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After reading Mike's diary, "A Simple Test", I found myself agreeing with the broad thrust of it, that Obama needs to move left-as FDR did, after his initial '100 Days'-guided most simply by the test, "does it benefit poor and middle class people, or does it benefit Goldman and Morgan?". Yet, at the same time, I found myself disagreeing that this simple test is necessarily enough. It's certainly a good starting point, and given that no legislation is ever perfect, and that time and energy spent on one thing is taken away from another, that test may well be enough for most legislation in most circumstances. But we should be clear that ideally more is required, and we should be clear just what that is, so that even when we don't pursue it, we know precisely what it is that we are foregoing. And so I present my three-part test:
(1) Mike's Simple Test:
who does it benefit the most, and who does it benefit first? If the main or biggest beneficiary is the big majority of poor and middle income people, I rate it a success. If the first and biggest beneficiaries are the wealthy and powerful, then I rate it a failure
(2) The Marine Test: Who did it leave behind on the battlefield? Who could have been helped who was not helped? Particularly when more was clearly achievable. If it failed to help a substantial number of poor and middle income people, then it was failure, even if it passed Mike's Simple Test-unless there is a clear and credible plan and a path forward to do more to help those people, and there is the political will to pass legislation that achieves the unmet goal.
(3) The Gramsci Test: Did it help change the direction of basic operating assumptions for future political struggles in a more progressive direction? If so, rate it a success. If it missed a rare opening, created new obstacles, or needlessly reinforced conservative assumptions, it is a failure.
Now, let me emphasize again, I am not suggesting that all three tests should apply to every piece of legislation, just because they could be applied. First of all, as already noted, there are practical trade-offs to be considered. Second, there are significant differences in the opportunities presented at different times. But when we're talking about major pieces of legislation, such as the stimulus, or the health care reform, then it seems entirely proper to employ all three tests. We might, in the end, decide to support legislation that failed one or more of the tests, but at least we would support it having a much more realistic sense of the cost involved.
On the flip, I consider what difference this might make in evaluating the stimulus and health care reform-with particular attention to the former, in light of new statistics out about the state of state finances. By sharpening critical awareness of what happened with the stimulus, perhaps we can do better with health care and global warming.
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In his diary, Mike wrote:
By this simple test, even though it is now clear that the stimulus package passed earlier this year was clearly too small, I still rate it a success in some important ways. It has saved the jobs of a lot of teachers, firefighters, police officers, social workers, and others doing important work, and it has created new jobs in the environment, health care, science, technology, the arts, construction, and road building.
By this simple test, Obama's health care plan as proposed will be a success if it's passed- it helps the uninsured and hard pressed middle class families, and makes it tougher for rich and powerful insurance and drug companies to screw people.
It's certainly true that these two examples pass Mike's Simple Test. But what about the other two tests? What do they say, and should we listen to them? I'm going to focus primarily on the stimulus, because it's received much less attention here of late, and because I think the argument will apply fairly directly in broad terms to health care.
First off, it's not just clear now that the stimulus package was too small. It was clear back when it was first unveiled, even before Obama first took office. What's more, it was equally clear that putting so many tax cuts in it doomed it to be far less effective than it otherwise would have been, and that failing to fully cover state budget shortfalls would inevitably mean that state budget cutting would be offsetting the stimulative effects of the stimulus. In short, there have not really been any surprises. Oh, sure, the recession is worse than Obama's team assumed. But that's not a surprise. That's exactly what folks like Krugman-and many other economists to his left and right-said would happen.
So let's look at the second test-who was left behind? The low-hanging fruit in trying to answer this question comes from looking at state governments, since (1) they represent a powerful, bipartisan political constituency that could have been mobilized rather effectively to get a bigger piece of the pie, and (2) their situation can be relatively well quantified. In fact, a report from the Rockefeller Institute released yesterday revealed the sharpest decline in state taxes collected in 46 years-the entire time period for which such data are available. From the press release:
Taxes collected by the 50 states dropped by 11.7 percent overall during the first quarter of 2009, compared to the same period a year earlier - the largest such decline in the 46 years for which quarterly data are available, according to the latest report on state finances from the Rockefeller Institute of Government.
Overall state tax revenues fell to the lowest first-quarter level since 2005, according to the Institute. The decline in personal income tax was particularly sharp, with an unprecedented decline of 17.5 percent, as the weakened economy continued to hammer state budgets. Forty-five of the 50 states experienced revenue drop-offs.
All regions of the country saw declines in total state tax collections, with the Far West seeing the largest decline at 16 percent. Only the Rocky Mountain and Plains regions saw single-digit declines at 5 percent and 6 percent, respectively.
And what about the second quarter? The press release continues:
Early figures for April and May of 2009 show an overall decline of nearly 20 percent for total taxes, a further dramatic worsening of fiscal conditions nationwide. Preliminary figures for the state fiscal year 2009 indicate around 8 percent decline in total taxes, 13 percent in personal income taxes, and 5 percent in sales taxes.
There are relatively brief stories about this report in the New York Times and the Wall Street Journal. But the plight of state governments--which deeply impact people's lives--is remarkably under-covered in the national media, a clear symptom of the failure to appreciate their importance and mobilize them politically during the stimulus fight.
For further insight from the report, I present a set of graphs with brief comments about them. All of them can be enlarged in a new window by clicking on them.
