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Wednesday, November 30, 2011

The Right-Wing Assault on the 99 Percent

Center for American Progress Action Fund

The Right-Wing Assault on the 99 Percent

How Conservatives in Congress Are United Against Proposals to Help Ordinary Americans

Occupy protest SOURCE: AP/John Minchillo

Demonstrators affiliated with the Occupy Wall Street protests pass through the Upper West Side during an 11-mile march from uptown Manhattan to Zuccotti Park, Monday, November 7, 2011, in New York.

Americans are clearly fed up with the yawning gulf between a powerful minority of the wealthiest Americans and the other 99 percent of us. The “Occupy” protest movement reflects widespread middle-class frustration with rising inequality of income, wealth, and economic opportunities.

A year before the first Occupy Wall Street protests in Lower Manhattan, the Center for American Progress exposed and explained the conservative political strategy to obstruct proposals that would boost job creation, help families hurt by the Great Recession, and hasten investments that strengthen productivity and competitiveness of the U.S. economy. Indeed, since the 2010 midterm election, conservative politicians who control half of Congress have pressed ahead with policies designed to shower privilege on the ultra-wealthy and saddle more economic burdens on everyone else.

Their actions weakened the economic recovery, discouraged private businesses from hiring, and left our economy more vulnerable to economic shocks. And those shocks came early in 2011 with an oil price spike, an earthquake in Japan, a deteriorating environment for U.S. exports, and conservative-led threats to shut down and default the U.S. government.

It's long past time for these politicians to heed the legitimate gripes of regular Americans who are fed up with rising economic inequality and congressional assaults on the middle class. Conservatives in Washington must:

  • Stop obstructing job-creating policies such as the American Jobs Act
  • Stop defending special tax privileges for America’s wealthiest citizens
  • Stop attacking the federal safety net
  • Stop sabotaging efforts to make our financial system safer, fairer, and more efficient

This column details the ongoing efforts by conservatives in Congress to obstruct proposals that would provide relief to the ordinary Americans participating in spontaneous protests around the country—and to the mass majority of people they represent.

How conservatives obstruct job-creating policies such as the American Jobs Act

What the U.S. economy needs most now is short-term policy support for employment creation and economic growth. That’s a consensus view shared by leading Republican economists such as Martin Feldstein and Bruce Bartlett as well as nonpartisan economic experts including those at the International Monetary Fund and many private-sector business economists.

Policies to create jobs and growth would help put 14 million unemployed Americans back to productive work. They would improve job opportunities and incomes for those already working. They would create an economic environment conducive to business investment and hiring. And they would sustain critical public services and investments while easing budget shortfalls faced at all levels of our government.

And yet at every turn, conservative politicians stand in the way of policies that would benefit the 99 percent.

Just this month, Republicans in the Senate voted unanimously against the proposed American Jobs Act. Republican House Majority Leader Eric Cantor (R-VA) similarly refused to let the American Jobs Act stand for a vote in the lower chamber of Congress, declaring it “dead” even before representatives could consider the policy. This opposition comes despite predictions by private-sector economists who estimate that the Jobs Act would add as many as 2 million net new jobs in the United States and boost the economic growth for 2012 by 2 percentage points—all while decreasing the federal budget deficit by $6 billion.

The American Jobs Act grouped together a menu of proven, widely accepted economic policies to promote jobs and growth, combined with innovative approaches to modernizing and increasing the competitiveness of the U.S. economy and its workers. “Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans,” Obama said in his September speech to Congress announcing the plan.

Among its provisions, the American Jobs Act would create jobs throughout the economy by investing in repairs and modernization of U.S. infrastructure. The legislation also would create a national infrastructure bank—something that organized labor and the Chamber of Commerce both support—to insulate critical infrastructure investments from political manipulation and mobilize private investors to help foot the bill.

In addition, the bill would modernize our unemployment insurance system to encourage entrepreneurship and ensure those who lose a job don’t fall down the economic ladder. Unemployment insurance is one of the most efficient policies available to spur short-term job creation, and the Jobs Act would make it even more effective. The Jobs Act would also put some 400,000 teachers back in the classroom to ensure America’s kids get the quality education they need to renew the competitive and productive U.S. economy.

