Avoiding a Government Shutdown Falls Far Short of What American Families Need

Reactions to last night’s budget deal epitomize what’s wrong with American tax and budget policy these days. On the one hand, policymakers are given a pat on the back for simply keeping the government from grinding to a shuddering halt. This is a low bar indeed. On the other hand, the criticisms lobbed against the deal are completely backwards—claiming that the deal is insufficiently ambitious in closing long-run budget deficits.

The deal is indeed insufficiently ambitious, especially when held up against all of the ways intelligent fiscal policy could help American living standards. I recently tried to provide some detail on what fiscal policy would look like if the living standards of low- and moderate-income families actually entered into policymakers’ calculations. For anybody interested in seeing just how far short the deal brokered yesterday was in meeting the economic needs of American families, take a look at that paper, Taking “Middle-Out” Economics Seriously in this Fall’s Fiscal Debates.

The very short version of how yesterday’s deal fell short is as follows:

Jobs: We need them, and fiscal policy has throttled job growth for the past couple of years. Cancelling the sequester outright would have been only a small step forward, but this deal couldn’t even do that. Even Republican appropriators could not figure out how to live under its draconian spending levels, and punted on doing their job in 2013 because of it. Yet nobody has simply called for its flat cancellation.

Revenue: Even after the American Taxpayer Relief Act (ATRA), we’re still asking far too little from the richest households and corporations relative to their increasing share of pre-tax incomes. This deal asks nothing extra from them, and the only additional resources it raises from Americans is from “fees” instead of “taxes” because, well, Republicans in Congress are childish and need a fig leaf from the charge that they allowed even a penny of revenue into the deal.

Social insurance (Social Security, Medicare, Medicaid, the Affordable Care Act, unemployment insurance, etc…): These programs are incredibly valuable to low- and moderate-income families. But they are often derided as bloated “entitlement” that must be cut by inside-the-Beltway deficit hawks. So far, major damage to the largest programs has been avoided, but yesterday’s deal does continue the precedent that discretionary spending cuts can only be reversed if this reversal is “paid for” with cuts elsewhere in the budget. This logic puts enormous pressure on social insurance programs. And, the deal’s most glaring weakness was its failure to continue extended unemployment insurance benefits into 2014, a cruel and stupid omission.

Public investment: There is broad bipartisan rhetorical commitment to the value of public investment. Yet even budget proposals that provide some temporary relief from budget cuts like the “sequester” still call for large cuts to discretionary spending over the next decade. And this discretionary spending is the source of the lion’s share of public investment in the federal budget. Yesterday’s deal does nothing to make the rhetorical commitment to public investment concrete.