The People’s Budget is an alternative budget put forward by the co-chairs of the 80-member Congressional Progressive Caucus. In contrast to the Ryan and Obama budget plans, it is humane, responsible, and sensible, reflecting the true values of the American people and the real needs of our struggling economy.
The far-Right, Ayn Rand inspired plan offered by Representative Paul Ryan, seeks to slash Medicaid, food stamps, support for child care, the environment, and the rest of government other than the military, Social Security, and Medicare (which he would phase out in 2022). Ryan wants to keep taxes absurdly low in order to destroy entitlement programs and other public, non-military spending. The far right budget plan is not really about deficits, but about the destruction of the social safety net.
President Obama’s budget, is a center-right proposal that would keep most of the Reagan-era and Bush-era tax cuts in place, which would result in less funding for vital programs such as community development, infrastructure, and job training. His budget request does very little to restrain military spending. Also, his plan never really closes the budget deficit.
In the progressive middle, representing (according to polls) the wishes of the vast majority of voters, is the People’s Budget. According to Jeffrey Sachs, writing on Huffington Post, it would cut the budget deficit to zero by 2021 in an efficient and fair way by raising taxes on the rich and giant corporations, curbing military spending, and bringing health care costs under control, partly by introducing a public option.
It raises tax revenues and closes the budget deficit while protecting the poor and promoting needed investments in education, health care, roads, power, energy, and the environment in order to raise America’s long-term competitiveness. The People’s Budget thereby achieves what Ryan and Obama do not: the combination of fairness, efficiency, and budget balance.
According to Sachs:
Ryan reflects the wishes of the rich and the far right. Obama’s position reflects the muddle of a White House that wavers between its true values and the demands of the wealthy campaign contributors and lobbyists that Obama courts for his re-election. Many Democrats in Congress have also gone along with the falsehood that deficit cutting means slashing spending on the poor and on civilian discretionary programs, rather than raising taxes on the rich, cutting military spending, and taking on the over-priced private health insurance industry. Only the People’s Budget speaks to the broad needs and values of the American people.
Highlights of the People’s Budget
The policy options that make up the People’s Budget fall into five broad categories: public investment, Social Security, health care reform, Department of Defense spending, and tax reform.
The following is a summary of the People’s Budget taken from a working paper published by the Economic Policy Institute in Washington, DC.
1. Public Investment:
The People’s Budget finances $1.7 trillion worth of public investment over the coming decade. Additionally, the plan budgets for $1.45 trillion in general public investment. The general public investment is front-loaded to put Americans back to work, with $1.2 trillion earmarked to be spent over the next five years.
The six-year surface transportation reauthorization proposal would rebuild and modernize the national surface transportation infrastructure and expand investments in highways, highway safety, passenger rail, and high-speed rail, among other projects. The proposal includes an up-front investment of $50 billion above current law for 2012, which, it is estimated, will generate hundreds of thousands of jobs over the next few years.
National Infrastructure Bank (I-Bank)
A National Infrastructure Bank (I-Bank) would leverage private capital and direct investment toward projects of national importance. A cornerstone of the I-Bank’s approach would be a rigorous project comparison method that would transparently measure which projects offer the biggest value to taxpayers and our economy.
Recapitalizing the Highway Trust Fund
The People’s Budget proposes raising the motor fuel excise tax by 25 cents as a direct funding mechanism to recapitalize the Highway Trust Fund and finance this surface transportation reauthorization proposal. The current tax on motor fuels is insufficient to fund today’s level of highway spending, which is already inadequate.
2. STRENGTHENING SOCIAL SECURITY
The People’s Budget does not propose any reductions in benefits. The People’s Budget raises the taxable maximum to include 90% of economy-wide earnings, and eliminates the maximum that employers pay on behalf of their high-income employees. This would mean raising the maximum taxable amount to $170,000 in 2012, up from $106,800 in 2011.
3. BUILDING ON HEALTH CARE REFORM
The People’s Budget adopts policies that build on the health care reform laws passed last year in order to assure access to affordable, quality care and expand coverage to Americans.
Offer a Public Option as part of the Health Insurance Exchanges
Beginning in 2014, national health insurance exchanges will be established (as a result of health care reform) through which individuals and families can purchase private coverage, increasing competition in largely fragmented, regional insurance markets. Under this option, the Secretary of the Department of Health and Human Services would administer a public health insurance plan to be offered alongside private plans through the exchanges. The public plan would exploit economies of scale to negotiate payment rates for prescription drugs.
Negotiate Drug Prices With Pharmaceutical Companies
When enacted, Medicare Part D (the prescription drug benefit) failed to harness the purchasing power of the federal government to negotiate wholesale prices for pharmaceutical drugs. Negotiating drug prices with pharmaceutical companies would save an estimated $157.9 billion over the 2012-21 period.
