Some Kind of Deficit

Thomas Massaro, S.J. 
APRIL 18, 2011 

My friends are tired of hearing me bemoan how seldom public discourse ever gets around to addressing substantive issues of justice, such as the shape of public finance and budgeting. So I suppose I ought to be rejoicing that our nation is conducting serious high-level debates about economic priorities: fierce budget battles in Washington; statehouse rallies in Wisconsin in support of beleaguered public-sector unions; deficit hawks wielding the budget axe with a vengeance; Congressional wrangling on debt ceiling extensions.

Sure, I am glad that such matters at least occasionally eclipse celebrity scandals and have maintained a place on the front page alongside the recent crises in Japan and Libya. If I harbor disappointment, it is because so many of our political leaders are getting it all wrong and are endorsing the wrong priorities entirely.

The shape of the current budget debates changes from minute to minute, and there is no way to predict the eventual outcome. Will we avert a government shutdown, or will the reckless game of “chicken” prevent sensible bipartisan compromise? But beyond the ebb and flow of events, a key challenge is to stay in touch with the bedrock ethical principles that should guide any process of social deliberation. Spiritual writers use the phrase id quod volo (“that which I desire”) to capture this task of discerning proper and heartfelt goals. I deeply desire to live in a country that:
  1. Does not abandon its poor to starvation, homelessness and destitution. Deficit hawks always seem to circle above the prey of anti-poverty programs, especially those with shadowy names like community services block grants. But the more you know about the crucial assistance they provide to struggling people and neighborhoods, the more eager you will be to exempt these particular heads from the chopping block. Investments in community health centers, job training and early childhood development for disadvantaged groups, through programs like Head Start, will surely in the long run save money for government at all levels. Current proposals to cut them sharply amount to eating our seed corn. Whether we argue from outcomes or from ethics, it is easy to agree with a line from a recent letter from the U.S. bishops’ conference to the Senate: “In a time of economic crisis, poor and vulnerable people are in greater need of assistance, not less.”
  2. Protects the rights of workers to organize and engage in collective bargaining. Several cash-strapped states are seeking to limit the influence of public-sector unions. Even some Catholic voices, like the Rev. Robert Sirico of the Acton Institute, are piling on against the unions, demonizing them as impediments to prosperity and justice. To his great credit, Archbishop Jerome Listecki of Milwaukee stepped up to defend the constant tradition of church support for organized labor, writing: “Hard times do not nullify the moral obligation each of us has to respect the legitimate rights of workers.” Scapegoating and demonizing organized labor is a sure sign that the drift of public deliberation is turning away from authentic social justice.
  3. Maintains a commitment to the least privileged around the world. The slash-and-burn approach to budget-cutting has targeted the already modest funding the United States provides to assist programs crucial for development. Foreign aid makes possible life-saving public health and social service outreach to some of the poorest people on earth. Cut-ting humanitarian aid and international pover-ty-focused development assistance would seriously undermine our nation’s leadership position in the world community. Fighting epidemics and helping people grow subsistence crops are not optional expenditures for a responsible nation, no matter how badly it needs to pinch pennies.
Each of us could compile a much longer list of deep desires, but these three priorities will always be near the top of my list.

Sure, deficits are serious concerns, but the current budget process is heading in a direction that is ethically and practically indefensible. Leaders from both parties appear not to be acting on consistent principles and seem unaware of the real human costs they are imposing through austerity plans. When politicians hide behind the mantra, “We are broke,” I am often tempted to think, “Morally bankrupt may be more like it.”

Jon Stweart on Provisions in the "First Responders" Bill

I don't usually pass on videos, but this one struck me as unusually funny and biting at the same time. It's Jon Stewart of Comedy Central's "The Daily Show," commenting on the amazingly absurd provision in the long-awaited "First Responder" bill that helps Fire Fighters and others who were made ill by working long hours in the rubble of the World Trade Center following 9/11. Even though he is funny about it, he can barely contain his rage over the evil, inhumane, and just stupid provision.

The scene is in two parts below.

