Feb 27 2012
By Sen. Kent Conrad and Rep. Chris Van Hollen
Republican reaction to the president’s budget highlighted just how out of touch our colleagues across the aisle are when it comes to the nation’s economy. They seem to be unaware of the economic disaster President Barack Obama inherited and oblivious to the recovery now under way. To fairly evaluate the president’s budget, we must keep both in mind.
When the president took his oath of office, we were in the midst of the worst recession since the Great Depression. In the fourth quarter of 2008, the economy contracted at an astonishing annualized rate of 8.9 percent. And we lost 800,000 private-sector jobs in January 2009 alone. Housing and financial market crises were rippling through the economy and unemployment was surging.
We have come a long way since then. The federal response to the crisis — including actions taken by the Obama administration, such as the American Recovery and Reinvestment Act of 2009 — successfully pulled the economy back from the brink. We have now had 10 consecutive quarters of positive economic growth and 23 consecutive months of private-sector job growth, including more than 250,000 jobs added last month. The unemployment rate has fallen and we have seen signs the recovery is strengthening. Obama deserves considerable credit for the part he played in that turnaround.
While the deficit has remained high over the past three years, that is largely a result of the policies of the previous Republican administration and the economic turmoil it left behind. It is wrong to blame Obama for a costly federal response to the economic crisis that economists widely view as necessary and successful.
Looking forward, we have two major problems. In the short term, we still have relatively weak demand for goods and services, which is holding back a stronger recovery. In the long term, we face a serious debt threat.
Job one is to improve economic growth with steps to strengthen demand. President Obama’s budget does just that — with upfront investments in schools, roads, bridges and rail as well as tax incentives to encourage business investment and hiring. The budget also proposed extending the payroll tax cut and unemployment benefits, which Congress passed and the president signed into law.
While we were pleased we were able to pass this element of the president’s jobs plan, our Republican colleagues continue to overlook the problem of weak demand. House Republicans have refused to move the remainder of the president’s jobs plan, which has been sitting before Congress since September. Their calls for deep near-term spending cuts would lower economic growth, kill job creation and choke off the recovery.
But we do need to address the second problem of rising debt. We need a long-term deficit-reduction plan that reforms our tax system, modernizes our mandatory spending programs and attacks wasteful spending. The key is to enact such a plan now but phase it in after the economy is on a stronger footing. By combining near-term recovery measures with credible long-term deficit reduction, we would instill confidence in the markets and give a double boost to the economy.
The president’s budget begins to address the debt problem by bringing the deficit down as a share of the economy from 8.5 percent in 2012 to 2.8 percent in 2022. It includes a number of significant savings proposals, many of which were also proposed by the bipartisan Simpson-Bowles commission. Importantly, the budget calls for a balanced approach, with spending cuts and new revenue and with everyone sharing responsibility for deficit reduction.
This element of balance is totally missing from the GOP approach. In fact, the vast majority of Washington Republicans have signed a pledge that would prevent them from using a single dollar in new revenue — which could be accomplished from closing special interest tax loopholes — for the purpose of deficit reduction.
The House Republican budget proposed last year would have decimated the safety net for seniors, children and the disabled while providing another $1 trillion in tax cuts for the wealthiest. In supporting that plan, Congressional Republicans voted to end the Medicare guarantee, turning it into a voucher program. They voted to add 34 million people to the ranks of the uninsured. And they voted to slash funding for energy, education and infrastructure — the engines of our future economic growth.
In negotiations with Republicans last summer, Obama demonstrated that he was willing to go the extra mile to reach a bipartisan deficit-reduction agreement. Now, others are going to have to be willing to step up and be part of the solution. Together, we can develop a plan that will strengthen the near-term economy and put the country on a sound long-term fiscal course.
Sen. Kent Conrad (D-N.D.) is the chairman of the Senate Budget Committee. Rep. Chris Van Hollen (D-Md.) is the ranking member of the House Budget Committee.
2/27/12 -Current record