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Sarah van Gelder
Yes! Magazine / Op-Ed
Published: Friday 7 December 2012
Artificial or not, the outcome of this fiscal showdown could set policy for years to come.

4 Ways to Leap the “Fiscal Cliff” to a Better U.S.A.

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Feeling panicked about the so-called “fiscal cliff?” Don’t be. At worst, if would be more of a “ramp” than a cliff, since effects would be spread out over time.

More importantly, the crisis atmosphere is a fabrication created by Congress. The cuts in spending and the end to tax breaks were intended to be so unacceptable that members of Congress would be forced to reach agreement to lower the deficit, which was considered, at least by some, to be at crisis levels.

Artificial or not, the outcome of this fiscal showdown could set policy for years to come. Times of crisis—even ones that are fabricated—open the door to changes that would be politically impossible in calmer settings, as author Naomi Klein has pointed out in her work on disaster capitalism.

We are told, for example, that we can’t afford full Social Security benefits, even though Social Security is entirely self-funded and not a contributor to the federal budget deficit. We are told Medicare must be cut, even though it is by far the least expensive means of providing health care coverage.

Fortunately, lowering living standards for ordinary people is not a necessary sacrifice, as the proponents of “entitlement cuts” would have us believe. Instead, these cuts would increase poverty and further undermine the stability of the middle class. And with less money to spend, there would be less money in circulation to maintain the economy’s already weak momentum.It’s not hard to see who would benefit from these cuts. Without Social Security, our retirement money would be poured into Wall Street accounts, which would profit investment bankers and financiers, but put savings at risk. And if eligibility for Medicare is moved from age 65 to age 67, more of the elderly would be forced to rely on expensive for-profit health insurance companies for coverage.

So how could we cut long-term deficits while also improving the standard of living of ordinary people? The answer, it turns out, involves a combination of familiar ideas and new ones.

1. Reduce the waste and overspending in the military budget

We could be cut $440 billion from the military over 10 years without harming our security, according to a report by the Institute of Policy Studies. The Center for American Progress placed that number even higher, at $487 billion.

There are few threats facing the United States today—at least few that hundreds of billions in military spending can protect us from. Instead, we need massive investments in a transition to a clean-energy economy that will protect against climate change—which poses a real threat to our security. And we need spending that creates jobs; every $1 million spent on the military creates about eight jobs, but the same amount spent on home weatherization creates 12 jobs, and the $1 million spent on educationcreates 15 jobs.

In a recent New York Times column, Reagan administration Assistant Secretary of Defense Lawrence J. Korb puts the scale of U.S. military spending in a global context: “Even with sequestration-size cuts, we would still account for more than 40 percent of the world’s defense spending, and our allies would account for about half of the rest.”

And he shows that there is room to cut billions of dollars of waste. “Over the past decade, the Pentagonsquandered $46 billion on weapons it later canceled, and let half its procurement programs balloon beyond their original budgets.”

A majority of Americans support cutting the military budget, as well: 54 percent of Republicans, 76 percent of Democrats, and 71 percent of Independents, according to the Chicago Council’s 2012 biennial survey of public opinion . The 68 percent overall who favor defense cuts is up 10 points since 2010.

2. Cut subsidies for climate-polluting energy corporations

Those companies now receive about $4 billion in subsidies each year, although they are among the largest and most powerful corporations in the world. Taxpayer money should not be spent supporting a form of energy that is destabilizing the climate. CNN developed a list of these subsidies and how they can be cut.

3. Get more tax revenue from those who can afford it

The best place to start is by recovering some of the billions in tax cuts given to the wealthiest 1 percent and large corporations, and by creating some carefully crafted new taxes.

The Forbes richest 400 individuals have assets worth $1.7 trillion—more than five times the $300 billion they owned in 1992, according to Warren Buffett. That’s partly because they kept $1.3 trillion dollars they would have paid without the Bush tax cuts. Meanwhile, the share of federal revenue contributed by corporations fell from 27.6 percent in the 1950s to just 10.4 percent in the 2000s, according to the Congressional Progressive Caucus.

New York Times columnist Paul Krugman agrees that the wealthy can pay more. In the 1950s, he points out, the top marginal tax rate was over 90 percent—and that was under a Republican administration. “The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent.”

With the 400 wealthiest individuals paying an effective tax rate of about 18 percent, according to theNational Economic Council , there is lots of room for tax increases on the wealthy that would result in a fairer tax system.