Blocking the American Jobs Act, however, is just the latest conservative move to thwart policies supporting jobs and economic growth. Conservative politicians have:

  • Stalled for months reauthorization of the Federal Aviation Administration funding, which put at risk 280,000 jobs building, expanding, and renovating airports and hurting the businesses and passengers that rely on them.
  • Proposed slashing the Economic Development Administration, a 45-year-old agency that punches above its weight to spur private-sector investment and job creation with public grants and innovation competitions, and builds regional innovation economies by linking university research centers with private business development. EDA was projected to create as many as 1 million jobs by 2015 but the Republican-controlled House is shortchanging EDA funding by more than $67 million.
  • Stalled for two months and then killed reauthorization of the Small Business Innovation and Research Program. SBIR created opportunities for small businesses to develop and commercialize innovative products and technologies from federally funded scientific research. Successful innovative companies developed under SBIR include what are now such household names as Qualcomm, Symantec, and Roomba maker iRobot. The program will die without further legislative action.
  • Blocked reauthorization of the federal highway trust fund, which delayed and jeopardized funding for job-creating infrastructure projects to improve America’s roads, bridges, rail, and mass transit systems, lowering costs for businesses and families. Private-sector analysts at Macroeconomic Advisors estimate that such investments to improve transportation infrastructure would create more than half a million jobs over three years.

In addition to throwing up fiscal policy obstacles such as the ones above, conservative politicians have also attempted to politicize the Federal Reserve and thwart it from fulfilling its congressional mandate of lowering unemployment through management of the U.S. money supply and interest rates. In late September, for example, Sens. Mitch McConnell (R-KY) and Jon Kyl (R-AZ) and Reps. John Boehner (R-OH) and Eric Cantor (R-VA)—the top Republican congressional leadership—penned a letter cautioning Fed Chairman Ben Bernanke against further monetary policy actions to strengthen the economy’s recovery from financial crisis and recession—again, what the Fed is supposed to be doing, something that even conservative economist Milton Friedman would agree is responsible macroeconomic policy.

Even conservative presidential candidates have joined in to try to cow Bernanke. On the campaign trail in late August, Gov. Rick Perry (R-TX) issued a veiled threat to “treat [Bernanke] pretty ugly” for pursuing monetary policy to stimulate the economy.

How conservatives defend tax privileges for the wealthiest Americans

The most obvious revenue source for job and growth policies that would benefit America’s bottom 99 percent is our unbalanced tax system that privileges the wealthiest Americans. Billionaire Warren Buffett famously complained that he pays a lower tax rate than his secretary.

But instead of putting the economy back on track by rebalancing the tax system, conservatives are instead pushing policies to expand tax giveaways to the top 1 percent, and to do so by raising taxes on low- and middle-income families.

In the fall of 2010, emboldened by winning half of Congress in the midterm elections, conservative lawmakers held up unemployment insurance extensions for millions of Americans still struggling in the aftermath of the Great Recession. They also held up tax cuts for middle-class families, demanding that top income earners also be rewarded with bonus tax cuts worth some $133 billion over 2 years.

Conservatives carried their fight for America’s wealthiest 1 percent into the summer months, threatening to shut down and push the federal government into default in order to secure more tax privileges for the wealthy few while slashing public services and investments that benefit the rest of the American population, such as health care, education, and infrastructure investments. Conservatives succeeded in 2010 in extending for two years tax breaks for America's wealthiest but they have yet to succeed in making these tax cuts permanent, though their intransigence in threatening government default over the issue is widely seen by private-sector economists as driving the U.S. economy back into a rut.

Right-leaning presidential candidates are also promising to keep fighting for tax policies that privilege the wealthiest 1 percent at the expense of the rest. Herman Cain’s widely panned “9-9-9” tax plan would cut taxes by $238,422 for the average 1 percenter, and by nearly $1.4 million for the average 0.1 percenter. Meanwhile, the average middle-class American would pay $4,000 more under the Cain plan.

Gov. Perry’s proposed flat tax is really more of an “upside-down tax” plan that would shift tax responsibilities away from the wealthy and toward lower-income and middle-class families. Perry's tax plan would leave billionaires such as Warren Buffett (who favor higher taxation for the wealthy) paying a mere 0.2 percent tax rate. And former Gov. Mitt Romney’s (R-MA) proposed tax plan would shower America’s wealthiest with another $6.6 trillion in tax breaks by making permanent the Bush tax cuts for the highest-income earners, eliminating the estate tax on the wealthiest households, and cutting corporate taxes by nearly $1 trillion.

How conservatives attack the federal safety net we all rely on

The top 1 percent can fend for themselves. The other 99 percent count on basic programs such as Medicare, Medicaid, and Social Security to ensure retirement and health security. These and other widely popular government programs have been under constant assault by congressional conservatives in recent years.

In April, House Budget Committee Chairman Paul Ryan (R-WI) proposed a sweeping attack on Medicare, replacing the popular insurance program with a voucher system that forces people to buy more expensive private insurance. The nonpartisan Congressional Budget Office found that “most elderly people would pay more for their health care than they would pay under the current Medicare system.” Despite popular backlash against the House Republican budget plan, nearly all House Republicans voted for the plan to privatize Medicare.