Medicare and Medicaid Savings
Major proposals include reducing the Medicaid provider tax threshold in 2015, tracking high prescribers and users of prescription drugs in Medicaid, strengthening Medicaid third-party liability, and recovering erroneous Medicare Advantage payments.
4. REALIGNING DEPARTMENT OF DEFENSE PRIORITIES
Base funding for the Department of Defense more than doubled from 2000 to 2009. Additional funding for military operations for Afghanistan, Iraq, and other combat missions has totaled $1.3 trillion over the 2001-11 period, of which $1.1 trillion went to the Department of Defense. These overseas contingency operations (OCOs) have been financed almost entirely off-budget in emergency supplemental appropriations bills. The president’s budget requested $126.5 billion for OCOs in 2012 and includes a $50 billion annual placeholder thereafter, for total costs of $576.5 billion over from 2012 through 2021.
Responsibly End the Wars in Iraq and Afghanistan
The People’s Budget accounts for an end to the wars in Iraq and Afghanistan. It would provide $161.4 billion in OCO funding for 2012 after which all OCO funding is ended. The Congressional Research Service estimates that this sum would be more than sufficient to safely and deliberately withdraw American soldiers from Afghanistan and Iraq. Relative to the highly uncertain costs budgeted for in the president’s 2012 budget, this withdrawal would save $415.1 billion.
Reduce Base Department of Defense Spending
Specific proposals for conventional forces include:
- Reducing active duty Army personnel strength to 427,000 by 2014 (a decrease of 120,000);
- Reducing the Marine Corps personnel strength by 30% to a force of 145,000 by 2014; reducing the Navy by 20% to a fleet of 230 ships; and
- Reducing the Air Force by 15%, reducing the number of squadrons by 18 of 60.
These force structure savings would total $593.7 billion over the 2012-21 period. Relative to higher spending levels in the president’s budget request, they would represent $816.7 billion in savings over the next decade.
5. TAX REFORM AND MODERNIZATION
The People’s Budget seeks to restore fairness to the tax code.
Reforming Taxation on Individual Income and Wealth
The People’s Budget would allow the Bush tax rate structure to expire on schedule when last December’s tax deal expires on December 31, 2012. It would immediately rescind the upper-income tax cuts, instead maintaining only those tax cuts for individuals earning less than $200,000 and joint-filers earning less than $250,000. Specifically, the budget would let the 33% and 35% tax brackets revert to 36% and 39.6%, respectively; reinstate the limitation on itemized deductions and personal exemption phase-out; and end all capital gains and dividends tax cuts. The People’s Budget would:
- Rescind the estate tax cut in December’s deal and replace it with Senator Bernie Sanders’ (I.-Vt.) Responsible Estate Tax Act (S. 3533). The policy would include a $3.5 million exemption ($7 million for married couples), leaving 99.75% of all estates fully exempt.
- Adopt Representative Jan Schakowsky’s (D.-Il.) Fairness in Taxation Act (H.R 1124), which would create several new tax brackets for high-income earners: $1-10 million would be taxed at 45%; $10-20 million, 46%; $20-100 million, 47%; $100 million to $1 billion, 48%; $1 billion and over would pay 49%.
- Eliminate the preferentially low rates on long-term capital gains and qualified dividends, and it would tax all capital income as ordinary income under the marginal tax rate structure.
- Limit the rate at which itemized deductions can reduce tax liability to a maximum of 28%. This policy would only affect itemizing tax filers currently in the top two income brackets.
- Replace the tax exclusion for interest with a direct subsidy to borrowers. Under this policy, state and local governments would make taxable interest payments to borrowers and receive a 15% subsidy from the federal government for the interest paid on those bonds.
Corporate Tax Reform and Responsibility Fees
- Impose a leverage tax (0.15% of covered liabilities) on large banks with more than $50 billion in assets. The fee would provide an incentive for large firms to decrease their liabilities, helping to rectify the problem of “too big to fail” financial institutions that was made all too apparent during the financial crisis.
- Impose a small tax on transactions of exotic financial products to further the policy goal of taming speculation and encouraging more productive investment.
- Eliminate fossil fuel tax preferences as detailed by the president’s budget. Specifically, this policy would repeal exploration and development expensing, preferential tax treatment of royalties, and domestic manufacturing deductions, among other tax preferences, for oil, natural gas, and coal producers.
- Reinstate the Superfund excise taxes that expired in 1995 in order to finance cleanup of hazardous waste.
- Eliminate the deferral of income from U.S.-controlled foreign subsidiary corporations and instead tax all foreign earnings as earned. Foreign tax credits (reducing U.S. tax liability by the amount of tax paid to foreign governments) would still be allowed, although the credit limits would be treated differently. The U.S. parent corporation would no longer split domestic and foreign expense activities, so the credit would only be allowed against tax liability to foreign governments.