In a major editorial last Sunday entitled “What They’re Not Telling You About the Deficit,” The New York Times offers at best a partial solution to the problem of the deficit. The Times justifiably criticizes the Republicans, who blame stimulus spending and extension of unemployment benefits for the deficit. The Republicans fail to mention the tax cuts they enacted primarily under the Bush administration to benefit the super-rich.

Allowing the tax cuts for wealthy families to expire at the end of the year would generate $680 billion, a major chunk of the deficit that is expected to rise to $1.4 trillion this year.

Unfortunately, the Times also calls for letting the tax cuts on working families expire and socking them with a new “value-added” tax – i.e. a sales tax. This regressive tax of course would hit working class people much harder than rich people. It is unnecessary, unjust and unwise since the basic problem in the recession is severely constricted consumer spending, accounting for over 70 percent of the U.S. economy. Unlike the wealthy, working people must spend their hard-earned income on consumer goods and thereby stimulate economic recovery.

Until mass buying power grows substantially, the private sector will have no incentive to hire more workers and expand production. They will continue to plow their excess wealth into various casino operations on Wall Street.

Furthermore the Times muddies the water by continuing to propagate the false idea that cuts in Social Security, Medicare and Medicaid are ultimately needed.

Social Security, once again in the cross hairs of the ultra-right and the Federal Commission on Fiscal Responsibility, has no impact whatsoever on the deficit. It is fully self-funded by payroll taxes on workers and employers and generates a huge surplus, expected to reach $4.3 trillion by 2023.

With no changes, Social Security can provide full benefits through 2037 and, even after that, would be able to pay 75 percent of benefits.

It is well known that that reduction can be easily avoided by making the rich pay their fair share. Currently Social Security taxes are taken out only on the first $106,000 in income. Raising or eliminating this “cap” would make Social Security solvent for generations to come.

Only if you are intent on protecting the super-rich from paying more taxes does it make sense to ask for increasing the retirement age or reducing benefits, cuts that the Times refers to as “modest.”

While raising the retirement age to 70 is being bandied about, what is really needed is to lower it and bring the U.S. into line with most other industrialized countries. AFL-CIO President Rich Trumka has said that those advocating cutting benefits and raising the retirement age are “playing with dynamite,” and the labor organization, together with 59 other groups, has formed a new coalition to oppose such proposals that may emerge when the federal commission reports in December.

It should be noted that earlier this year the labor movement in France held a general strike when the government suggested raising the retirement age from 60 to 61.

Medicare and Medicaid do impact the federal budget but this is because even with the recently enacted health care reform, skyrocketing health care costs have not been contained. This can be best addressed by expanding Medicare and displacing the extraneous private insurance companies whose profits and overhead account for 30 percent of health care costs.

As in the case of the tax proposals, cuts in Social Security, Medicare and Medicaid only reduce working class buying power and undermine economic recovery.

Aside from restoring taxes on the rich, the Times gives at best passing reference to the other major cause of the deficit – military spending. The extent of its comments is: “That has traditionally been politically off limits but there will have to be some very hard thinking there.”

No mention is made of the proposal by Reps. Barney Frank, D-Mass., Ron Paul, R-Texas, Walter Jones, R-N.C., and Sen. Ron Wyden, D-Ore., to cut $1 trillion from military spending over the next decade. Even though the U.S. is not threatened militarily by a single country, we spend more than the rest of the world combined on “defense.” Rapidly ending the pointless wars in Iraq and Afghanistan, which have so far cost over $1 trillion, would also do wonders to eliminate the deficit.

In any case the deficit is largely a red herring – an issue being ginned up by the Republicans for the purpose of preventing Obama from making headway on economic recovery. They hope that anger and frustration over the ongoing crisis can be channeled into Republican votes in November.

As Trumka has stressed repeatedly, the U.S. has no short-term deficit problem; it has a short-term jobs problem.

Only if that is addressed will there be economic recovery, including more tax revenues to reduce the deficit.




Rick Nagin
Rick Nagin

Rick Nagin has written for People's World and its predecessors since 1970. He has been active for many years in Cleveland politics and the labor movement.