This week, the budget proposal from the Congressional Progressive Caucus is suddenly getting some attention, and I'm glad. Does it stand any chance of becoming law? Of course not. But does Paul Ryan's plan have a shot at passing? Despite gaining House approval, it does not.
Matt Miller got the ball rolling a few days ago, noting in passing that the Congressional Progressive Caucus' budget plan "wins the fiscal responsibility derby"against its competing proposals because "it reaches balance by 2021 largely through assorted tax hikes and defense cuts."
This one sentence seemed to have let much of the political world that the CPC plan exists. The Economistnoted today:
Have you ever heard of the Congressional Progressive Caucus budget plan? Neither had I. The caucus's co-chairs, Raul Grijalva of Arizona and Keith Ellison of Minnesota, released it on April 6th. The budget savings come from defence cuts, including immediately withdrawing from Afghanistan and Iraq, which saves $1.6 trillion over the CBO baseline from 2012-2021. The tax hikes include restoring the estate tax, ending the Bush tax cuts, and adding new tax brackets for the extremely rich, running from 45% on income over a million a year to 49% on income over a billion a year.
Mr Ryan's plan adds (by its own claims) $6 trillion to the national debt over the next decade, but promises to balance the budget by sometime in the 2030s by cutting programmes for the poor and the elderly. The Progressive Caucus's plan would (by its own claims) balance the budget by 2021 by cutting defence spending and raising taxes, mainly on rich people. Mr Ryan has been fulsomely praised for his courage. The Progressive Caucus has not.
I'm not really sure what "courage" is supposed to mean here, but this seems precisely backwards.
Bingo. Trying to restore tax rates to levels that were pretty normal in the America John Boehner grew up in takes some courage, because it challenges the powerful and the elite to sacrifice. Republicans are doing the opposite -- as President Obama put it the other day, "Nothing is easier than solving a problem on the backs of people who are poor, or people who are powerless and don't have lobbyists or don't have clout."
Paul Krugman also had an item on this today, noting some of the policy specifics.
The CPC plan essentially balances the budget through higher taxes and defense cuts, plus some tougher bargaining by Medicare (and a public option to reduce the costs of the Affordable Care Act). The proposed tax hikes would fall mainly on higher incomes, although not just on the top 2%: super-brackets for very high incomes, elimination of deductions, taxation of capital income as ordinary income, and — the part that would be most controversial — raising the cap on payroll taxes.
None of this is economically outlandish. Marginal tax rates on high incomes would rise substantially -- enough to make even liberal economists slightly uncomfortable -- but the historical evidence suggests that the incentive effects wouldn't be too severe. Overall taxes as a share of GDP aren't given, but they would clearly remain well below European levels.
Also note, the CPC numbers add up -- which is more than we can say for the House Republican plan -- actually dealing with the problem conservatives claim to care about.
In case this isn't obvious, it's important to have competing ideas in the larger conversation.
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There are a variety of credible alternatives, and Obama's vision may represent the center, but there's a sensible, sound liberal approach that deserves to be in the mix.