Sunday, June 6, 2010

The Lies of Austerity

Sheldon Lubar seems to feel The Age of Austerity Lies Ahead. He claims, "The county is spending, and agreeing to spend, very much in excess of its revenues and ability to meet its promises to current employees and retirees...What is causing this crisis is overgenerous entitlements such as health care, Social Security and other benefit spending."

He then uses the worn and mistaken comparison between household debt and government debt. "Can you continue to spend beyond your income and borrow money forever to pay for this deficit? Of course not." But, especially during economic downturns, government needs to spend to stabilize aggregate demand. And, lets not forget, two-thirds of homeowners have a mortgage. Meaning - they are in debt; their budget is not balanced. Some will say, "But that mortgage is an investment." I retort, just as government spending - sewers, roads, energy, etc. - is an investment is America's future.

And, his reforms are way off the base. As I and many others have written, Social Security is not a problem. Plus, the savings from extending the retirement age would be minimal, not to mention, the economic impact such a change would have on seniors would be negative.

He then says we need to reduce health care benefits. Um, no. We need to reduce health care costs. All other advanced nations have universal health care and they spend half as much (per capita) as we do.

Lubar's next idea is to cut public workers' benefits. But as recent research has shown, when compared with similarly aged and experienced workers, public workers make less than private ones. Instead, how about we put a cap on CEO compensation? Since Mr. Lubar is so concerned with our budgetary situation, I'm sure he's behind this idea, and is more than willing to do his part.

He, next, calls for an overhaul of the tax system. "To produce sufficient revenue to balance the various government budgets." But, he wants any new spending to be tied to budget cuts. Which, during a recession, as we're in now, would reek havoc and prolong suffering. These blanket prescriptions superficially sound good, but are unworkable in reality - unless, of course, we truly wish to see: more people unemployed, more out of their home, crime increasing, roads crumbling, etc.

His next point, reducing the military budget, is long overdue. On this point, we agree. Why we need a military budget as large as all other advanced nations combined is unjustifiable.

Sheldon's closing, "Let's throw the rascals out," may go over well with the Tea Party crowd, but is really just the rallying cry of the obtuse. Sure, we have bad politicians (just like we have greedy, self-serving businessmen), and by all means, elect officials more willing to work for citizens. But lets not throw the baby out with the bathwater.

Why don't we just reinstate higher tax rates, as we had during our post-WWII era of high growth? There are simpler and more equitable ways to balance budgets and restore growth. Higher taxes on the wealthy, historically, have helped, not hurt the economy. Does Mr. Lubar really want to solve budget problems and grow the economy, or is he more concerned with his own wealth and quarterly returns?

For Further Reading:
Breaking Down The U.S. Military Budget
CEO-to-Worker Pay Imbalance Grows
Our View On Defense Spending
Post WWII Golden Age
Republican Resurrect Welfare Charge For Tax Day
Republicans Heart Irish Taxes
Tax Cuts
The Bounteous Wisdom of High Marginal Tax Rates
The Budget Deficit Crisis
The Great Tax Con Job

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