President Obama should use the fiscal cliff to shift the debate away from deficits and take on the inequality that's undermining our democracy.

It has been well said that "the freest government, if it could exist, would not be long acceptable, if the tendency of the laws were to create a rapid accumulation of property in few hands, and to render the great mass of the population dependent and penniless…"

We believe in a way of living in which political democracy and free private enterprise for profit should serve and protect each other—to ensure a maximum of human liberty not for a few but for all…

Today many Americans ask the uneasy question: Is the vociferation that our liberties are in danger justified by the facts?

...Their answer is that if there is that danger it comes from that concentrated private economic power which is struggling so hard to master our democratic government.—Franklin D. Roosevelt, 1938

In his remarks on the so-called “fiscal cliff,” and in numerous campaign speeches, President Obama has repeatedly remarked that “we can’t just cut our way to prosperity,” and that “if we’re serious about reducing the deficit, we have to combine spending cuts with revenue. And that means asking the wealthiest Americans to pay a little more in taxes.” The president has also said that he is “not wedded to every detail” of his current plan to reduce the deficit and that he is open to compromise. But he also has made it plain, as he did in his recent remarks at the White House, that he will refuse to accept any approach that isn’t balanced; that he is “not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me making over $250,000 aren’t asked to pay a dime more in taxes.”

For the millions of Americans who remain out of work, or are struggling with hourly wages that when adjusted for inflation stand where they were in 1978, this is welcome news. But the president’s focus on taxes and the deficit is only part of the story. What the country really needs, according to most economists, is more stimulus, for the best way to reduce the deficit is to expand the economy, which would of course result in more government revenue.

The president has certainly made reference to this, and he has included a modest $50 billion in stimulus spending in his recent budget proposal to Congress, but for the most part the public discourse on how to avoid the “fiscal cliff” and fix our economy has been centered not on jobs or the vast structural inequality that now separates the top 1-2 percent from the rest of us, but on the deficit. This is unfortunate, for it means, in essence, that the country’s economic agenda is still very much in the hands of the conservative right; that we are still focused not on the cause of our economic woes—a collapsed economy brought on by the worst financial crisis since the Great Depression—but on the by-product: the vast fall-off in federal, state, and local revenue that naturally came about as a result of this collapse.

A far better exercise would be to move away from the right’s obsession with the deficit and open up a conversation with the American people about a far more critical issue facing the nation: the ever-widening gulf between the rich and the rest of us and the very real consequences that this disparity in income has had on our economy and indeed on the very nature of our democracy.

Roughly three-quarters of a century ago, when faced with a similar set of circumstances—including a conservative right that was fond of labeling his policies socialist—Franklin Roosevelt did not shy away from addressing the conditions that led to the collapse of the world’s economy. He well understood—as did the millions of Americans who lived in or on the threshold of poverty—that “the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself.” He also understood that “the Federal debt, whether it be twenty-five billions or forty billions, can only be paid if the Nation obtains a vastly increased citizen income…The higher the national income goes the faster will we be able to reduce the total of Federal and state and local debts. Viewed from every angle, today's purchasing power—the citizens' income of today—is not at this time sufficient to drive the economic system of America at higher speed.”

Taking note of this—and in a reference to the bottom half of the U.S. population that today sounds all too familiar—FDR observed in a speech on the perils of monopoly that:

47 per cent of all American families and single individuals living alone had incomes of less than $1,000 for the year; and at the other end of the ladder a little less than 1 1/2 per cent of the nation's families received incomes which in dollars and cents reached the same total as the incomes of the 47 per cent at the bottom…

This clearly was unacceptable, he went on, for:

No people, least of all a democratic people, will be content to go without work or to accept some standard of living which obviously and woefully falls short of their capacity to produce. No people, least of all a people with our traditions of personal liberty, will endure the slow erosion of opportunity for the common man, the oppressive sense of helplessness under the domination of a few, which are overshadowing our whole economic life.

Hence, for Roosevelt it was economic plight of the average American—not the deficit—that was the key not only to the restoration of our economy, but also to the health and well-being of our democratic system of government; even to our very way of life.

The debate over the so-called fiscal cliff and the showdown between President Obama and Congress over what to do about it has attracted a great deal of attention from the media. But rather than fall into another round of endless bickering with the budget hawks about the deficit, the president should use this opportunity to remind the American people—as FDR did all those years ago—that an economy and a political system built on fundamental inequality is simply not sustainable. If we really want to help the 47 percent our highest priority should be to adopt policies based on the fundamental idea that “political democracy and free private enterprise for profit should serve and protect each other,” not just the wealthy few at the top.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

Capping federal spending at 21 percent of GDP is arbitrary, short-sighted, and wrong for America.

