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How To Keep The Economy Weak: Dumb Budget Deal

Image: Representative Paul D. Ryan of Wisconsin and Senator Patty Murray of Washington at a news conference on a budget deal. (Gabriella Demczuk/The New York Times)

Lauded as a “step in the right direction” by high-level members from both parties, progressives–calling it both ‘dumb’ and ‘cruel’–say that should be a warning to the nation


That’s what University of California, Berkely economist Robert Reich called the budget deal announced by Senate Budget Committee Chair Patty Murray and House Budget Committee Chair Paul Ryan late Tuesday.

Why dumb? According to Reich, the “deal doesn’t close tax loopholes for wealthy, restore food stamps to poor, or extend unemployment benefits for jobless.”

In separate tweets, he added:

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And he’s not alone in thinking the negotiated deal—designed to stave off another government shutdown threat by the Republican Party in the New Year—is another example where working people, those suffering unemployment, the poor, and public employees are asked to sacrifice as the nation’s corporate barons and wealthiest individuals are once again insulated from scrutiny.

Though much of the reporting said that both parties were able to make the deal because their respective sacred cows—cuts to Medicare or Social Security for Democrats and tax increases for Republicans—were left off the table.

“I support reaching an agreement that will end the culture of periodic crises that has driven policy in recent years,” said Lawrence Mishel, executive director of the Economic Policy Institute. “However, this deal addresses the wrong set of priorities: namely, deficit reduction ten years out rather than a stronger recovery now, and tweaking domestic spending for a few years as we continue to ignore the public investments our country needs.”

He continued: “The worst part of the budget deal by far is what it doesn’t address: unemployment insurance for America’s four million long-term unemployed workers. This deal asks essentially nothing of the richest Americans while placing terrible burdens on the unemployed as well as new federal employees, and continuing the fiscal policy drag on our still-unfinished recovery.”

And according to Michael McAuliff’s reporting, the negotiated agreement is going to give Medicare a huge “whack” by increasing cuts to the program’s providers.

The “mandatory budget resources” referred to in the deal, explains McAuliff, will focus mostly on Medicare providers, including doctors, clinics, and hospitals who serve the program.

Under the Budget Control Act of 2011, which set up the sequester, so-called discretionary programs were subject to 5.1 percent across-the-board cuts when the Congress’ “supercommittee” failed to find targeted savings. Most “mandatory” programs, such as Social Security and Medicaid, were exempt. But Medicare was not, and was subject to a 2 percent cut aimed at providers, worth more than $120 billion over the 10 years of the sequester.

By extending the sequester for mandatory programs, Medicare providers — including hospitals — will have to take the hit for two more years.

The Nation’s John Nichols describes the deal as “cruel, irresponsible, and dysfunctional” in his assessment, where he chastised lawmakers who said the deal was a “step in the right direction.”

What of the 1.3 million jobless Americans who — with a fully Dickensian twist — now stand to lose Federal unemployment benefits three days after Christmas?

The budget agreement does not look like a “step in the right direction” for them. And unless Democrats succeed in renewing benefits in a distinct piece of legislation that apparently must pass this week — as Congress is moving rapidly toward recess — many of the most economically-vulnerable Americans will be “lurching from crisis to crisis” very soon.

Calling it a “dirge for the unemployed” and a great modern example of the phrase “man’s inhumanity to man,” Campaign for America’s Future senior fellow Richard Eskow slammed the deal and the Democrats who (once again) “seemed to go soft” against a dug-in GOP who, despite the mean-spirited nature of their proposals, stood firm.

Looking at the facts of the deal, says Eskow:

Federal workers will be expected to subsidize this deal with an increase in their out-of-pocket pension costs. There will be cuts to Medicare. Airline passengers will pay a new tax. Military retirees – military retirees – will see their benefits cut.
And the long-term unemployed, who have paid dearly for Wall Street’s excesses, will receive no extension of benefits. The sequester’s cuts were disastrous, but this deal is needlessly punitive. It’s mean-spirited toward people who are struggling through no fault of their own, people who have chosen a life of public service, and the middle class in general.

Senator Bernie Sanders (I-Vt.) appeared on MSNBC’s All In with Chris Hayes to respond to the deal:


And the Huffington Post reports:

Progressives viewed the fact that the final arrangement did not include an extension of unemployment insurance as a major tactical defeat. Federal unemployment benefits are currently set to expire on Dec. 28, affecting an estimated 1.3 million jobless Americans. Democrats will now push to renew the benefits in a separate piece of legislation.

In addition, news of the pension provision angered federal workers even before the deal was announced, with dozens of federal unions signing on to a letter opposing it.

“Federal workers have sacrificed over $113 billion for deficit reduction since 2011, including a three-year pay freeze and increased pension contributions for newly hired employees. This figure does not include the up to eight furlough days caused by sequestration this summer and a 16-day shutdown in October which resulted in financial hardship and profound anxiety for half the government’s workforce and their families,” the coalition of labor groups wrote.

“Given these contributions, we are dismayed to learn that increasing the pension contributions and/or changing the retirement formula for current federal employees is on the table,” they wrote. “This is simply unacceptable.”

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