Labor & Employment Law

Report: Deficit Commission Proposals Would Cost 4 Million Jobs

By James Parks

The deficit reduction plan released last week by the co-chairmen of the National Commission on Fiscal Responsibility shows that this so-called  budget deficit commission shows the commission has run severely off course.

The recommendations issued by co-chairs Alan Simpson and Erskine Bowles would cost 4 million jobs over three years and reduce economic growth by 0.7 percent in 2012, 1.4 percent in 2013 and 1.9 percent in 2014, according to an analysis by the Economic Policy Institute (EPI).

The Simpson-Bowles approach calls for job-killing budget austerity to begin in October 2011, even though most economic forecasters expect unemployment to remain as high as it is today or even increase by then.

Simpson and Bowles also call for deep cuts in Social Security benefits, even though Social Security is not responsible for our long-term budget problem and the public is overwhelmingly opposed to benefit cuts.

Simpson and Bowles also propose more cost-sharing in Medicare. They suggest lowering top income tax rates for the wealthiest Americans and for corporations and eliminating the Alternative Minimum Tax (AMT), while sparing Wall Street from any taxes on bonuses or financial speculation.

Bowles collects $335,000 a year as a director of Wall Street investment bank Mor gan Stanley, and Simpson has called Social Security ?a milk cow with 310 million tits.?

AFL-CIO President Richard Trumka said Simpson and Bowles ?just told  working Americans to “Drop Dead.”

Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare. Some people are saying this plan is just a ?starting point.? Let me be clear, it is not.

In the EPI report, economists Josh Bivens and Andrew Fieldhouse note that  because the Simpson and Bowles recommendations would reduce economic growth, they would end up lowering the deficit far less than Simpson and Bowles claim.

Bivens and Fieldhouse say the co-chairs? proposal ?threatens to increase the already unacceptably high level of unemployment and increases the possibility of the economy falling back into outright recession.?

They argue a  better path to fiscal responsibility would be to invest in job creation and growth to increase revenue in the near-term, raising revenue from new sources over the medium-term to stem the hemmoraging caused by the Bush-era tax cuts for the very well-off, and reforming the health care provision to generate long-run budgetary savings. Otherwise, Bivens and Fieldhouse say:

In the present economic environment, the near-term austerity measures proposed by the co-chairs would be fiscally counterproductive and crippling to states, communities, and families, delaying a robust economic recovery for years. 

Check out the entire report here.

Full post as published by AFL-CIO NOW BLOG on November 23, 2010 (boomark / email).