November 21, 2011
As was revealed in summer, when Tea Party Republicans were prepared to see America’s credit rating downgradedfrom AAA for the first time in its history rather than reaching a budget agreement with the administration (an act that ought to have counted as economic treason), the possibility of a bipartisan group reaching an agreement to reduce America’ s deficit has to be regarded as something close to impossible.
That, however, is what the deficit super committee, which has been meeting in August, is supposed to do by Wednesday, although, as the Guardian reported on Sunday, the committee, tasked with cutting $1.2 trillion from America’s $15 trillion budget deficit “looks close to admitting defeat as its deadline looms,” even though failure “will trigger automatic cuts to defence and social welfare programmes starting in 2013.” And today, as this article was published, the prognosis was no less gloomy. “‘Super-committee’ on brink of US deficit failure,” the BBC reported at 10 am Eastern time.
As the Guardian also noted yesterday, “Economists warned on Friday that failure by the ‘super committee’ could have dire consequences for the US and lead to another downgrade of its credit rating,” but, typically, Republicans are “refusing to budge on Bush-era cuts that provide tax breaks for wealthier Americans and expire in 2012,” which they want to extend, Democrats are “refusing to budge on cuts to ‘entitlement’ social welfare programs.”
While I side with the Democrats in this particular struggle, the problem, is that, when it comes to the bigger picture of how to rethink America’s economy for the benefit of as many people as possible, the Democrats also have no clue, and as a result, I was delighted, last week, to be notified by the activist Kevin Zeese, part of the October2011.org movement in Washington, DC that has renamed itself Occupy Washington, DC, that a group of activists and experts had come up with a detailed report explaining how the super committee could “not only reduce the deficit but close the wealth divide, create millions of jobs, strengthen the safety net and develop a democratized economy.”
I’m cross-posting the introduction and the full report below, as the conclusions are genuinely inspiring, and I’m also delighted to do so as this is a powerful document produced by people participating in the “Occupy” movement that began just two months ago with Occupy Wall Street, and which has seized people’s imaginations to such an extent that it has spread across America and around the world. While the Occupy Washington DC organizers conceived their occupation before Occupy Wall Street came into existence, and their report has come about through their specific experience and perspectives as long-term activists and radical thinkers, it is, I believe, an important signpost for the way forward, as the energy of the ‘Occupy” movement begins to work out how to move forward and to come up with specific policies to effectively tackle the inequalities in wealth between the 1 percent and the 99 percent.
Washington, DC: The Occupation of Washington, DC published “The 99%’s Deficit Proposal: How to create jobs, reduce the wealth divide and control spending” detailing plans to not only reduce the deficit but close the wealth divide, create millions of jobs, strengthen the safety net and develop a democratized economy. This report has been provided to the twelve members of the Congressional Super Committee.
After holding an Occupy Super Committee Hearing on November 9, Occupy Washington, DC published an evidence-based report that:
The report points out why the Congressional Super Committee will be unable to put in place these obvious evidence-based solutions by detailing the campaign donations received by the twelve members of the Super Committee. The report describes the committee as being occupied by monied interests that prevent them from confronting the extreme wealth divide. This corruption by concentrated wealth makes the committee dysfunctional.
The report concludes that the American people will see “corruption reign supreme” and that economic and political elites should expect to see this historic American revolt of the 99% grow larger and stronger in its resolve to create a just and sustainable future.
The disconnect between Congress and the people is vast. For decades, Congress has been passing laws that benefit the 1%, their campaign donors and big business interests, rather than creating a fair economy that serves all U.S. citizens. With this report Occupy Washington, DC shows that Congress is out of touch with evidence-based solutions, supported by the majority of Americans that can revive the economy, reduce the deficit and wealth divide while create millions of jobs.
OccupyWashingtonDC.org seeks a major transformation to a participatory democracy in the economy as well as in government. For forty years, concentrated corporate interests have acted with intent to take over government and other institutions. We seek an end to the rule of concentrated wealth and corporate power by shifting control, wealth and ownership to the people.
This report puts forward evidence-based solutions that will re-start the economy and avoid placing financial burdens on future generations. For the most part these ideas are not new. They are well accepted by economists and are consistent with the views of super majorities of Americans on key issues. Further, more than three-quarters of U.S. citizens say the country’s economic structure is out of balance and “favors a very small proportion of the rich over the rest of the country.” They are right. The solutions to our economic crisis are evident but they are blocked by those who profit from the status quo and control elected officials through the corrupt U.S. political system and its money-based elections.