The Simpson-Bowles budget balancing plan seems to have become the common-sense standard for dealing with America’s future budget deficits. I’d say this move toward the right is dangerous to the future of the nation and essentially cruel—far more dangerous than the level of the deficit over the next 15 years. The commission, formally known as the Commission on Fiscal Responsibility and Reform, appointed by President Obama, achieves its deficit reduction by reducing government spending to do two-thirds of the job and raising taxes to do only one-third of the job. Even 50-50 would not be fair in such a low-tax nation. The commission proposed cuts in Social Security benefits of 15 percent for medium earners, for example.

But easily the most short-sighted objective is to hold federal spending to 21 percent of Gross Domestic Product into the future. How did they get this number? It is roughly the average level of federal spending since 1970. This is not a reasonable standard—it is not even a way to think about the issue. So where did the idea originally come from? The answer: the right-wing Heritage Foundation.

Now our most respected elder statesmen of the economy, Paul Volcker and Warren Buffett, are endorsing the 21 percent level in recent editorials. It may have been missed in Buffett’s piece, which endorsed a 30 percent tax on the rich, and correctly so. But he said it plain as day: “Our government’s goal should be to…spend about 21 percent of G.D.P.”

Oh my. Did they do any analysis at all about what that level would mean for retired, sick, and middle-income-to-poor Americans? Did it occur to them how vastly the U.S. economy has changed over those years? There are many more retirees, health care is more expensive and more extensive, the U.S. has chosen to fight expensive wars, and its infrastructure and educational needs are dire.

The words of the wise oracles should not be taken seriously. One wonders whether Volcker would have run the Federal Reserve or Buffett picked stock on such skimpy analysis. They present no evidence, nor do I think they have done any research or even reading that shows that a 21 percent spending level will make the economy more efficient than, say, a 24 percent level of spending. 

And they beat their chests as the exemplars of responsibility in an otherwise irresponsible America. Moreover, Pete Peterson, of course, is now financing a road tour for Bowles and Simpson to fight their great moral battle to get America’s budget under control—as a reminder, not by raising taxes significantly but by cutting social entitlements significantly. America cannot be run by men like these. America’s great moral battle is for social justice and adequate federal investment.

The heroic and correct analysis of the Simpson-Bowles plan has been done by Paul Van de Water of the Center on Budget and Policy Priorities. Some think of the CBPP as left-wing, but it is only mildly so. It makes deficit reduction a top priority, and its analysis is typically excellent. 

Van de Water concludes that keeping federal spending at 21 percent of GDP would require deep cuts in Social Security, Medicare, and Medicaid over time, as well as virtually all other federal programs. He wrote this before the Budget Control Act and the sequester we now face, but its principles still apply.

Moreover, he reminds us that the Brookings Institution held panels on the future budget, and in general, centrists on those panels agreed that spending as a percent of GDP should be 23 to 25 percent 20 years from now. He thinks the Simpson-Bowles plan is simply wrong for America. In truth, Social Security is inadequate today, and Medicaid tragically so. The latter in particular needs building up.

And then the 21 percenters generally have the audacity to demand more investment in education and infrastructure. How?

Centrists had better get together and remind America, with analysis, pragmatism, and a keen sense of justice and America’s future, how deeply wrongheaded most of the basic principles of Simpson-Bowles are. This thinking has led to today’s fiscal cliff, and as a blueprint for the future it is both damaging to the economy and cruel for most Americans.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

Republicans are using the fiscal cliff to extract payback for all the "gifts" President Obama has given to Americans.

Before Americans have even finished digesting their Thanksgiving turkey, the holiday shopping season will have officially begun. But according to Mitt Romney, Christmas came early for those who voted for Barack Obama. The failed Republican presidential nominee and latter-day Scrooge told donors last week that President Obama had won reelection by “giving targeted groups a big gift.” And what generous stocking-stuffers they were! For the young and the poor, health coverage under the Affordable Care Act. For Hispanics, an executive order halting deportation of the children of undocumented immigrants. For women, free contraception for use in all their filthy lady activities. If Malia and Sasha don’t find a pair of baby unicorns under the White House Christmas tree this year, they have a right to feel jealous.

Romney’s comments met with disapproval from fellow Republicans who hope to have a future in elective office, but the truth is that they reflect an understanding of the American public and its relationship with government that is widely shared among conservatives. Paul Waldman argues that it fits right in with their “makers vs. takers” ideology, the notion that the country is divided between “the brave individualists needing nothing from anyone, and the blood-sucking parasites who rely on government.” But Republicans don’t just want to reset policy to some sort of neutral state where everyone gives and receives his or her fair share (slow down there, Karl Marx). Instead, they seem to view the fiscal cliff as an opportunity to impose austerity measures that would redistribute the gifts to their Nice List and punish those who have been spoiled by Obama’s socialist Santa. 

