Even with some spending increases on education and health care, Democratic presidential candidates still can reduce the overall deficit by doing four things:
- Repealing President Bush's giant tax cuts for the wealthy. Most of the $2 trillion in cuts go to rich Americans, who already are richer than ever before. These tax cuts are the single biggest cause of the runaway federal budget deficit. Every Democratic candidate has promised to do away with tax cuts for the rich.
- Ending Bush's corporate-welfare spending on big agribusiness, energy, insurance and pharmaceuticals. These industries hardly need it. Reduce Medicare drug costs, for example, through tough bargaining with insurers and drug manufacturers rather than the current $400 billion giveaway.
- Preventing U.S. corporations from hiding their profits in foreign "tax havens." And while we're at it, increasing funding for IRS enforcement against rich tax avoiders. These initiatives would bring in tens of billions of dollars each year.
- Cutting out waste in the huge and rapidly growing military budget, and requiring true competitive bidding on military contracts. No more favoritism for those who are politically well connected. In the face of the threat of terrorism, it's understandable why defense spending has soared 22% since Bush took office. But there's no excuse for throwing taxpayer money at military contractors or for war profiteering.
Democrats also can reduce the deficit by speeding economic growth. Republicans are right that faster growth will generate more tax revenues and, thereby, reduce the deficit. But Republicans are wrong to think that tax cuts for the rich and corporations produce faster growth. We learned in the 1980s that so-called trickle-down economics doesn't work. In a global economy, wealthy people and corporations will invest their extra money wherever around the world it can get the highest return. It "trickles out" rather than down.
Democrats understand that the best way to grow the American economy is to invest in the one resource that's truly American our people, especially in their education and their health. To date, we've underinvested in our people.
Better schools, easier access to college and affordable health care aren't just matters of fairness. These investments generate a high return for the American economy and reduce the long-term deficit because they make Americans more productive.
Robert B. Reich, secretary of Labor during the Clinton administration, is the Maurice Hexter Professor of social and economic policy at Brandeis University. His next book, out in May, is Reason: Why Liberals Will Win the Battle for America.
