In the early 1980s, President Ronald Reagan’s budget director, David Stockman, developed a “starve the beast” strategy that would ultimately shrink the size of government through drastic cuts in social programs.
By passing huge tax cuts, especially for the wealthiest Americans, Stockman and Reagan could force Congress to reduce the size of programs that the administration did not favor under the guise of deficit reduction. At the same time, increased Cold War military spending would create pressure for further cuts in social programs.
As a result, when Reagan refused to cut Social Security and other major safety net programs, Stockman had to “savage” other programs, as one article at the time put it. That meant Head Start, Jobs Corps, programs for women and children, and other vital programs were sliced and diced, or terminated outright.
This set off a cynical cycle of cause and effect. The cause was tax cuts. The effect was unprecedented reductions to programs designed to help the most vulnerable. The cause was defense spending. The effect was an exponential increase in the national debt.
In 2001, when President Obama was a state senator in Illinois, the first Bush tax cuts were passed. The deal that was struck in order to gain the support of conservative Democrats (and ensure passage of the bill) made the tax cuts expire after 10 years, meaning the bill would not be a deficit sink-hole for decades to come.
Now, that original deal is being trashed, and those who benefited most under the tax system of the past decade stand to get another windfall. If this new tax compromise goes through then we will shirk our responsibility to reduce unemployment while exacerbating the deficit. This is bad policy and bad politics at a time when voters have clearly rejected running up the debt if it does not create jobs.
Furthermore, in the years since the original Bush tax cuts passed, America has been engaged in two wars, which have been massively expensive both in treasure and in the toll on our soldiers and their families.
By capitulating on the high-income tax cuts, Democrats would play right into the hands of the Republican “starve the beast” strategy since we have already committed billions of dollars to the wars in Iraq and Afghanistan.
Just when we need to make sure that social programs such as unemployment insurance, Social Security and Medicare are strong as we continue to face economic uncertainty, this tax compromise will put pressure on vital social safety-net programs. It will compel—in fact, empower—the Republican-controlled Congress to put social programs on the chopping block.
Sound familiar? The cause has been tax cuts and defense spending. The effect will be cuts to programs for the most vulnerable, when those programs are needed most.
This begs the question: Will Obamanomics end up looking like Reaganomics?
Clearly, President Obama comes from the exact opposite philosophical starting point from President Reagan and his supporters. If the decision were his alone to make, the President would adopt a tax cut for 98 percent of Americans and let the upper-income tax cuts from the Bush era expire.
However, if he refuses to fight the cause of tax cuts, then the effect will be the same: Leaving our seniors, our young people, our disabled, our uninsured, and our veterans out in the cold when we cut the programs they need.
What’s the alternative? First, we should enact a middle- and low-income tax cut. Those Americans are more likely to spend the extra money they will have in their pockets, making the economic impact of that targeted tax cut stimulative. The House has passed such a bill. The Senate should follow suit.
Next, we should take the amount that would have been spent on the high-income tax cut—nearly $800 billion—and invest that in a Works Progress Administration-like jobs program that would put Americans back to work.
What’s more likely to boost the economy: a $75,000 tax break to somebody who makes a million dollars, or a $75,000-a-year job for an unemployed American worker who has a family to feed?
The re-employed person would put that money to use feeding his family, buying Christmas presents and paying rent. The re-enriched person would put the money to use in his investment portfolio or in his kids’ trust fund. There is nothing wrong with that, of course, but it will not do much to help today’s troubled economy.
The cause here would be to bolster the middle class. The effect would be a boost in employment and economic activity.
Obamanomics so far has meant compromising on his principles. It has meant capitulating in the name of getting things done. The effect has been Reagan all over again. In order to rewrite that narrative we should reject this tax cut compromise and instead push for a better deal for American workers—a deal centered on jobs.
Rather than “starve the beast” we should strengthen the middle class.
(Jesse L. Jackson Jr. is a member of Congress representing Illinois’ second district.)