Reject the Fiscal Cliff and the Grand Bargain


Posted on 29 November 2012

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By Duane Campbell

The Sacramento Bee editorial board started in the right direction in their editorial of November 26, 2012 by calling for small steps to avoid the "fiscal cliff". Then, strangely, they list small steps that only call for compromise as advocated by the Republican-austerity side. While unemployment remains high and economic growth slow, we do not need more austerity. If you want some small steps, President Obama suggested that we extend the Bush era tax reductions for the bottom 98% of earners. This is a proposal that almost everyone agrees with - or at least say they agree with. Then, we can disagree over the 2%, and work out a compromise.

We should also immediately reauthorize the funding for extended unemployment benefits to prevent 1.5 million workers and their dependents losing their benefits. California has received over $5 billion in federal funds for extended unemployment insurance during this financial crisis. If these funds are cut it could well throw California back into recession. Putting the most vulnerable people at risk is the wrong response to the fiscal situation. These, and other proposed cuts, will cost jobs.

We should reject the "fiscal cliff" hysteria of the corporate establishment and the pressure for a "Grand Bargain" that would cut Social Security, Medicare and Medicaid. While unemployment remains high and economic growth slow, the government should not impose austerity measures that reduce essential programs that benefit the middle and working classes and that further shred the safety net for the most vulnerable. Rather, government policy should prioritize investments in job creation, public education and healthcare reform, while raising essential revenues by taxing the large corporations and wealthiest citizens who can afford to pay.

We should oppose the notion that some "unified" fiscal cliff must be addressed in the lame-duck session of Congress. It is in fact a "fiscal obstacle course" that Congress should address without panic early in 2013, while heeding the election results. A progressive solution would include restoring all automatic domestic cuts, while making more strategic and deeper cuts in defense procurement spending. The revenue for expanding domestic social welfare spending can be raised by ending the Bush tax cuts for the top 2% and corporate tax-giveaways, while instituting a modest financial transaction tax on stock and bond transactions.

Over 200 community organizations in the Save for All Campaign of the Coalition on Human Needs, along with organized labor, are mobilizing their members and allies to insist on strengthening America's Values and Economy for All: to protect low-income and vulnerable people, promote job creation to strengthen the economy, increase revenues from fair sources, and seek responsible savings by targeting wasteful spending in the Pentagon and in other areas that do not serve the public interest. Readers should call on the lame duck members of Congress to follow these principles as they face budgetary decisions of immediate and long-lasting national consequence. To achieve sustained growth, fiscal stability, and economic security for all our people, we must invest in job creation, ensure that job seekers have the opportunity to work, and protect vulnerable people from hardship. We cannot promote the common good by cutting more and more services and jobs. See for example, End This Depression Now by Paul Krugman (2012, W. W. Norton & Company).

Democratic Socialists of America recommends these specific steps that should be taken:

  1. Restore all the automatic cuts to the domestic discretionary budget. These cuts would deny WIC nutrition to 750,000 mothers and children, eliminate Title I funding for 1.8 million low-income school children and would deny 734,000 households home heating assistance. In addition, it would cut financing of all federal regulatory agencies by 10%.
  2. Reauthorize federal funding of extended unemployment insurance. Otherwise, on January 1, 1.5 million unemployed workers and their dependents will lose their unemployment benefits.
  3. Restore the improvements to the Earned Income Tax Credit and the Child Care Credit that have reduced the tax burden on the middle and working classes.
  4. Abolish the Bush tax cuts on the top 2% and tax capital gains and stock dividends at the same rate as earned income. Increase effective corporate taxation through the elimination of corporate tax loopholes and corporate "tax expenditures." These reforms would yield $275 billion in additional annual revenue. In addition, instituting a "Robin Hood Tax" could net another $300 billion in annual revenues. (This Financial Transaction Tax is a small sales tax - for example 0.25% charged on all trading in stocks.)

So, yes, slow down. Don't panic. We need to deal with the fiscal problems, but not with the cruel austerity being imposed upon Greece, Spain, and Portugal. It does not work. Even Great Britain is returning to a recession.


Duane Campbell is Director of the Institute for Democracy and Education in Sacramento and a former Professor of Bilingual/Multicultural Education at California State University, Sacramento as well as the author of Choosing Democracy: A Practical Guide To Multicultural Education. He blogs at Choosing Democracy.

The four items listed are not worthy to be continued.The rich can certainly afford to pay more taxes; but before any more taxes are collected, Congress needs to determine which programs are worthy to be continued.Liberals presume that all existing programs (except defense) are good and need not to be looked at for efficieny and fraud. Of course, there is a great deal of waste in defense and all other programs. First, stop all grants in education, etc., to the states. Secondly, put a ceiling on federal salaries. Thirdly, stop all benefits to illegal aliens.