The fiscal cliff is in fact better described as an “austerity bomb,” a term coined by TPM’s Brian Beutler and echoed by Paul Krugman. Despite what the cliff terminology might suggest, the problem isn’t that the federal deficit is about to explode, but that conservatives who have spent years demanding swift and substantial deficit reduction are about to get exactly what they wanted. If this mix of scheduled tax increases and spending cuts is allowed to take effect, it will carve $560 billion out of the budget next year – so why are deficit scolds suddenly terrified of the consequences? Krugman argues that they’re implicitly conceding that “Keynesians were right all along, that slashing spending and raising taxes on ordinary workers is destructive in a depressed economy, and that we should actually be doing the opposite.”

But are Republicans really worried about the plight of the working man? You wouldn’t know it based on the alternatives they’ve proposed, which involve swapping one set of austerity measures for a slightly different set of austerity measures. Their real concern is what the fiscal cliff will mean for their friends and supporters, not what it will mean for the broader economy. Sure, the poor will take the hit first, as is their lot in life, but taxes will go up on rich people, too! That’s money coming straight out of the 2014 campaign coffers. And what about those poor defense contractors who will suffer from cuts to the Pentagon’s budget? They have mouths to feed, too.

The terms that Republicans have set for the fiscal cliff negotiations provide clear evidence of this favoritism. Chastened by President Obama’s reelection, they keep claiming they’re open to compromise, but they steadfastly refuse to raise tax rates on the rich. Instead, they insist any new revenue must come from “closing loopholes,” a hoary Beltway cliché that means nothing in particular, and they’ll only concede that much if Democrats agree to “reform entitlements,” which is even less specific but more ominous. Oh, and they also want “changes” to the Affordable Care Act to be on the table. In fact, if Barack Obama would just go ahead and resign from office, it would be a real show of good faith and bipartisan spirit.

Proposing to cut Social Security benefits or raise the retirement age as part of a fiscal cliff deal is a non sequitur at best. With all due respect to financial masterminds like Lloyd Blankfein, it’s hard to believe that anyone could be told that Congress is about to pull the rug out from under the fragile recovery and honestly conclude that the solution is to make old people work longer. It’s the equivalent of the president being told that we’re on the verge of nuclear war and replying, “I’ll have the soup.” As Jeff Madrick has explained at length, Social Security is not in crisis, and there are plenty of easy fixes available for its future financial shortfall. (Medicare is a thornier problem, but one that probably shouldn’t be dealt with on a timer.) Senator Mark Begich, for instance, has proposed to cover the gap and pay for more generous benefits by eliminating the payroll tax cap. But don’t expect that plan to be taken very seriously by the Very Serious People, because it asks the rich to sacrifice more instead of inflicting some character-building pain on everyone else.

Aside from being unnecessary, such cuts would have a disproportionate impact on the poor. The right’s claim that Social Security wasn’t designed to handle increased life expectancies is based on a serious misunderstanding of history and human biology, but it is true that life expectancy has risen dramatically – for the rich. Workers on the lower rungs of the economic ladder haven’t been so lucky, so a higher retirement age is just a massive benefit cut for them. Of course, any such changes would only be phased in for younger workers, who (purely coincidentally) don’t vote Republican, not current retirees who do. That will teach those spoiled little punks. Er, I mean, preserve the promise of Social Security for future generations.

The same logic, if you can call it that, applies to demanding changes to the Affordable Care Act. The current law will save $109 billion over the next 10 years, so in theory, the deficit hawks should love it, right? Well, there are two problems with that theory. The first is that those cost savings are based on CBO projections, which, like Nate Silver’s electoral analysis, fall into that category of “liberal math” that Republicans find inherently suspect. The other is that the ACA achieves those savings while helping poor people -- that’s what makes it a gift, according to Romney. But deficit reduction isn’t supposed to make life easier; it’s supposed to be tough love that forces people to fend for themselves in a harsh and unforgiving world. Like exercise, the pain means it’s working. Or maybe you just tore a tendon. You should probably check with your doctor, assuming you can afford health insurance.

This barely concealed impulse to punish the undeserving is the source of Republicans’ internal conflict over the fiscal cliff and the biggest hurdle they must overcome in their efforts to become viable contenders for the White House again. They may not see it as punishment; to them, it’s just a teaspoon of unpleasant medicine that will eventually make the country much healthier. But things like government-funded health care, education, and retirement security only look like gifts from the perspective of the man who has everything. What Republicans see as unaffordable luxuries, the rest of us see as essential to a basic standard of living. Until they realize that, we might be able to reach a compromise on the fiscal cliff, but we’ll never really find common ground.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter @txprice.