4. Use these smart revenue ideas to create multiple benefits.

In addition to these familiar cuts and revenues, creative new ways of generating tax income are coming in from around the world and at home. Here are three we should do right away:

  • We should tax carbon—an idea that is gaining widespread support as a means to address the climate crisis. Doing so would tap market forces to free us from dependence on fossil fuels and make renewable sources of energy and energy-efficiency investments more cost competitive. An equal rebate to every American can offset the immediate burden of the tax, while providing an incentive for each household to shift to climate-friendly energy sources and to get efficient with energy use.
  • We should enact a financial transaction tax, as 10 European countries are doing. This tax would help cool the speculative fever of Wall Street, hit the highest income earners, and help reduce the deficit.
  • And we should eliminate the cap on wages subject to Social Security contributions. Doing so would keep the Social Security Trust Fund solvent for the next 75 years without any need to reduce benefits or raise retirement age.

What do Americans think of these ideas? Here’s an indication:

According to a recent poll conducted by Princeton Survey Researcher Associates just one in five Americans supports cuts to Social Security and Medicare. Just one in three supports cuts in Medicaid.

But two out of three support cuts in military spending. And, 60 percent support raising taxes on those with incomes over $250,000 a year, according to an ABC News/Washington Post poll from late November.

Ask the American people, and you will find no patience for using an artificial “fiscal cliff” to push through cuts that will harm ordinary people and extend tax breaks for the wealthiest Americans. The subject was thoroughly debated during the election. The argument should be over.

Sarah van Gelder wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Sarah is YES! Magazine's co-founder and executive editor.



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ABOUT Sarah van Gelder

Sarah van Gelder is co-founder of YES! Magazine and has been its executive editor since it began publication in 1996. Her focus at YES! is on the solutions and innovations that address the most profound issues of our time.

I don't know that we're able

I don't know that we're able to have a sane discussion about the economy in an era of stunning, widespread ignorance. For example, we still hear people complain that welfare is draining our budgets (note: Welfare has been gone since 1996). During the time that simple poverty relief in the US was being phased out, govt. redistributed several trillion taxpayer dollars upward, largely to corporations, which continue to use this money (our tax dollars) to build factories outside of the US, shipping out our jobs. This generation responds by throwing the poor off the cliff, utterly turning our backs on fellow citizens in need, and by accepting the idea that the very rich need our help via tax cuts.

Top Heavy Corporate America

Top Heavy Corporate America is about to fall over the cliff, not because of any decision or non-decision of Congress at the eleventh hour; but, by their own greed and corruption. Anyone who buys groceries, knows how much the cost of living has increased and it's certainly not because the average worker's salary has gone up. And, about those fuel costs (?)...is it really about the cost of crude, or the cost of the Executives at the Top of the fuel industry ?
There are more millionaires (and billionaires) today than anytime in history. Pickup any major newspaper the past few years and read how Corporate profits continued to roll-in during the recession with Executive pay increasing annually at 35% ...add on the tax savings advantage and you have a huge coup reaping a payscale in the millions while consumers pay for it and the workforce of these same corporations are cut to maintain this top heavy load. Corporations are so busy keeping up with the top heavy salaries, they haven't put anything back into building new jobs or retaining a living wage workforce who can buy their own products. There is no place for those at the top to go, but down...If they don't like the hike in taxes on their wealth, then cut their pay to reduce their tax...it's time to start closing the gap from the top down.

Negotiate for Medicare drug

Negotiate for Medicare drug prices like the VA does!

How To "Reform" MediCare,

How To "Reform" MediCare, MedicAid and Social Security

Instead of raising the age of eligibility for MediCare, eliminate the age restriction altogether, creating universal single payer healthcare for all Americans. This would eliminate the need for MedicAid altogether.

And, as the author advocates, eliminate the $106,800 cap on wages subject to Social Security contribution.

There .. "entitlement reform" done!

Add one more item. Include

Add one more item. Include "unearned" income in the payroll tax base.

It's worth pointing out again

It's worth pointing out again that a large part of our military expenditures are used to keep us supplied with hydrocarbon fuel's.

I agree that jumping off the

I agree that jumping off the financial cliff is dumb, but Republicans are just like that. What I also know is that the economy needs to shrink as we can never grow our way out of global warming. it is only by using LESS and having a smaller economy that we will be able to heal the ecosystems that support life (including human life) on Earth. So cut the Military Industrial complex, cut the excessive profits of the medical industrial complex, stop subsidizing the fossil fuel climate killers, and get rid of the idea that more is better. It is entirely crazy that the US economy demands that we spend more on Christmas each year in order to keep people employed.

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