Reports from the Economic Front

a blog by Marty Hart-Landsberg

AmericaSpeaks—If Only It Were So

National Town Hall meetings to discuss our economic problems and, even more importantly, provide feedback to our national policy-makers—sounds great, doesn’t it?  That is what AmericaSpeaks, a Washington DC non-profit organization, promised.

Unfortunately, things are not always what they appear.  This initiative is far more about shaping public opinion in ways that do not serve the public interest than it is about engaging the public.

On June 26, Town Hall meetings took place in 19 different locations, including Portland, Oregon.  This was a well funded and organized initiative.  Those interested in participating were interviewed and carefully selected to ensure a diverse, but politically “open” audience.  Those selected received educational materials highlighting what organizers believe are the main economic challenges facing our nation and offering possible responses to them.

At the meetings, participants were assigned to predetermined groups and encouraged to discuss responses to the highlighted challenges.  Experts were provided to answer technical questions.  The various sites were connected live via satellite video and webcast. Finally, responses were recorded with the aim of generating consensus positions to be communicated to those shaping our national policies.

So, what could be wrong with this?  Well, as it turns out, plenty.

Let’s start with some context.  In brief, we are still suffering from the effects of the Great Recession.  The Great Recession was decades in the making, a consequence of the interplay of many trends, including globalization, financialization, deregulation, militarism, and inequality.  Appropriately, many people have argued that rebuilding our economy will require significant structural changes in the way we organize economic activity.  For example: a takeover, shrinkage and restructuring of the finance sector; an end to free trade agreements; a massive public stimulus tied to the creation of a new green economy; labor law reform; and a transformation and strengthening of social programs.

Sadly, those with power have successfully resisted all of these changes.  As a consequence, our economic recovery has been unacceptably weak.  Moreover, as state and local governments move ahead with their planned cuts in spending, things are likely to get worse.

A new battle has now been joined.  Having lost the fight over structural change, many people are regrouping around a call for additional federal spending to avoid a double-dip recession.  But those in power are resisting this as well.  They prefer austerity—more specifically, new cuts in social spending.  An illustration of their continuing strength is the recent failure of the Senate to pass a bill extending unemployment payments and providing additional aid to states.  Those who opposed the bill argued that it would add too much to our national debt and thus represented a danger to our economic future.

Of course, our economic elite well understand that this is a difficult time to advocate austerity.  In fact, if conditions remain bad it is even possible that popular demands for real structural change might be renewed.  Therefore they are doing what they can to discredit any alternatives to their own position.

With this context in mind, we can now appreciate the significance of the AmericaSpeaks initiative.  The guidebook provided to participants at the Town Hall meetings has one main theme: we face a growing national debt crisis that will destroy our economy.

How does AmericaSpeaks justify its fear of a national debt crisis?  It begins by making estimates of future national deficits and, by extension, the national debt.  To do this it makes assumptions:

On the spending side, we incorporated President Obama’s fiscal year 2011 request for defense spending for the next five years and extended it for later years. On the tax side, we extended all of the 2001 and 2003 tax cuts as well as other expiring provisions of tax law (known as “the extenders”) – all of which is considered “current policy.” . . . After 2020, the last year for which CBO has yearly figures, we assume, as CBO does, that spending and revenues grow at the same rate as the economy.

These assumptions produce a yearly deficit equal to 9% of GDP in 2025 and a staggering 22% in 2050, and a national debt equal to 114% of GDP in 2025 and a record 316% of GDP in 2050.

The situation in 2050 is clearly an attention grabber and AmericaSpeaks uses it to make the case that we need a change in policy long before then to avoid the worst.  The guidebook therefore challenges its participants “to focus on the year 2025 and choose spending or revenue options, or both, to reduce [the deficit] by $1.2 trillion.”

There is a lot of fancy footwork behind these assumptions which tend to bias the results in favor of a larger debt problem.  Here is what the Center for Economic and Policy Research (CEPR) has to say about this:

The baseline seems deliberately designed to make the 2025 problem as bad as possible. It effectively assumes nothing has been done to rein in the budget between now and 2025, including items that have already been put forward by President Obama, most notably allowing the tax cuts for high-income taxpayers to expire at the end of this year. The cumulative effect over 15 years (including interest) of allowing for the changes to income taxes already proposed by President Obama would reduce the 2025 debt by more than $1 trillion.  This implies an interest burden that it is $40-50 billion less than what is assumed in the guide. Of course it is virtually certain that other changes will be made between now and 2025 that will prevent the deficit from growing as large as projected in the guide. However, the expiration of the Bush tax cuts for high earners is already in current law and is explicitly supported by the President and the congressional leadership. There seems no obvious reason for assuming that these tax cuts will be extended, as the guide does.

