Deficit reduction debate is really about which class pays

The federal government and state governments across the country have been forced to confront sudden budget deficits in the wake of the 2008 recession. For state governments, the overriding cause of the deficits was a more than 30% reduction in state revenues following the economic downturn. For the federal budget deficit, the causes are more varied as this chart from the Economic Policy Institute indicates.

Although varied, none of the causes of the present deficit problems across the country can be reasonably blamed on poor and working people. The recession resulted from the near total economic meltdown that followed the bursting of the housing speculation bubble. Investment bankers — struck by a dangerous mix of greed, incompetence, and perverse incentives — are the culprits in that catastrophe.

The Bush tax cuts — which make up nearly 20% of the present federal deficit — were primarily a giveaway to the wealthy. Even the sudden public employee pension problems are largely the result of the economic recession as the investments of the pension funds took a hit when the market fell.

Despite the fact that poor and working people did not cause these deficits, efforts to reduce them have relied on policies primarily focused on making them pay. The infamous Scott Walker budget repair bill seeks to plug the Wisconsin state budget deficit in part by decreasing compensation for teachers and other public employees. Texas cut $15.2 billion dollars to shore up its deficit, primarily in the areas of education and health care. Ohio followed suit with Governor Kasich signing a budget that reduced taxes while slashing spending on education, libraries, nursing homes, and social programs.

As the eclipse of the federal debt-ceiling nears, it is not out of the question that similar approaches will be tried at the federal level, especially if Republicans win the present standoff on the matter. But cuts are not the only way to respond to budget deficits. Bringing in more revenue is the other option, an option which is not getting nearly the sort of play that it ought to.

Republicans predictably oppose revenue increases; the official line is that revenue increases reduce investment, destroy jobs, and fail to increase revenue due to decreased economic production. The response to this line has been disappointingly technocratic in nature.

Christina Romer pushes back with a dispassionate economic analysis about the relative economic impacts of spending cuts and tax increases, the takeaway being that spending cuts decrease economic production more than tax increases do. Paul Krugman keeps forwarding the Keynesian line that cuts would be devastating, and possibly result in a double-dip recession due to a decrease in consumer demand.

While these technocratic responses have merit, I think a much more moralistic argument is called upon here. What the deficit reduction question centers around is not really whether tax increases or spending cuts are best for the country as a whole. Analysis about the country as a whole is totally inadequate as the country is not made up of a unified population with unified economic interests. Cuts in education, health care, and worker pensions have no impact whatsoever on the wealthier classes as they already enjoy private education, can afford their health care, and do not rely on public pensions for their retirement.

The question of how we reduce our budget deficits is really a question about which class should pay. Should it be the poor and working people who had nothing to do with the causes of the present crisis, and — after 41 years of total wage stagnation — are not in a position to afford to pay for it to begin with? Or should it be wealthier people whose tax cuts are a significant driver of the deficit problem, and whose mismanagement of financial markets precipitated the crash that caused almost all of the rest of the budget shortfalls?

The answer to me is clear. Poor and working people should not be forced to pay for the tax cuts and market failures of the wealthy. To force them to do so is nothing more than a form of redistribution of income from poor and working people to the very rich.

The absurd framing of the Boeing labor dispute

The National Labor Relations Board ruled in April that Boeing’s decision to locate a plant in South Carolina was a form of illegal retaliation against union workers in Washington. Immediately after the decision of the board, opponents of organized labor began working to manufacture outrage at this clear cut enforcement of labor law.

The National Labor Relations Act grants workers the right to form labor unions, and the right to “engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” It forbids employer retaliation for exercising these rights, and specifically forbids hiring practices that seek to discourage membership in labor organizations.

When Boeing CEO Jim Albaugh remarked in March that the “overriding factor” in his decision to expand into South Carolina “was that [Boeing] can’t afford to have a work stoppage every three years,” he was acting illegally. Remarking that production is being located in South Carolina in response to previous strikes is about as clear an instance of retaliation that you will ever find.

In fact, what is most surprising in this case is not that the NLRB made the decision that it did, but that Albaugh publicly revealed that union avoidance was the primary motivation of his decision. There is no doubt that firms silently violate labor laws often by relocating to punish union activity, but rarely are they bold enough to admit it.

Instead of discussing the legality or legitimacy of management retaliation — which is what the NLRB ruling is actually about — somehow the issue has been framed as one about the right of firms to build where they would like. The usual camp of perennial labor opponents charged that the NLRB was out of control, trying do destroy jobs, and mimicking Soviet-style central planning.

Tim Pawlenty put forward the clearest articulation of that spin, remarking that “a federal agency telling an American business in a supposedly free market that it can’t grow a business or start a business in another state is one of the most outrageous things I have seen.” That of course would be outrageous if that is what the NLRB actually ruled. On the other hand, telling a business that it cannot retaliate against workers exercising legally protected rights is not outrageous at all.

This kind of misleading framing is normal politics though, and there is extra incentive to lay it on thick as Republican presidential candidates are vying for an endorsement from South Carolina Governor Nikki Haley in that important primary state.

That opponents of organized labor would try to spin and disrupt a clear cut case of labor law violations is not surprising, but the total lack of any spirited response is, well, not surprising either. Barack Obama — in his typical center-right manner — declined to comment on the particular case, saying instead that “as a general proposition, companies need to have the freedom to relocate.” He followed that proclamation with a broad statement about the harmful effects of labor-management conflict.

Teamsters’ reformer Sandy Pope gives a decent defense of the NLRB action, one that others would be wise to copy. However, even Pope’s defense falters a bit in the deeper debate about the importance of preventing retaliation, getting bogged down in the distracting rhetoric of job creation which this case has nothing to do with.

These kinds of weak responses allow the issue to continue to be framed as a matter of the NLRB preventing businesses from opening up shop wherever they would like. Unless labor supporters are able to correct the framing of the issue as one of retaliation — which is after all what the case is actually about — the opponents of organized labor will score at least a public relations victory out of an otherwise very legitimate NLRB action.