The elites in Washington, DC seek to erase deficits that were caused by increases in war and military spending, tax breaks for the wealthy and corporations, the increased cost of health care, as well as bank bailouts, and increased costs and lost revenue from the economic collapse. The bi-partisan elites seek to cut $1.2 trillion in deficits even though there is no outcry for such cuts or evidence in the economy that they are urgently needed. They are proposing cuts in services to seniors, students, the poor and middle-working class households who did not cause the crash but already suffer from its consequences. This report shows that we can get the economy moving, reduce the wealth divide and control government spending while helping the 99%.
This report should not be considered the demand of the Occupy Movement. It was prepared (1) by one Occupation, Freedom Plaza in Washington, DC and it does not reflect even that Occupation’s full demands. Most of this report provides solutions to the deficit questions the Congressional Super Committee is attempting to address while also re-starting the economy. The difference between the Occupied Super Committee report and the Congressional Super Committee report will be stark and further demonstrate the corruption and dysfunction of government. While this report’s recommendations would benefit the 99%, the report that will come out of the congressional Super Committee will benefit the 1%.
Creating a Fair Tax System That Shrinks the Wealth Divide
The United States does not have a lack of financial resources; it has an intentionally unfair distribution of resources. The federal income tax has become less progressive and the rate paid by the wealthiest has been cut dramatically in recent decades. From 1944 through 1951, the highest marginal tax rate for individuals was 91%, increasing to 92% for 1952 and 1953, and reverting to 91% for tax years 1954 through 1963. In 1964, the top marginal tax rate for individuals was 77%. From 1965 through 1981 the top rate was 70%. The top marginal tax rate was lowered to 50% for tax years 1982 through 1986 and today it is just 35%.
The tax on investment income, capital gains, has also been dramatically reduced. The maximum statutory rate on long-term capital gains was 28% in 1991, 20% in 1997 and has been merely 15% since 2003.
The wealth divide has become extreme over the past three decades and tax policies have exacerbated this trend; much of the tax code exemplifies policies for the 1% at the expense of the 99%. The wealth divide is one of the foundational reasons why the economy no longer works and is in steady decline for most people in the United States. The tax code inadequately funds government, but that is the result of unfair tax cuts, not because America is broke (it isn’t). As Andrew Fieldhouse of the Economic Policy Institute testified: “Income per capita has jumped 66% over the past 30 years, and is projected to grow another 60% over the next 30 years.” The country needs to put in place policies that reduce the wealth divide and share wealth fairly so that when the economy grows it benefits all citizens, not just the 1%.
The recommendations below begin to correct the unfair policies of the last three decades, but these are only first steps to the transformational changes that are needed.
The taxes described above would generate at least $600 billion annually. The goal of the Joint Deficit Committee of $1.2 trillion over ten years could be met in two years. The United States has more than enough wealth to meet the needs of its people.
Cutting Spending for Economic Security
Creating Jobs and Restarting the Economy
One in six people who would like a full-time job are unable to find one. The unemployment rate of 9% greatly underestimates unemployment. If the pre-1994 measures were used, e.g. including discouraged workers who want jobs, as well as part-time workers who want full time jobs the underemployment and unemployment rate would be 23%. The measures listed below would effectively create jobs and restart the economy. Job loss means less tax revenue and more expenditure by the government. A critical ingredient to reducing the deficit is job creation.
These recommendations would create millions of jobs and get the economy moving again. As the economy develops and expands, programs need to be put in place so that new wealth is shared more fairly; workers have greater control over their work through employee ownership and protections for collective bargaining; and so some of the profits created by public investment (i.e. by tax dollars) are shared among all U.S. taxpayers. See below, Democratizing the Economy, Shifting Economic Power, Wealth and Ownership to all U.S. Citizens.
Protecting and Improving Social Security
Saving Social Security is not a traditional left-right battle. Polls consistently show that people across the political spectrum overwhelmingly support Social Security and do not want to see it cut. Even the vast majority of Tea Party Republicans support these programs. Cutting Social Security is a Wall Street agenda of the 1% that opposes the interests of the rest of us. As Dean Baker writes: “There is a bipartisan consensus among the elites that these programs should be cut. The guiding philosophy of this drive is that public money that goes to programs for middle income and poor people is money that could be in the pockets of the wealthy.”
Social Security does not contribute to the deficit. Social Security is financed by a designated Social Security tax and there is more than $2.5 trillion in the Social Security trust fund. The efforts to cut Social Security to fix the deficit are a fraud designed to enrich Wall Street financiers by forcing people into the private retirement market.
