The Economic Policy Institute, Demos and the Century Foundation have combined efforts to publish a budget and deficit reduction plan alternative to the regressive Simpson-Bowles plan recently announced by the president’s deficit reduction commission.

In a nutshell, the plan shows that it is possible to have job creation, reinvestment in America, improvement in retirement security and health care for all, while at the same time balancing the budget. All of this, the progressive groups argue, can be done without cutting workers’ income or benefits.

The plan focuses on job creation and investment. Some of the additional revenue comes from indirect taxes – green taxes and fuel taxes – but the rest comes from measures that would raise taxes mainly on upper-income Americans. Taxing bad energy to promote good (i.e. cutting coal and foreign oil to promote renewables and green technologies) is the only practical way to compete with Germany and China on the critical industrial paths of the future. The plan supports taxing the rich to restore equity and fairness to rewards for work as opposed to enriching flim-flam artists on Wall Street. It proposes drawing down the large deficits from Bush-era wars, profligacy and tax cuts that let to the current depression.

The “Investing in America’s Economy” executive summary says the nation’s first priority “is to secure the fundamentals of the economy: strong growth and good jobs.” 

“In order to reduce our long-term national debt we must refuel the engine of our economy: the middle class,” the report says. “We strongly oppose the idea that America’s fiscal challenges should be solved by cutting longstanding social insurance programs that have brought security and prosperity to millions of Americans.”

According to the AFL-CIO, the proposal recommends increased public investments in the first 10 years for economic and job creation boosters. One example is transportation infrastructure investment, which, says Tamara Draut, vice president of policy and programs at Demos, returns $2.50 to the economy for every $1 spent.  The blueprint also calls for investments in early childhood care, health care technology, broadband expansion and fundamental research and development.

The plan expands upon the cost-cutting features promised in the recent health care reform act by strengthening the public option to improve bargaining power of consumers at the expense of big hospitals and their partners in the insurance industry.

The plan reimposes budget constraints on the Department of Defense, which has had carte blanch since Bush took office.

None of these changes will reduce US competitiveness. As Paul Krugman notes, “even with the revenue measures in the progressive plan, the US would have lower overall taxation than almost any other advanced country.” 

Lastly, unlike the Simpson-Bowles plan, or the current path, the progressive plan would achieve budget balance as early as 2018, five years earlier than Simpson-Bowles.

A second alternative plan is scheduled for release today by the The Citizens’ Commission on Jobs, Deficits and America’s Economic Future. The commission is sponsored by the Institute for America’s Future. This is a more centrist paper that proposes a longer schedule of debt reduction, a truer Keynesian position, to ease the impact of eventual austerities. Don’t overly fear the debt, this plans says: jobs are first, with less emphasis on military cuts as a budget target. Do not extend tax cuts for the rich.

The main lesson of these and other progressive plans, such as the one put forth by Rep. Jan Schakowsky: don’t let them tell you Simpson-Bowles/cut social security is the only option.


John Case
John Case

John Case is a former electronics worker and union organizer with the United Electrical, Radio and Machine Workers (UE), also formerly a software developer, now host of the WSHC "Winners and Losers" radio program in Shepherdstown, W.Va.