In other words, if we assume that the government allows the Bush tax cuts to expire as planned, we have already reduced the deficit by roughly the amount targeted by AmericaSpeaks.

There are many other problems with the way issues are presented in the guidebook.  For a more detailed look at some of them, check out the excellent CEPR critique, which goes issue by issue.

For example, the guidebook does acknowledge that most of the growth in our future budget deficits is due to rising health care costs and the aging of the population.  But having done so, it doesn’t encourage any serious discussion of health care reform options–such as single payer or a public option–which would greatly reduce those deficits.  As CEPR notes:

The guide instead offers participants a menu of options that accept the structure of the existing health care system. As a result, the options mean either charging people more money for the same care or requiring that they get by with less care. The options that could hurt the profits of the insurance industry, pharmaceutical industry or other powerful special interest have been excluded from the list.

The guide also provides no sense of the interaction between the budget and the economy.  Although AmericaSpeaks relies on economic projections to estimate our future deficits, the guidebook includes no discussion of the ways in which changing spending priorities might change growth rates and, by extension, our budget situation.  Is there a difference between spending on infrastructure or the military in terms of employment and growth?  Will cuts in spending on critical programs negatively affect investment and production decisions?  The guidebook ignores these kinds of questions.

Moreover, one would never know from reading the guidebook that CBO estimates suggest that average hourly wages will be 20 percent higher in 2025 than they are today.  As the CEPR points out: “This knowledge might affect how people view things like tax increases. For example, if we know that people will be on average 20 percent richer in 2025 than today, we might be less concerned if their tax rate were to rise by 1-2 percentage points.”

In sum, the entire structure of the Town Hall is designed to focus popular attention on “out of control” government spending and the need for us to make unpopular cuts in government programs.  In this way, concern with our current real crisis is replaced by fears of a possible future one.  And discussions of structural change are replaced by debates over spending levels of existing programs.

Significantly, one of the government programs in the spotlight is Social Security.  It is telling that Social Security is on the Town Hall agenda because it is a fully self-funded program; it generates its own revenue from a dedicated tax and spends only the money it has accumulated.  It is not part of our overall budget and certainly is not part of our budget deficit.  It was put on the Town Hall agenda for one reason—to build support for its dismantling and privatization.

This is not accidental.  The underlying political agenda of this initiative is largely driven by the agenda of one of its main financial sponsors: Peter G. Peterson.  Peterson is the leading underwriter of AmericaSpeaks.  He has spent decades demonizing Social Security and “some $12 million among economists, think tanks, foundations and assorted front groups to sell his case. . . . that Social Security somehow contributes to the swollen federal deficits and that cutting benefits will address this problem.”

Peterson has also been working closely with the National Commission on Fiscal Responsibility and Reform that was recently created by President Obama.  That commission is headed by two co-chairs appointed by President Obama–Senator Alan Simpson and Erskine Bowles—both of whom have long advocated slashing Social Security benefits and privatizing the system.  It should come as no surprise, then, that the results of the Town Hall are to be transmitted to this commission.

In sum, the AmericaSpeaks project offers a case study in how power operates in this country to set the national agenda.  The popular support it has received also reveals how little we understand power and how to fight for our own agenda.

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One response to “AmericaSpeaks—If Only It Were So

  1. Chris June 28, 2010 at 8:07 am

    I fully agree with your critique. Despite their clear intention to use deficit terrorism to justify attacks on Social Security, participants refused to be led down that path. In fact, an overwhelming 86% of Town Hall attendees voted to strengthen Social Security by lifting the cap on taxable earnings, so that the the wealthy would have to pay more into the system. Participants also insisted on listing Single Payer health care as an option (although since it had previously been taken off the table, a vote on it was never taken). Majorities also favored raising taxes on the wealthy and corporations, and taxing financial transactions.

    In general, people supported the most progressive options available, and wanted to go further (my table wanted to cut defense spending even more, and there was near unanimous support for single payer).

    I look forward to seeing how the Pete Peterson spins this, because these are definitely not the results that he wanted to see.

    Like

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