The temporary payroll tax cut will create some jobs, but not enough to get the economy moving and is not the most effective tax cut stimulus. Further, it unnecessarily puts Social Security in jeopardy by reducing taxes designated for Social Security. The Congressional Budget Office estimates the cut will reduce federal revenues by $112 billion over the next two years. The government will have to borrow to fill that hole in the Social Security trust fund, giving opponents of Social Security another argument against the program.
Social Security faces no immediate threat of insolvency. The Congressional Budget Office just released new projections showing that the Social Security trust fund is fully solvent through the year 2038. Even after that date, the program would have enough money to pay 81% of scheduled benefits for the rest of the century. Below are recommendations that would strengthen social security:
Improving Medicare and Expanding it to Provide Health Care to All in the United States
Democratizing the Economy, Shifting Economic Power, Wealth and Ownership to all Citizens in the United States
Big finance corporate capitalism is failing. It is concentrating ownership and wealth as well as domination of the economy in the wealthiest Americans. New approaches are needed to share wealth, ownership and economic power more fairly. The grass roots protests, whether from the Occupy Movement or the anger from the conservative Tea Party, are based on the same realities: economic insecurity and economic unfairness. A full discussion of these issues is beyond the scope of this report but it is time for the people of the United States to be asking critical questions:
The answers to these questions lie in the conflict of our era — participatory democracy vs. concentrated wealth. There is growing evidence and experience that shows a democratized economy is the fairest, most sustainable and effective approach which results in a shared prosperity.
Democratizing the economy would move the United States away from concentrated corporate capitalism and create an economy in which wealth is more equitably shared. This change is already happening under the radar of U.S. media coverage. A democratized economy already has a foothold in the United States.
There is a lot of experimentation going on regarding worker ownership, democracy in the work place and sharing in the profits of corporations; with communities working together to control development through non-profit land trusts; with public banking, democratizing money and community banks; with public utilities and democratizing energy; and with participatory budgeting. These are a few examples of the democratization of the economy that is building a new economic model of more widespread ownership of assets and participation and wealth. As one of the witnesses of the Occupied Super Committee, Gar Alperovitz writes:
Over the last three decades, for instance, more workers have become owners of their own companies than are members of unions in the private sector; indeed, 5 million more. Simultaneously, there has been increasing experimentation with unions within such firms, and with new ways to increase participation and control. There are also more than 4,500 nonprofit community development corporations that operate affordable housing and other neighborhood programs. Approximately 130 million Americans are members of co-ops. In Cleveland, an innovative group of linked cooperatives has set new standards for community-building economic change. ‘Social enterprises’ are developing in communities throughout the nation that transform the ownership of capital into businesses, the sole purpose of which is to provide community services.
One form of new ownership is cooperatives. There are 130 million Americans who are members of some types of co-ops, most commonly credit unions. Another widely shared experience is joint-ownership is Employee Stock Ownership Plans (ESOPs) which give employees ownership of companies through stocks, while these do not usually include management by employees they do provide a share of the profit. There are more than 13 million people who are part of ESOPs — meaning there are more employee stock owners than there are members of private unions. Worker-owned co-ops go further and give workers a say in the management of the company. Worker owned co-ops are at the cutting edge of democratizing the economy and provide some of what we need to transform the economy.
At a national level, despite comments of some in the corporate media and some elected officials who speak for big business interests, the truth is that national programs like Social Security and Medicare have worked well. As described in previous sections of this report, these programs can be improved and expanded but they are also models on which to create programs that respond to national needs. Further, the bail out of the automobile industry, which included some public ownership, has succeeded in saving that industry and returning it to profit.
However, more could have been done to serve the public good by continuing public representation on the boards of automobile companies, requiring taxpayers share in the profit as investors and directing those industries to build mass transit and create jobs.
The Occupy Movement seeks a radical transformation to a new economy and political system. A close examination of what is happening in the United States shows that this transformation is already underway.
The Lessons of the Super Committee: Corruption Rules Dysfunctional Government
The proposals in this report show that it would not be difficult for the so-called “Super Committee” to achieve the requirement of at least $1.2 trillion in savings over the next decade. And, that it can be done in a way that corrects wealth disparity and re-starts the economy. But, in many ways, the super committee is “occupied” by corporate interests and cannot act for the people. The make-up of the committee and the tens of millions of dollars members have received from entrenched corporate interests ensure that the committee will exemplify the corruption in Congress — which is why people are occupying public spaces across the country.
The Occupation of Washington, DC at Freedom Plaza expects the commission’s recommendations, if they are able to make recommendations, to reflect the interests of their donors. We urge the public and the media to review their recommendations with these political donations in mind.
