Streams

The Day After: the Deficit War

Tuesday, November 02, 2010 - 10:15 AM

Reshma Saujani

On Wednesday morning, a passionate political debate on deficit reduction will begin that will be on par with the health care debate. Both parties must come to a resolution on how to slash the $1.4 trillion debt and put forth policies to reduce the staggering unemployment rate.

A Rasmussen Report last week found that seventy-six percent of those polled said that they know someone who is unemployed. The poll also found that only thirty-two percent of likely voters feel the country is heading in the right direction. Many Americans think the answer to the economic and debt crisis is spending cuts and not higher taxes.

After the election, this nation is likely to end up with a more divided and partisan government, where we can expect increased gridlock on economic policies. The parties have vastly different philosophical ideas on how to dig our economy out of the recession. President Obama and the Democrats have been painted as big government spenders who are leaving our children to deal with out of control deficits. This perception cannot continue if Democrats are to have any hope in 2012.

Regardless of the outcome, the day after the midterm elections, the Obama administration must emphasize that deficit reduction is a keen focus for the President.

To do so, Obama must repair his relationship with the business community. The administration views itself as pro-business, but many in the business community view this as the one of the most anti-business administration they have ever seen. 

Regardless of who is right and who is wrong, when it comes to markets, perceptions matter. President Obama must reboot his relationship with small, medium and large businesses and build real alliances. In conjunction with the business community, he must put forth policies that encourage growth and innovation and lead to a climate for job creation

The first major battle in the deficit war will be a vote to extend the Bush tax cuts. The Obama administration has favored extending the cuts only for those families earning less than $250,000. Republicans want to extend the Bush tax cuts for all income brackets. Recently, the administration signaled that they are willing to negotiate on this and have stated that they know they cannot tax their way out of the deficit problem.  

After the results are tallied, the newly elected Congress has some real challenges to solve. Lets hope that those who are elected and entrusted with our country’s future put partisan politics aside, and get creative and smart about how to balance our budget. We need to for our children’s sake.

Reshma Saujani ran an unsuccessful campaign in the Democratic primary against Rep. Carolyn Maloney in New York's 14th district, which covers Manhattan and Western Queens. A community activist, attorney for hedge funds and a legal scholar, she is a graduate of the University of Illinois, received her Masters in Public Policy from the Kennedy School of Government at Harvard University and her JD from Yale Law School.

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Comments [2]

I'm from lost in NJ

The biggest problem we will have trying to balance the budget is the lack of knowledge that most people - pols included - have regarding what makes up our federal budget. Fully 66% of the expenses are considered "untouchable" since this is what Social Security spending, Medicare/Medicaid and interest on the debt eat up. The rest of the budget - about 33% - is everything else including defense (the biggest expense at around a quarter of a trillion bucks). And, oddly enough, revenue (that's taxes, fees, etc.) just about covers the 66% we are obliged to spend. So, even if you could cut what some call "waste and abuse" and limit/eliminate earmarks, tax cheats and stop all future stimulus adventures, we are still stuck with more than a half-trillion hole in the budget. So if you can't cut that much from the 66%, how can you balance the budget?

The big lie is we have to cut taxes to increase revenue. That right wing mantra of "tax cuts" has never worked - history proves that foolish cuts just made the deficits worse (not convinced? Then see Reagan / Bush 1 / Bush 2 - the first two had to raise taxes after their cuts unleashed oceans of red ink and the third, waged two unfunded wars - yes, they were run "off the books" - done on top of huge tax cuts - and was unwilling to do anything to affect spending or raise revenue lest it help the left. Bush 43 slinked away from office having put the USA in the hole we find ourselves in now).

You have only so many options. Cut spending in that 66% which means Social Security, Medicare/Medicaid and you know that's not going to happen because seniors vote. And you can't stop paying the interest on our debt for obvious reasons.

You would have to cut defense spending - it's the biggest item in the 33% and probably has the greatest "fat". And you have to raise revenue. This is done by collecting taxes on wages through "full employment", by plugging loopholes that allow companies to ship jobs overseas and ones that allow them to, essentially, pay no taxes on huge profits and by - here is the rub - raising somebody's taxes.

I am not optimistic. The right won't allow tax increases and the left - meaning Mr. Obama who doesn't want to be a one-termer like Carter and Bush 1 - won't propose any.

This all comes back to my original point. The vast number of voters lack the understanding of the size and complexity of our budget. Trying to explain it to them amid the lies being told by the media and by politicians who only say what the voters want to hear and who won't tell them that there are sacrifices to be made to achieve the desired results pretty much makes getting anything done mission impossible.

Our budget woes are like dieting to lose weight - there are no secrets, just a lack of will. Eat less, exercise more and the weight should come off. Spend less take in more revenue money and the debt will be reduced. We need the will to do it and that's the last thing America seems to have these days.

Nov. 03 2010 09:32 AM
shak from NYC

Reshma Saujani is sooo NOT a community activist. She's an excellent fundraiser. But in no way has she ever been a real community activist. Her one claim to community activism fame was that she sent out a series of emails some years ago after an admittedly serious racial assault at NYC's Leela Lounge. But her emails were seriously naive; they didn't clarify how people could help; who was in charge of the case; who she was; or anything that people with any shred of community activism would do. She did not help the case, and it continued without her naive communications. No self respecting community activist in New York had ever heard of her, or respects her.

Nov. 03 2010 07:37 AM

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