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Home » Clarion » 2013 » January 2013 » Time to Stiff the Fiscal Cliff: False Crisis Risks Safety Net

Time to Stiff the Fiscal Cliff: False Crisis Risks Safety Net


On January 1, Congress approved a compromise agreement to avert going over the “fiscal cliff.” Under the deal, tax rates for families earning more than $450,000 per year – a move that is expected to bring in more than $700 billion in revenue over the next decade. The terms of the deal also make it likely that another battle will take place within the next couple of months over future spending on safety net programs like Social Security, Medicare and Medicaid. Meanwhile, House Republicans are balking even at making disaster relief funds available to Hurricane Sandy victims. Sign this petition from the New York State AFL-CIO and tell the GOP to do the right thing and approve the approve the Sandy relief money.

As Washington is gripped by the confrontation over the so-called “fiscal cliff,” the central question is who will pay: the wealthiest Americans, through higher tax rates? Or working-class people, especially the elderly and disabled, through cuts to basic social programs?

“It’s time that we stand up together,” said New York City Central Labor Council President Vincent Alvarez at a December 6 labor rally in Times Square, “to fight to protect Social Security, fight to protect Medicare, fight for grandparents, and to make sure the rich pay their fair share.”

Former PSC Secretary Cecilia McCall speaks at a December 6 rally at Times Square that drew unions from across the city to oppose cuts to future Social Security benefits.

Reversing Reagan

Former PSC Secretary Cecelia McCall, a member of the PSC’s Legislative Committee and its Retiree Chapter, also spoke at the December demonstration. Unions across the country are mobilizing for a fair solution to the fiscal cliff showdown, and McCall described this as part of a longer-term fight to reverse the so-called Reagan Revolution of the 1980s. Before Reagan was president, McCall reminded the crowd, he was a national spokesperson for General Electric. “He paid back his handlers for putting him in the White House by cutting their personal taxes and taxes on corporations,” said McCall. “Bush did the same thing. We’re here to say, ‘No more to that!’”

The Times Square rally was just one part of New York unions’ efforts to affect the outcome in Congress. Representative Michael Grimm, a Republican member of Congress from Staten Island, was targeted in a December 1 event that organizers dubbed “The People’s Yacht Trip” and involved leafleting and discussing the issue with passengers on the Staten Island Ferry. It was followed by a march and a speakout at Staten Island Borough Hall.

Grimm is among the 238 out of 242 House Republicans who signed anti-tax activist Grover Norquist’s pledge to oppose any and all tax increases. Staten Island residents who spoke at the December 1 protest emphasized that if Bush’s tax cuts for the rich are made permanent, it will be difficult or impossible for Staten Island to get the federal aid it so badly needs.

Upper Hand

On November 30, John Hyland of the PSC’s Social Safety Net Working Group was one of several labor and community activists who met with Senator Chuck Schumer for close to an hour, in a meeting organized by the New York Coalition for a People’s Budget. The group’s message to Sen. Schumer was that “no bargain is better than a bad bargain,” Hyland told Clarion. “Deep cuts in social programs would hurt the economy, increase poverty, and damage these programs for the future,” Hyland told Clarion. “That’s a bad idea from any angle.”

With the Bush tax cuts scheduled to expire on December 31 if Congress does nothing, Republicans are in a weak bargaining position, said Hyland, the PSC’s former treasurer. In that context, he said, a GOP offer to accept marginally higher taxes for the rich does not represent a major concession, and certainly could not justify slashing Social Security, Medicaid or Medicare.

In the meeting, Schumer spoke positively about proposals from some Senate Democrats to lower the costs of social programs without reducing benefits – for example, by allowing Medicare to use its market power to negotiate lower prices on prescription drugs. This approach fits with the analysis of the PSC’s Safety Net Working Group, as laid out in its booklet, Defending the Social Safety Net. After all the exaggerations have been swept away, Hyland and other PSC activists say, budget shortfalls facing programs like Social Security can be addressed without benefit cuts – for example, through adjustments like eliminating the current cap on payroll taxes that protects income above $113,700.

Unionists organizing around the budget showdown warn that with unemployment still high, this is exactly the wrong time to push for deficit reductions. They cite Nobel-Prize-winning economists Joseph Stiglitz and Paul Krugman, who argue that the weak economy needs more public spending, not less. A policy of cutbacks and austerity, they say, will only cause the economy to contract, and could even trigger a “double-dip” recession.

How We Got Here

How did we end up on the edge of this fiscal cliff? It’s the result of politics, not economics, PSC activists say. With the growth of its Tea Party caucus, in 2011 the House refused to pass a routine bill to raise the federal debt ceiling. No new spending was involved: the bill was simply needed to pay for spending already authorized by Congress. But GOP lawmakers used the vote as leverage to try to win spending cuts they had been unable to achieve the first time around.

In the tense negotiations that followed, President Obama agreed to a plan that will trigger automatic across-the-board spending cuts at the end of this year unless Congress agrees on a plan to steeply reduce the federal deficit.

“It’s a manufactured crisis,” said PSC member Adam Tripp at the December Times Square rally. Tripp, who teaches economics at Bronx Community College, noted that healthy countries often carry significant debt. The looming December 31 deadline, he said, was driven by Tea Party ideology, not economic necessity.

‘Grand Bargain’

Talk of a “grand bargain” or a “balanced” combination of benefit cuts and spending hikes leaves most labor activists uneasy, concerned that Democrats could end up trading major benefit cuts for minor tax increases on the wealthy. So, activists are simultaneously pressuring Republicans on taxes while encouraging Democrats to “spine up.”

Steve Leberstein, co-chair of the PSC’s Social Safety Net Working Group, says that despite the scary sound of “going over the cliff,” the impact of the automatic cuts would roll out over time – more of a gradual “fiscal slope” than a cliff. The new Congress, in which Tea Party forces are somewhat weaker, would have time to take corrective action, Leberstein says. What’s more, recent polls show that the public is ready to blame Republican obstinance, not Obama or other Democrats, if no deal is reached by December 31 – so “going over the cliff” could increase the pressure on Republicans to make concessions.

For all these reasons, PSC activists insist, there is no good reason to start cutting more holes in our already frayed safety net, and they are urging members to contact their representatives without delay. “We need to make our feelings known,” said Joel Berger, a retired professor of education, at the Times Square rally, “that the social safety net must be protected and enhanced.”



AFL-CIO Statement on the Jan. 1 “Fiscal Cliff” Agreement

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