The recent federal government shutdown and tea party threats not to pay all the nation’s bills damaged the country’s economy. Past budget decisions have made the nation’s fiscal situation and Americans’ economic situation worse.
Going forward, we can do more than recoup our losses.
Our elected officials can work toward what most want: an economy that works for all, with vibrant businesses and opportunity and security buoyed by government.
Doing so requires addressing broader economic changes over the last decades.
Our middle class is being squeezed. It’s increasingly harder for families to make ends meet. Class background makes more of a difference than before, with young generations less able to rise. While the United States was a shining example, many other countries now have greater class mobility.
All of this matters in our lives, as parents fret over the small and large expenses, and middle-aged Americans and new high school and college graduates worry about their futures.
Wages for most have increased little, undermining the broader economy. When people have little discretionary income, they buy less. Lower demand means fewer jobs.
Low-wage jobs also contribute to budgetary pressures. People with depressed wages pay less federal tax and require more financial support.
According to a report by Democratic staff for the U.S. House Committee on Education and the Workforce, taxpayers subsidize companies with many low-paid employees. “A single 300-person Walmart Supercenter store in Wisconsin likely costs taxpayers at least $904,542 per year,” the report reads, for, among other things, workers’ food stamps and health care coverage. While Walmart claims low wages are necessary, competitors pay more and are still highly profitable.
As companies paying basement wages benefit from this federal spending, their hard-working employees may be stigmatized, said to be receiving “welfare,” for which they are eligible because their pay is so low.
Americans believe in the American dream, and it can be recovered with the proper mix of policies promoting opportunity and providing security.
But nothing will change if the nation is ungovernable, an outcome some seem to desire. Hurting government serves their political purposes.
As Sen. Michael Bennet, D-Colo., recently said, “If your ideology is about dismantling the federal government, having a 9 percent approval rating suits you just fine because . . . the more degraded they can make the government seem, the more it suits [your] ideological purposes.”
The vast majority of Americans want a government that works. Yet we have been on a path of deep, damaging automatic cuts.
Between the cuts adopted in 2011 through the Budget Control Act and sequestration, federal spending declined by $2.7 billion. According to Macroeconomic Advisers, budget austerity “lowered economic growth by one percent each year since 2010, with a combined loss of over two million jobs.”
These wrong-headed cuts also reduced revenue and made the tax system less fair.
As journalist George Packer reports, “face-to-face audits have dropped by half since 1992, as have the odds of being convicted for a tax crime. Frank Clemente, the director of Americans for Tax Fairness, says, ‘When the IRS doesn’t have the money to do its job, it’s easier for wealthy people and big corporations to cheat the system, especially by hiding profits offshore.’ For every dollar added to the IRS budget, the agency is able to collect at least seven dollars in revenue, but in times of austerity that money doesn’t come in — which means that, in recent years, the Treasury has lost billions in taxes, starving government services and increasing the deficit.”
Maine’s U.S. senators have stood up against the thoughtlessness of this approach. After the Senate passed a budget in March 2013, Sen. Susan Collins called for the usual next step. While some Republicans blocked a conference committee with the House 19 times, Collins pushed for negotiations. Collins did so again during the shutdown, a positive step, albeit while problematically supporting a repeal of the medical device tax. And now Sen. Angus King will serve on a body tasked with developing a budget compromise between the House and the Senate.
Collins and King’s willingness to make decisions rather than choose shutdowns and mindless cuts is essential for improving our economy and making government work better. But they must also make the policy choices that create opportunity and provide the security needed by Americans who have suffered from the growing class divide.