While conservative attempts to end Medicare as we know it have received most of the attention, the Ryan budget proposal to replace Medicaid with block grants would likewise have devastating effects on the middle class, which increasingly use the health insurance for the “poor” to get long-term care. Seventy percent of nursing home residents eventually become Medicaid beneficiaries, once they exhaust their savings and use up the mere 20 days of nursing home care covered by Medicare. “The overwhelming majority of families who make up what is generally considered the nation’s middle class will be at significantly greater risk of facing financial catastrophe at some point in their lives if these benefits are taken away,” according to CAP Senior Fellow Scott Lilly, a former staff director of the House Appropriations Committee.

Meanwhile, conservative candidates for president and their allies in Congress are assaulting Social Security, the retirement insurance Americans invest in through payroll taxes. Gov. Perry considers Social Security “a Ponzi scheme on a scale that makes Bernie Madoff look like an amateur.” Conservatives in power such as Sen. Mike Lee (R-UT) and Rep. Bob Goodlatte (R-VA) have suggested Social Security is unconstitutional. That puts them at odds with the overwhelming majority of the public, who by a 60 percent to 32 percent margin want to preserve Social Security just as it is.

More recently, conservatives in Congress continue to try and delay implementation of health reform. The House Republican funding bill for fiscal year 2012 would starve funding for the Affordable Care Act—a move that would actually drive up the federal deficit by about $6 billion this decade, while ensuring more Americans remain uninsured.

That same 2012 bill also cuts by $2.3 billion the Pell Grant program that helps students attend college and reduce their student loan burden. Mounting student debt is a chief complaint of the Occupy movement—and with good cause. It is on pace to top $1 trillion in outstanding loans this year, a heavy burden on recent graduates at a time when the unemployment rate among 16-to-24-year-olds, at 18 percent, is about twice the national average.

How conservatives resist reforms to make Wall Street safer, fairer, and more productive

Conservative politicians aren’t just carrying water for the top 1 percent tax privileges; they’re also actively defending and undermining attempts to rein in the big banks and financiers responsible for driving the U.S. economy into a ditch.

Reasonable people might conclude that a financial system that fueled a massive bubble and collapse needs better oversight and regulation. Reasonable people might also question the fairness of a system where financial institutions run by the wealthiest 1 percent collapse, get bailed out by taxpayers, and then use bailouts to fund bonuses worth more than what many in the bottom 99 percent earn in a lifetime.

In fact, reasonable people do. In 2009 Nicholas Brady, Treasury secretary to two Republican presidents, outlined a path out of financial crisis that lamented how the U.S. financial system has evolved to focus on innovation for financial profit’s sake rather than for building U.S. industrial capacity and infrastructure. This financial system, which led the United States to the brink of collapse, “is broken,” Brady said. In a 2010 interview University of Chicago economist Eugene Fama, father of the “efficient financial market hypothesis,” advocated strong capital requirement regulations to rein in “too big to fail” banks that invite crisis and costly bailouts at taxpayer expense.

Today’s conservatives are cut from a less reasonable cloth. Not one Republican in the House and only three Republicans in the Senate voted in favor of the 2010 financial regulatory reform bill, often called Dodd-Frank after its sponsors, former Sen. Chris Dodd (D-CT) and Rep. Barney Frank (D-MA). Every major Republican presidential candidate for 2012 vows to repeal Dodd-Frank. And conservatives in today’s Congress are already working to stall, undermine, and rollback Dodd-Frank’s efforts to fix our broken financial system.

As part of the budget they passed by party line in April, House Republicans also voted to undo Dodd-Frank provisions dealing with “too big to fail” financial institutions whose power destabilizes our economy and distorts our democracy in their favor. They also voted to undo stronger “resolution authority” granted to bank supervisors to unwind failing financial firms and recoup the costs for taxpayers, thus avoiding the need for taxpayer-funded bailouts to prevent financial system collapse.

Conservatives are also attacking the newly created Consumer Financial Protection Bureau, which will ensure Americans can gain access to needed financial services without fear of being preyed upon, exploited, or defrauded by financial companies. The CFPB is already playing a central role in protecting Americans against illegal mortgage foreclosures and usurious debt card swipe fees.

In July President Obama nominated Richard Cordray to be the first director of the CFPB but “a filibuster-proof bloc” of Republican senators vowed to obstruct any nominee to head the bureau unless Congress and the president agree to neuter the new agency.

The other 99 percent are still waiting.

Adam Hersh is an Economist and Gadi Dechter is Associate Director of Government Reform at the Center for American Progress Action Fund.

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