America Is Not Broke: Fiscal Reforms that Washington Needs to Consider

That’s a wrap. The Supercommittee Show is over, brought to you by corporate media that continue to peddle horse-trading, the blame game and the mini-drama of who compromised and who didn’t to consumers.

What’s missing from the coverage is what matters—a recognition that the inside-the-Beltway crowd has a misplaced obsession with short-term deficits and debt rather than the real crisis of our time: joblessness, growing inequality and building a more sustainable, Main Street economy.

There are in fact many alternatives out there worthy of attention—ideas that are more reasonable, more equitable and accomplished far more fiscally responsibly and in hold more promise for bettering people’s lives than anything considered by a Supercommittee and Congress heavily mortgaged to corporate dough. The Progressive Caucus’s People’s Budget is one example. And now, a recently released report by the Institute for Policy Studies (IPS), America Is Not Broke.

IPS focuses on twenty-four fiscal reforms that amount to an estimated $824 billion in potential revenue per year—seven times the total savings the Supercommittee was charged with identifying. The revenues are found in three categories: taxing Wall Street, corporations and the wealthy; taxing pollution and ending environmentally harmful subsidies; and cutting military spending. IPS is uniquely positioned to offer a comprehensive report like this because it has experts working year-round on defense, energy and fair taxation issues. Many of the reforms called for are widely supported in opinion polls, and reflect the kind of broad, bold vision that Democrats should embrace if they want to connect with the 99 percent.

“The report reminds people that we’re not broke, we’re actually a rich country,” says co-author Sarah Anderson, director of the IPS global economy project. “Instead of getting so bogged down in the horse-trading deals in Washington, we should be thinking about how we can actually use this crisis as an opportunity to harness our wealth in ways that will make us stronger for the future—more equitable, with a cleaner environment, and a sane defense policy.”

In the more equitable category, that means implementing ideas whose time has come like a modest financial transaction tax, stopping tax haven abuse and creating additional tax brackets for individuals earning over $1 million annually as well as eliminating the tax preference for capital gains and dividends. These reforms alone could bring in up to $329 billion per year. Want a little more accountability for the economic crisis? How about a levy on the Big Banks with more than $50 billion in assets? It could bring in $9 billion a year, recoup some of the costs of the crisis and provide a deterrent against excessive leverage.

As for defense, the Pentagon consumes more than half of US federal discretionary spending and much of it doesn’t make us safer. For instance, why do we need 1,000 US military bases abroad, including 227 in Germany? That costs us $102 billion annually, not including the bases in Afghanistan and Iraq! IPS suggests eliminating one-third of the bases in Europe and Asia for potential savings of $10 billion annually, and eliminating remaining operations of 15,000 or more military contractors in Iraq for another $11 billion. But the biggest savings would come from ending the war in Afghanistan, which I’ve long argued isn’t making us safer and is stoking resentment towards the US abroad, in addition to the tragic loss of life (at least 1,721 US soldiers killed, and tens of thousands of Afghan civilian deaths). Ending the war brings an estimated $122 billion in annual savings at a time when 64 percent of Americans believe the war isn’t worth fighting. Finally, a reduction of the US nuclear arsenal to no more than 311 warheads would save $21 billion per year and is more than enough to maintain deterrence against current and likely future threats, according to the faculty of the Air War College and the School of Advanced Air and Space Studies.

What’s especially valuable is how the IPS report also hones in on how our fiscal challenges can be used to protect the environment, at a moment when too many people mistakenly feel we need to address the deficit issue and jobs crisis first—and the hell with global warming.

“The Supercommittee completely ignored that we’re shoveling all these subsidies to the fossil fuel industry,” says Anderson. “If we take those away it could not only free up revenues for other purposes, but it could give these industries incentives to change, to try to adopt more green technologies, and in the long run reduce our dependence on foreign oil.”

IPS suggests polluters pay for their pollution through a tax on carbon that would raise an estimated $75 billion annually, with revenues used to compensate consumers through rebates or financing reductions in the federal payroll tax; air and water pollution taxes could raise an estimated $38 billion; eliminating subsidies for fossil fuels, nuclear and dubious energy sources like “clean coal” and ethanol would save another $41 billion annually.

“People are so discouraged with Congress, and so turned off,” says Anderson. “But I think opinion polls should give people hope. The sentiments of people out there are right and we’re seeing that turn into political force through the Occupy Wall Street movement. But I think it needs to get even bigger to really change the dynamic in Washington, and we hope this report contributes to the kind of broad, comprehensive vision that can do that.”