Enjoy (more or less),


Part one:

Part two:

Warning! Inequality May Be Hazardous to Your Growth

There is little question that growing income inequality is dangerous for democracy. Money as a form of "Freedom of Speech" is now firmly a part of  American law and its impact on swaying elections and passing bills is increasingly clear. However, it seems that the gap could also be bad for a country's economy. The more money that gets sucked out of the economy and into the accounts of the wealthiest classes, the smaller are the resources the country has with which to sustain growth times and bounce back in recessions.

In a recent note on the IMF Blog, shares research they did on the relationship between income and economic stability and found that countries that have a declining income gap (like Brazil) have longer booms and shorter busts. And countries with a widening income gap (like the US) are just the opposite: longer busts and shorter booms. Our experience in the recent sluggish recovery from the 2001 recession and non-recovery from the 2008 recession seem to support their research.

Here is an excerpt from the article, "Warning! Inequality May Be Hazardous to Your Growth," (Note that bold faced print was in the original.)
Some time ago, we became interested in long periods of high growth (“growth spells”) and what keeps them going. The initial thought was that sometimes crises happen when a “growth spell” comes to an end, as perhaps occurred with Japan in the 1990s. 
We approached the problem as a medical researcher might think of life expectancy, looking at age, weight, gender, smoking habits, etc. We do something similar, looking for what might bring long “growth spells” to an end by focusing on factors like political institutions, health and education, macroeconomic instability, debt, trade openness, and so on. 
Somewhat to our surprise, income inequality stood out in our analysis as a key driver of the duration of “growth spells”. 
We found that high “growth spells” were much more likely to end in countries with less equal income distributions. The effect is large. 
For example, we estimate that closing, say, half the inequality gap between Latin America and emerging Asia would more than double the expected duration of a “growth spell”. Inequality seemed to make a big difference almost no matter what other variables were in the model or exactly how we defined a “growth spell”.
Inequality is of course not the only thing that matters but, from our analysis, it clearly belongs in the “pantheon” of well-established growth factors such as the quality of political institutions or trade openness. 
While income distribution within a given country is pretty stable most of the time, it sometimes moves a lot. In addition to the United States in recent decades, we’ve also seen changes in China and many other countries. Brazil reduced inequality significantly from the early 1990s through a focused set of transfer programs that have become a model for many around the world. 
A reduction of the magnitude achieved by Brazil could—albeit with uncertainty about the precise effect—increase the expected length of a typical “growth spell” by about 50 percent. 
The upshot? It is a big mistake to separate analyses of growth and income distribution. A rising tide is still critical to lifting all boats. The implication of our analysis is that helping to raise the lowest boats may actually help to keep the tide rising!

The “Hire Abroad, Fire at Home” Strategy

There was a very interesting article in The Wall Street Journal this morning by David Wessel. I hope it gets commented on by politicians and the mainstream press (including Wessel’s own paper).

It has to do with the employment strategy of the major employing corporations in America.

According to data from the US Commerce Department during the 2000s, multi-national corporations based in the US cut their domestic work force by 2.9 million while expanding it overseas by nearly as much at 2.4 million. The irony of that, of course, is that the 2000s were touted as an era of low taxes, low regulations, with an abundance of incentives to help corporations grow and make money for the rest of us. They did grow, but just didn’t make any money for the rest of us. Income and jobs stagnated during that time for the vast majority of Americans. The recovery from the 2001 recession was one of the most sluggish on record, and of course any minimal gains we received were wiped out in 2008.

This is interesting because by comparison, the nineties are now being ridiculed and dismissed by many on the right as a high tax, high regulation era that stifled growth and discouraged corporate profits. But, again according to the US Commerce Department’s numbers, in those years the multi-nationals created 4.4 million jobs in the US and 2.7 million elsewhere. They created almost twice as many domestic jobs as international jobs. Altogether, they employed 21.1 million here and 10.3 abroad. Not bad for a country led by a godless, commie, socialist, philandering, murderous tax and spend liberal.

Click here to go to the article in the Journal

 And click here for a summary of it at the Business Insider.

Woe to You, Legislators!

Jim Wallis is the author of Rediscovering Values: A Guide for Economic and Moral Recovery, and CEO of Sojourners. He blogs at Follow Jim on Twitter @JimWallis.

It is reported that Congressman Paul Ryan makes every member of his staff read philosopher Ayn Rand, the shameless promoter of the gospel of aggressive self-interest. This makes sense to me as I read Congressman Ryan's new budget proposal. I wish he had his staff reading the Bible instead.

