Municipal Government

PSC Forum Emphasizes Challenges and Solutions to Defend Safety Net

October 28, 2011
By Marc Bussanich, LaborPress City Reporter
The deadline for the Super Committee to reach agreement on a plan to reduce the nation’s staggering $1.5 trillion deficit is fast approaching. Many are concerned that cutbacks in vital social services, such as Medicaid and Medicare, will be the focus of deficit reduction targets rather than increased taxes. Some are hopeful that the Super Committee’s proposed cuts will be tempered as the Occupy Wall Street (OWS) progresses and grows. As expected, the approaching date is leading to growing consternation.

A recent forum organized by the Professional Staff Congress (PSC) Safety Net Working Group featured a distinguished panel who discussed the necessity to defend the nation’s social safety net in the context of national and local political leaders pursuing policies that may balance budgets, but at significant social costs.

Prominent economist Dean Baker, co-director of the Center for Economic and Policy Research, first told the audience with hard-hitting facts the contributors to the Great Recession. “The main cause of the economic collapse was the bursting of the $8 trillion housing bubble.” He noted that, “Alan Greenspan [former chairman of the U.S. Federal Reserve Board] should have seen the housing crisis coming” because Greenspan was reading and analyzing the same data as Baker and Baker had predicted a housing bubble crisis in 2004.

Compounding the housing bust, “the broken healthcare system is the real story behind the deficit. We pay two times more per person than other industrialized societies such as Germany and Canada and what are we getting for it other than shorter life expectancy,” said Baker.

Baker said the first stimulus, the American Recovery and Reinvestment Act (ARRA), didn’t fail as “conservatives like to spin it,” but wasn’t big enough in light of the staggering loses. “Since 2008, there’s been a $600 billion loss in new housing construction, $500 billion loss in consumption demand and $100 million loss in non-residential construction [malls, office space, etc.].”

Baker continued, “The federal stimulus did work because it created two to three million jobs, but we need 10 to 12 million jobs. The almost $800 billion stimulus wasn’t big enough to counter a $1.5 trillion drag on the economy.”

Baker proposed his own stimulus with different provisions, but didn’t specify a price tag. He’s advocating for a youth jobs program whereby young people aged 18 to 26, a segment of the population hard hit by the Great Recession, and consequently now involved with OWS, would clean up communities. The federal government should provide significant aid to local and state governments for infrastructure projects. He believes the Federal Reserve could act more aggressively to stimulate the economy. He noted a Work Sharing program in Germany could be replicated here. Rather than being laid off, German workers work shorter hours.

The final component of Baker’s stimulus is to lower the value of the dollar to not only increase exports from the U.S. but also to make prices cheaper for foreign buyers of U.S. goods.  

While Baker explained problems and solutions on the national front, James Parrot, Deputy Director and Chief Economist for the Fiscal Policy Institute, discussed the recently approved state 2011-2012 budget. “Governor Cuomo has changed the rules. As a Democrat, he’s pursuing the policies conservatives are pursuing nationally.”

He mentioned the “$132.5 billion budget was balanced on the expenditure side and excluded revenues.” According to Cuomo’s office, “the budget eliminated 3,700 prison beds, establishes Regional Economic Development Councils, brings performance funding to education, redesigns Medicaid, and caps next year’s education and Medicaid spending.”  

These budget actions are proactive steps by the state to reduce the deficit, but in another document, the numbers make clear the constituents who will bear the brunt of deficit reduction. The 2011-2012 Enacted Budget Financial Plan indicates “savings” of $2.8 billion in school aid, $2.7 billion in Medicaid, $1.5 billion in state agency operations and $1.6 billion “in a range of other programs.”  

Parrott didn’t specify a stimulus solution, but Francis Fox-Piven, Distinguished Professor of Sociology and Political Science at the CUNY Graduate Center, recommended that audience members and others interested in participating in the growing push-back against social cuts and austerity should consider building coalitions among the city’s unions and anti-poverty groups before suggesting audience members come forward to present their ideas for organized actions.

October 28, 2011

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