The Republicans' economic agenda
Levinson, Mark
Republican ideologues are fighting a new cold war. Their enemy is the "corrosive liberal ethos" and the government that it supports. They believe that Ronald Reagan and George Bush failed,...
...Nearly 30 percent of the benefits will go to the top 2 percent of families, those with incomes exceeding $200,000...
...The brunt of the conservative attack was borne by programs deriving from the Great Society initiatives...
...This is unacceptable because government, as conservative writer David Frum puts it, "makes the social problems that conservatives fret about so intractable...
...All other federal expenditures would have to be cut by 30 percent compared with spending projected under current law for fiscal year 2002...
...We are paying for this now in suffering and social turmoil in our cities...
...For example, all federal food assistance programs—ten programs in all, including food stamps, WIC, and the school lunch program—would be consolidated into one block grant...
...The centerpiece of the Republican agenda is a constitutional amendment to balance the federal budget by fiscal year 2002...
...According to the Congressional Budget Office, to balance the budget by 2002 and pay for the tax cuts contained in the Contract With America would require more than $1.4 trillion in non-defense, non-Social Security program cuts...
...A balanced budget amendment would throw the automatic stabilizers into reverse...
...The Republican reforms would wreak havoc with the economy...
...According to the Treasury Department, the Contract's tax provisions would cost the federal government $205 billion in the first five years, rising to $520 billion in the second five-year period after enactment...
...The average number of lowincome children receiving free school lunches rose by more than one million during this period...
...Only the most gingerly attempts were made to reduce Social Security spending, and these were immediately thrown back by bipartisan opposition in Congress...
...When the economy recovers, the automatic stabilizers work in the other direction: tax revenues rise, spending for unemployment benefits and other 178 • DISSENT Right Turn safety net programs falls, and the deficit narrows...
...The damage that Reagan did was real enough...
...The Contract also proposes to cap other lowincome programs—including Supplemental Security Income benefits for the elderly and disabled poor, Aid to Families with Dependent Children (AFDC), low-income housing, the child support enforcement program, child care support for working poor families not on welfare, and the employment and training program for AFDC recipients...
...The first, the New Deal, was characterized by social insurance programs, principally Social Security and unemployment insurance, and by great structural reforms, such as the Wagner Act, the Wage-Hour Act, and the Tennessee Valley Authority, whose object was not to redistribute income but to redistribute power in the economy...
...Behind their fervor is a belief that this may be their last chance to do away with the welfare state...
...q SPRING • 1995 • 179...
...It seems inescapable that a balanced budget requirement after 2002, reduced taxes, and increased defense spending would lead to enormous pressure to reduce Social Security...
...Newt Gingrich has said that Social Security is off-limits for now, but that Congress should look at it in five to seven years...
...In 176 • DISSENT Right Turn contrast to the social insurance programs of the New Deal, most Great Society programs were funded by the federal government but administered by agencies of state and local governments...
...How does the new Republican agenda contained in the "Contract With America" go beyond Reagan...
...Congress would be required to raise taxes or cut spending programs in a recession to counteract increases in the deficit...
...The new Republican Congress is considering changes that go well beyond anything accomplished by Reagan...
...Virtually all of the budget savings proposed in the Contract consist of reductions in basic food, cash, housing, medical insurance, child care, and other benefits for the poor...
...Since the Contract was written there have been proposals to turn AFDC into a block grant to states...
...With luck —some stiff opposition from the Democrats also wouldn't hurt—many of these proposals may never become law...
...In addition, the Contract calls for making most legal immigrants ineligible for sixty different health, education, job training, nutrition, housing cash assistance, and social service programs...
...There are precious few people who will benefit from the Contract With America...
...That means a 30 percent cut in Medicare, a 30 percent reduction in payments to veterans' widows and widowers, the firing of one in three federal workers, and so on...
...The funds available would no longer be adjusted automatically to reflect changes in the number of households in need...
...The Contract's cuts in poverty programs would constitute less than 10 percent of the total spending cuts needed to balance the budget by fiscal year 2002 without touching Social Security or defense and while cutting taxes...
...If the next five years are like the last five, the states would lose at least $20 billion...
...According to the U.S...
...In 1929 federal spending was less than 3 percent of gross national product...
...The Great Society was an attempt to eliminate urban poverty through increased public assistance...
...Food assistance would be reduced by about $18 billion over four years...
...Such temporary increases in the deficit act as automatic stabilizers, offsetting some of the reduction in the purchasing power of the private sector and cushioning the economy's slide...
...Conference of Mayors, federal spending for urban programs fell by 72 percent between 1979 and 1989...
...The American welfare state developed in two phases...
...The sheer size of the federal government prevents recessions from turning into depressions...
...Which leads to the question: what about Social Security...
...From June 1990 to June 1992, when the civilian unemployment rate rose from 5.1 to 7.7 percent, food stamp participation climbed by more than five million people...
...Of course these cuts are not spelled out in the Contract...
...With the usual fanfare about states' rights and decentralization, the Contract calls for folding many formerly separate programs into block grants to be given to states...
...Devolving more federal programs to states would simply encourage states to be more ruthless in bidding for business...
...Reagan reduced aid to states and cities while burdening them with responsibility for many programs—particularly housing, education, mass transportation, infrastructure, and aid to the poor...
...They believe that Ronald Reagan and George Bush failed, because government, or some semblance of it, still exists...
...Today federal spending is almost one-fourth of GNP...
...All figures, unless otherwise specified, come from the Center on Budget and Policy Priorities...
...States and cities already compete in offering tax breaks to lure corporate investment and jobs...
...If there is anything to the claim of economists about the importance of self-interest, it is bad news for the Republicans...
...Rather than moderating the normal ups and downs of the business cycle, government policy would make them worse...
...Distinct in origin and rationale, these two sources of the increase in government spending— social insurance associated with the New Deal and federal aid associated with the Great Society—met different fates at the hands of the Reagan budget cutters in 1981...
...The loss of entitlements would be particularly serious during recessions, when the number of poor families needing food stamps and the number of poor children needing free school lunches increase...
...About half of the benefits from the tax cuts will go to the top 10 percent of families, those with income over SPRING • 1995 • 177 Right Turn $100,000 a year...
...The second phase was the Great Society of the late 1960s and early 1970s...
...Despite the depth of these reductions, the budget cannot be balanced simply by cutting programs for poor people...
...What state would dare to keep taxes high enough to finance food stamps, at the cost of losing business to its neighbor...
...If the Republicans succeed in fulfilling their Contract With America it will lead to the dismantling of much of the federal government and the redistribution of income from low- and middle-income households to upper-income Americans...
...The cuts in low-income programs are unprecedented in their severity, almost three times as large as the cuts in such programs that were enacted in 1981 and 1982 under Reagan...
...The budget cuts are needed not only to balance the budget but also to finance an array of generous tax cuts primarily benefiting upperincome Americans and large corporations...
...Republicans plan to do this while cutting taxes and protecting the military and Social Security from budget reductions...
...Block grants are biased against the programs involved...
...Currently, when the economy slows down, tax revenues decline and government spending increases on such programs as unemployment compensation, food stamps, and welfare...
...The proposal would freeze the amount of money the federal government gives to states at 103 percent of the amount they received in 1994...
...How severely did Reagan damage the welfare state...
...It is precisely to avoid this debasing spectacle that social service benefit levels and the taxes that support them should remain the responsibility of the federal government...
...The block grants come with no strings attached and with lower funding levels than the programs had before consolidation...
...They were also means-tested, meaning that recipients had to have incomes below a certain level...
Vol. 42 • April 1995 • No. 2
