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In one of his best columns ever, Robert Reich cuts through a lot of bull-malarchy in The Ongoing War: After the Battle Over the Cliff, the Battle Over the Debt Ceiling, were he gets to the core issue of our fiscal battles -- it's about the size of government, not deficits or debt. Our biggest problems are not excess spending on Social Security and Medicare, but is rather insufficient numbers of jobs and over concentration of wealth which is dragging down our economy.


It's about the size of government. Tea-Party Republicans (and other congressional Republicans worried about a Tea-Party challenge in their next primary) want the government to be much smaller.

"My goal," says conservative guru Grover Norquist, "is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub."

What's behind this zeal to shrink government? It's not that the U.S. government has suddenly become larger. In fact, non-military government spending relative to the size of the U.S. economy remains the smallest of any other rich nation.

Reich notes that apart from the military, the highly popular Medicare and Social Security make up most of the rest of government expenditures. (Yes he understands the Social Security Trust Fund is on a separate balance sheet from the primary federal budget.)

Reich recounts our recent history which show deficits have been dropping recently, if measured properly, as a percentage of gross domestic product (GDP is the value of all goods and services produced in the U.S.) In September of 2009 the deficit was 10.1% of GDP, and it has fallen to 7%  by 2012.

After President Clinton handed President Bush an economy in surplus, Bush trashed it with tax cuts equal to 2% of GDP, two unfunded wars and a near doubling of total defense spending, which was then made worse by the Great Recession of 2009 when our economy and consequent tax revenues tanked. This recession also "boosted government spending on a stimulus program and on safety nets like unemployment insurance and food stamps."

As our economy and employment improve - and tax revenues increase, and safety net spending such as unemployment declines our deficits are improving.

Yes, we do have to deal with rising health care cost as baby boomers age, but this is not the core problem with our economy or our budgets. Health care consumes "18 percent of the total economy and almost a quarter of the federal budget (mostly in Medicare and Medicaid).

Reich then sarcastically predicts that we would see Republicans and Democrats looking for ways to hold down future health care cost such as:

They might be debating how to make the cost controls in the Affordable Care Act more effective, for example, or the merits of moving to a more efficient single-payer system, as every other advanced country has done.

Reich does not mention the large savings we could achieve by letting Medicare negotiate with the big pharmaceutical companies over drug prices, or allow people to buy-in to Medicare at cost, as the public option in the ACA, bring cost down substantially.

Reich argues we are not hearing this debate because that is not what this war is about. I'm already stretching fair use, as this point so I encourage you to follow the link to read Reich's cogent analysis of the deep despair, frustration and anger that many Americans feel as no matter how hard we work we find it difficult to get ahead. And, worse, we fear for our children's future as we see a more wide spread collapse of the American dream.  

The Tea Party has learned to channel this anger against government rather than keep it focused on  the true causes of poverty, the declining real per capita wages, overly concentrated wealth, and record corporate profits through eviscerated regulation and corporate accountability.  

Government is an easy scapegoat, utilized by much of corporate America to convince average Americans to cut taxes, spending, and regulations -- and divert attention from record-high corporate profits and concentration of income and wealth at the top.

The median wage continues to drop, adjusted for inflation, even though the economy is growing. And the share of the economy going to wages rather than to profits is the smallest on record.

When people see government bailing out corporation but not people it is too easy for the Norquist "drown the government" zealots to channel anger against "Big goverment" with lies about the "47% of moochers, takers, and fakers."  

Reich's cogent analysis helps focus our progressive attentions on the goals of refocusing Americans frustration on the proper problems of over concentration of wealth, falling real wages, a non-progressive tax system where the wealthy and corporation do not pay their fair share, and inadequate regulation and accountability.

Outside of our overly large military spending, the fraction of GDP we spend on social programs appears to be much less than other modern nations, and our total taxation is less.

The McConnell-Biden bill fixed government tax revenues at 18% of GDP which is inadequate to sustain our current spending of 23% of GDP. If we more aggressively wind down the Iraq and Afghanistan war spending (not just troop reductions), and improve our jobs and economy (thereby reducing safety net spending such as unemployment), if appears we may be get our total spending down to 21% of GDP, without totally slashing our New Deal, Great Society, and ACA programs as the GOP intends to do, but we need to resist.  

From a progressive Democratic point of view, our problem then should be raising 3% of GDP of tax revenues, stimulating job and wage growth, and rationalizing military spending, not cutting Medicare, Social Security, Medicare, food stamps, the NSF, NIH, Amtrak, regulatory agencies, and other non-military government spending.

Democrats should not get suckered into the dominant GOP meme. Our problems is not too much government spending, except for military spending, but too little taxation on the wealthiest and corporations, too few jobs, and inadequately low wages. Our spending on these are lower than most other modern advanced nations.  

Originally posted to HoundDog on Thu Jan 03, 2013 at 05:00 PM PST.

Also republished by TrueMarket.

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