First, we see that state revenues have virtually fallen off a cliff, while local revenues continue to grow, albeit at a sluggish pace. This isn't really good news for local governments, since expenditures naturally rise during a recession, and state governments are a significant source of revenue for local governments in most, if not all states. At best, it means that things could be much worse:
[Click to enlarge in new window]
Second, we see that both sales and income tax revenues have declined drastically, while property taxes, interestingly, have not:
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Third, we see that GDP and state tax revenues are closely related, but that state tax revenues are far more volatile, particularly on the downswing. Thus, the current plummeting revenues could clearly have been foreseen, not just by state governments, but by anyone paying attention:
[Click to enlarge in new window]
Fourth, we see that economic decline is virtually universal. If folks thought the first Bush recession was bad, just look at how much more widespread state distress is today:
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Fifth, we see that state economies are still getting worse at rapid pace, but that pace has slowed somewhat from what it was a few months ago:
[Click to enlarge in new window]
Overall, this is a picture of state-level economies in desperate straights, with no end in sight. Given the data in Figure 3 above, this was entirely predictable in advance. Indeed, state legislatures were predicting this sort of extreme budget situation, and the National Conference of State Legislatures was telling anyone who would listen about the dire situation nationwide. The cumulative two-year shortfall of $350 billion was only partially offset with $140 billion in federal stimulus aid, and the largest chunk of money "saved" (ie. cut) by the so-called "Senate moderates" consisted of state assistance. The total shortfall was about half the size of the stimulus--more than 40% of which consisted of tax cuts, which are a relatively poor economic stimulus. In contrast, state spending is generally much better overall, and will almost entirely be spent in the fiscal year it is received--thus frontloading the recovery process.
In short, states governments, and the hundreds of millions of Americans who depend on them, directly or indirectly, were deliberately left out in the cold. For every two jobs that stimulus spending may save or create over the next two years, there is another job that's not being saved or created because of the shortchanging of state government needs. By this measure, the stimulus totally fails the Marine Test. Far too many people were needlessly left in harm's way.
But what of the Gramsci Test? Here, I would say the answer is obvious: a crisis of this magnitude is a golden opportunity to restore people's sense of the vital role of government, the same as happened during the Great Depression. But let's get a little more specific, by considering the state of debate surrounding the stimulus. Just over a week ago, the Center on Budget And Policy Priorities issued a brief report, "Correcting Five Myths About the Stimulus Bill". The points made in the report are cogent and well-argued, but they are not only entirely defensive, they are defending half-measures in much weaker terms than would have been necessary if the stimulus had been truly adequate for the job. Here is an excerpted version of highlights from the report:
1: The recent rise in unemployment does not mean the law is not working.
No mainstream economist believed the law would immediately revive the economy and cause unemployment to begin falling. In addition, at the time Congress enacted the law, virtually all forecasts in both the public and private sectors underestimated the severity of the downturn. Nevertheless, the law has slowed the decline and will help the turnaround occur sooner than it would have otherwise....
2: The Administration and Congress expected the stimulus money to be spent gradually over the next two to three years, and what's been spent to date is stimulating the economy and helping millions of Americans.
CBO estimated that one quarter of the recovery-law spending would occur in fiscal 2009,[8] and has said that the funds already expended have helped strengthen the economy. In late May, Elmendorf stated that "the rate of spending [for the stimulus bill] is broadly consistent with the assumptions that CBO used to estimate the macroeconomic effects of the legislation. Under those assumptions, ARRA will boost the level of GDP by the end of this year by between 1.4 percent and 3.8 percent...."[9] ....
3: The nation faces a very serious long-term budget problem, but the recovery law will exacerbate that problem only a very small amount.
Although the recovery law significantly increases short-run deficits, the fiscal effects of the bill over the long run are tiny. In January, the Center on Budget and Policy Priorities calculated that the recovery law would add just 3 percent to the budget shortfall through 2050. [12] That's because the tax cuts and new spending in the law are temporary. The main driver of the nation's long-term budget shortfall is ongoing factors, the most notable of which is steadily rising health care costs....
4: The law was specifically designed to help states close their budget shortfalls.
State revenues have fallen sharply due to the recession. As a result, states face a combined $350 billion in projected budget gaps over the next two years. Because states also face legal requirements to balance their budgets, they must enact program cuts and tax increases to close their budget gaps. Such measures, however, reduce demand for goods and services, making a weak economy even weaker. Without federal funds, states would have to take even more dramatic measures that, by reducing demand, would cost jobs and make the recession even more severe....
5: States are properly using stimulus funds for short-term projects.
In the recovery law, Congress required that states put their additional federal funds to work as quickly as possible, which in many cases means investing in existing projects and programs rather than mounting major new initiatives. That helps to achieve the goals of both stimulating demand for goods and services and of saving or creating as many jobs as possible, as quickly as possible ....
How much stronger would the arguments be, if we were able to say that thanks to the stimulus state governments were avoiding cuts entirely... just when people need their services the most? How much stronger if the rise in unemployment had been lessened? How much stronger if state budget-cutting weren't directly undermining the stimulus? Finally, consider the cumulative effect of the arguments above. Collectively, they could be used to argue that there's no need for a second stimulus. I doubt that CBPP would make that argument, but it would be natural to take such arguments in that direction. And it's more difficult to make these arguments, and then turn around and say we need more stimulus. It's like being in the middle of a battle and shooting in two different directions at once. That's what happens when you get surrounded, rather than maneuvering so that the other side is surrounded.
That's a clear sign that the other side is winning what Gramsci called the "war of position". And it's a clear sign that the stimulus would indeed fail the Gramsci Test.
I don't think it's hard to see why the current health care proposals--all of them except single payer--would fail the Gramsci Test as well. So long as we leave the cost escalation factors built into the current system in place, we will not solve the problem. Issue like these--as well as global warming--are once-in-a-lifetime struggles that can only be won by reorienting basic values, beliefs and perceptions, and this generally only becomes possible during times of great stress and crisis.
To waste such an opportunity is to leave us stuck with only the narrowed range of possibilities that exists between once-in-life-time opportunities. It is to squander the greatest political possibilities we will ever have. |
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