The twelve Members of the Joint Committee on Deficit Reduction have received $41 million from the financial sector during their time in Congress, according to a report by Public Campaign and National People’s Action, “Wall Street and the Supercommittee: The $41 Million Question.” At least 27 current or former aides for the “super committee” members have lobbied on behalf of financial firms:
The ten biggest contributors to the super committee members include:
Club for Growth $990,066
Microsoft Corp. $810,100
University of California $629,495
Goldman Sachs $592,684
EMILY’s List $586,835
Citigroup Inc. $561,081
JPMorgan Chase & Co. $494,316
Bank of America $349,566
Skadden, Arps, et al. $347,356
General Electric $340,935
The largest donor, the Club for Growth, opposes any new taxes on the wealthiest in the United States. As a result, despite the abhorrent wealth divide, the committee is unlikely to recommend the obvious, fair taxes on the wealthiest people who fund their campaigns.
The members of the committee received more than $3 million total during the past five years in donations from political committees with ties to weapons contractors, health care providers and labor unions. They received more than $1 million overall in contributions from the health care industry and at least $700,000 from weapons companies. This presents a problem for the super committee because if they fail to find $1.2 trillion in savings over the next decade it will result to mandatory cuts that will impact health care and weapons makers. This means the committee is likely to make a bad deal for the United States, in order to avoid cuts to their major donors.
Throughout the time when the committee has been meeting they have been holding fundraisers across the country. This open money-taking while making decisions that affect those who are giving money is the kind of open corruption that has led to a loss of faith in government.
It is not only donations that will impact the committee, but a major lobbying onslaught by 400 groups who report lobbying the Super Committee. About 30% of these organizations — 118 groups in total – were from the health sector. The finance insurance and real estate sector ranked third, with 40 companies within that sector reporting lobbying activity during the third quarter that targeted the super committee. And 39 groups in the energy sector reported lobbying the super committee. Both the communications and electronics sector and the general business sector saw 26 companies and organizations explicitly mention the super committee in their third-quarter lobbying reports. These are many of the same concentrated corporate interests that have funded the campaigns of super committee members.
Conclusion: Revolt against Economics for the 1%
Once again, the people of the United States will see corruption reign supreme. Despite evident solutions to the deficit and the economic collapse, the Congress will show its corruption and dysfunction and be unable to put forward real solutions.
We issue this report to alert everyone — the political system is broken. It is corrupted by the power of concentrated wealth, campaign donations and corporate power. The job of the occupations across the country is to build an independent nonviolent movement that replaces this corrupt system with one in which the people rule. The battle between concentrated wealth and participatory democracy will be heightened by the evident corruption of the Super Committee which will not challenge the unfair policies of the 1% while requiring austerity for the 99%.
The economic and political elite should expect protests to grow. We are at the beginning of what will be seen as a historic revolt against status quo elites that will transform this economy as well as how the United States is governed.
(1) The evidence-based solutions in this report come from people who are experts in the fields addressed as well as the views of people affected by the policies. We relied on a range of sources and have provided links to those sources in the on-line version of this report. In addition, Occupy Washington, DC held a public hearing on Wednesday, November 9th. You can see the public hearing at: CSPAN Coverage of Occupied Super Committee Hearings. Participants included: Kevin Zeese, an organizer of Occupy Washington, DC and co-director of It’s Our Economy and co-chair of Come Home America; Andrew Fieldhouse of the Economic Policy Institute; Carl Conetta of the Project on Defense Alternatives; Kenneth Peres, an economist with the Communications Workers of America; Dean Baker of the Center for Economic and Policy Research; Margaret Flowers, an organizer of Occupy Washington DC and congressional fellow for Physicians for National Health Program; Gar Alperovitz, a founding principal of the Democracy Collaborative and with the National Center for Economic and Security Alternatives.
(2) This is commonly known as corporate welfare. All corporate welfare should be stopped until the Congress passes laws transforming corporate welfare into taxpayer investment. There are reasons for government to invest in building the economy, for example there is a need to invest in a new energy economy, but the profits from these investments should not only go to the 1% who own energy companies, they should be treated as taxpayer investment and all taxpayers should share in the profit from the investment. Such a system could be modeled after the Alaska Permanent Trust which has existed for oil exploration on state lands in Alaska since 1980. Such a system could develop into a guaranteed national income that would lift people out of poverty and provide a safety net to all. This is a critical part of a democratized economy. See: Agenda for a Democratized Economy.
Read all posts by Andy Worthington