While widely lauded by conservatives, Congressman Ryan's budget isn't really about deficit reduction. It's about choices -- choices that will determine what kind of a country we become. And Paul Ryan has made the choice to hurt people who don't have the political clout to defend themselves. Two-thirds of the long-term budget cuts that Ryan proposed are directed at modest and low-income people, as well as the poorest of the poor at home and abroad. At the same time, he proposed tax cuts up to 30 percent for some of our country's wealthiest corporations. Let me say that again: Two-thirds of the cuts come at the expense of already struggling people and families, while corporations posting record profits get tax breaks. In short, the most vulnerable members of society are being attacked by Ryan and his supporters. This makes them bullies.
In dramatic contrast, Ryan has chosen to help the people who need help the least. Wealthy individuals and companies reap a windfall of benefits in Ryan's plan -- with tax cuts and breaks, continued subsidies and loopholes for every powerful special interest, and increased corporate welfare payments from the government. Congressman Ryan and his supporters have carefully and faithfully rewarded the rich people who make their campaign contributions, and, in most cases, have also rewarded themselves as rich people. This makes them corrupt.

And, as self-professed budget hawks, they have completely ignored the most consistently egregious, wasteful, and morally compromised area of the whole federal budget -- our endless and unaccountable military spending. Paul Ryan and the Republicans would cut nothing from the Pentagon profligacy. This makes them hypocrites.

You may think that my language sounds too strong: "bullies", "corrupt", "hypocrites." But listen to the prophet Isaiah:
Doom to you who legislate evil, who make laws that make victims -- laws that make misery for the poor, that rob my destitute people of dignity, exploiting defenseless widows, taking advantage of homeless children. What will you have to say on Judgment Day, when Doomsday arrives out of the blue? Who will you get to help you? What good will your money do you?  (Isaiah 10:1-3, The Message)
Ryan's budget seems to follow, almost line by line, the "oppressive statues" Isaiah rails against. Ryan's budget slashes health care for the poor and elderly by gutting Medicaid and undermining Medicare, and cuts funding for food stamps, early childhood development programs, low-income housing assistance, and educational programs for students.

Cuts of this magnitude for people of modest and low-incomes will result in a direct increase of poverty and misery in America. Furthermore, poverty-focused international assistance proven to save lives is under continued attack. As Washington Post columnist Michael Gerson said, not all cuts are equal because some will lead to "a fever and a small coffin."

Simply put, the Ryan budget is a bonanza for the rich and devastation for the poor, and it will never be accepted by the religious community. And I don't believe Ryan's budget expresses the values of the American people. I just don't believe it. (You can click here if it doesn't represent your values.)
Of course, many Americans, including in the faith community, believe that rising deficits are immoral and a threat to our future.  But how you reduce a deficit is also a moral issue, and to do so by further impoverishing the poor in order to add more wealth to the wealthy is not an acceptable political or moral strategy.
Ayn Rand said, "Money is the barometer of a society's virtue," and she made no apology for not liking the teachings of Jesus. But for those of us who do aim to live out the teachings of Jesus, the Paul Ryan budget is a moral non-starter.

Yesterday, as President Obama offered his budget, he both failed and succeeded. What Obama failed to say was that we are currently wasting lives and billions of dollars in Afghanistan on a strategy that fails to make us any safer. Today, I am joining with some fiscal conservatives and Republican members of Congress at a "ReThink Afghanistan" press conference. We don't agree on a lot of other budget issues, but we are united in our belief that we are wasting lives and money with misguided strategy in Afghanistan. For those who truly care about the deficit, I believe this is the first place we should start cutting.

The president succeeded yesterday by making this important statement: "In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. Meanwhile, the top 1 percent saw their income rise by an average of more than a quarter of a million dollars each. That's who needs to pay less taxes? They want to give people like me a $200,000 tax cut that's paid for by asking 33 seniors each to pay $6,000 more in health costs. That's not right. And it's not going to happen as long as I'm president."

This last line was the clearest message we've heard for some time from the White House. It's a message President Obama will have to repeat over and over again in the months ahead against all the pressures to compromise. Presidents sometimes have to draw some clear lines in the sand, and the time for this president to do that is now.