republicans are so ideologically right-wing right now that this would be a very, very dangerous sort of robotic automatic mechanism that would be on its own track, with its own dynamism, that it could come back to the Congress, and then members would actually vote for it.
JAY: Well, we’ve seen how well that works in places, states like California.
HICKEY: Yeah. Well, they didn’t try this particular maneuver, but they—.
JAY: No, but something like it, where you have these sort of automatic confines about what can be done in terms of revenue and cuts.
HICKEY: And the point of all this is they don’t want to talk about a government that actually works. They want to talk about a government that’s the enemy and needs to be drastically slashed. These are the same people who wanted to privatize the Social Security system. These are the same people who have been really complaining about the fact that the US has a fairly basic social contract with seniors for some time. I personally don’t want to see Social Security benefits cut any more than they are currently, the level that they’re at right now. I don’t want to see Medicare cut in terms of benefits that people receive. I want to see Medicare reorganized so that the health-care system works in a more efficient way. These guys want to cut, and they don’t believe in raising taxes, even on the wealthy, to finance affirmative government. So it’s a very important ideological battle that we’re going to have to wage and win, reaching out to the American people and showing them how dangerous it is to put government on automatic. Conservative policies, if they were in effect right now, would have thrown this economy into a Great Depression. And you want to have the flexibility to spend money when you need to, as well as the long-term strategy of investing in the future.
JAY: I don’t think you understand. If the Republicans are in power, then it’s okay to [inaudible] There was no problem with that after 9/11. There was no problem with that during last fall when Bush was [inaudible]
HICKEY: There’s no doubt that the Republicans became just opponents of doing anything about the deficit while they were in power, that’s right, first with their tax cuts and then with their wars. So you’re absolutely right. In fact, their supply-side ideology said that deficits were not a problem. Now that they’re facing Obama in power, they’re using the deficit as a weapon against him.
JAY: The problem’s going to be we’ll see where Obama is on this, because I don’t think that’s entirely clear. It wasn’t long after he got elected he met with a bunch of conservative columnists—David Brooks and Krauthammer, George Will—and they asked him: what are you going to do about entitlement programs once you have to start dealing with the deficit after all this stimulus spending? And he apparently told them all entitlement programs will be on the table. But I guess that’s a battle we’ll have to see soon.
HICKEY: Yes. And as I say, there’s a big difference between reorganizing Medicare, which he’s trying to do through the health reform, and slashing Medicare or privatizing Social Security, which is what the conservatives want. So it’ll be a test. Democrats do have to show the American public that economic growth and smart investments will bring down deficits and not burden their children with unsustainable debt. But we can do that without these crazy automatic slashing machines.
JAY: Thanks for joining us.
HICKEY: Thank you.
JAY: And thank you for joining us on The Real News Network.