Andy Stern takes on America's second deficit
"Do we really need another deficit-reduction plan?" I ask Andy Stern. I like this stuff, but even I'm getting exhausted by the endless parade of plans, each just slightly different than the last, and none with an obviously supportive constituency in Congress. He laughs. "Yes," he says. "We need to debate as many as we possibly can. We need to get this right."
Stern, the former president of the Service Employees International Union, is a member of the Simpson-Bowles Commission. He's not the only participant to bring out his own plan (pdf) -- both Rep. Jan Schakowsky and Alice Rivlin have already released separate proposals -- but his plan is more clearly distinguished from the others. This is, in part, because where they reduce one deficit, he reduces two.
Stern's proposal cuts and raises about $4 trillion by 2020, which is comparable to the Simpson-Bowles proposal, and sufficient to get us back to the black. "But we need to appreciate that we have two deficits," Stern says. "A fiscal deficit, and an investment deficit. A family under stress would think hard before they didn’t invest in their kid’s education. A company under stress would think hard about not investing in new equipment that it needed. I wanted to show you can invest as well as cut."
Stern's critique of the fiscal commission is that its mandate has been too narrow: You can cut and tax your way to a balanced budget, but more is needed for a dynamic economy. His plan calls for the creation of "a permanent fund beginning in 2015, with an initial investment of $75 billion dollars, increasing by 3% annually. A range of long term investments (e.g. infrastructure, smart grid, education, and broadband) will be recommended each year by an outside panel of experts appointed by the President and Congress."
The point, he says, is that Congress isn't very good at creating space in the budget -- or in the budget process -- for long-term investments. In a PAYGO world, investing in something new means taking from something old, and the old thing has entrenched interests, while the new thing rarely does. So if we want long-term investments, we need a dedicated fund with a dedicated funding source. Stern proposes a few possibilities: a financial transaction tax, for instance, that would add a 0.25 percent-0.5 percent charge onto stock transactions if the stock is held for less than a year (that way, it mainly falls on professional investors making speculative trades, not ordinary investors managing their retirement savings). Another option is a surcharge on income over $1,000,000.
You can imagine a lot of ways to fund such a project. Stern's point is that you can implement one of them at the same time you're reducing the broader deficit. General austerity doesn't mean there aren't opportunities -- and even a need -- for targeted investment. That raises the question, of course, of whether Stern plans to vote for the Simpson-Bowles plan on Friday. "I'm still trying to figure out what I want to do on that," he says. "But the thing I definitely wanted to do was highlight a larger discussion on jobs, investment, and competitiveness which the commission and the country still needs to have."
Photo credit: Haraz N. Ghanbari/AP.
| December 2, 2010; 9:01 AM ET
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