It's time for progressives to take the offensive on the deficit.

Illinois Rep. Jan Schakowsky, a member of the President's deficit reduction commission, put out a straight-forward plan yesterday that demonstrates what you can do if you believe that we need a strong middle class to build a strong economy. Unlike the recommendations of the commission's chairs, Alan Simpson and Erskine Bowls, which would hurt growth and long-term recovery by cutting supports to the middle class and increasing the wealth gap, the Schakowsky plan is aimed at spurring economic growth and closing our growing inequality chasm.

Schakowsky's plan has three components: cutting the deficit, investing in growth immediately, and closing the long-term funding gap in Social Security. Taken together, the plan would help short-term recovery, reduce long-term budget shortfalls while encouraging growth, and assure that Social Security is in good shape for the foreseeable future.

Schakowsky would cut the deficit through a combination of actual cuts in waste and inefficiency, such as eliminating a program that helps McDonald's market overseas and introducing energy savings to federal employees' computer usage. It finds savings from elimination or reduction in 20 specific defense programs. It reduces the amount that the federal government pays for prescription drugs and includes a robust public option in health reform. It also cuts farm subsidies.

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On the revenue side, she goes after corporate tax subsidies and wealthy individuals. Her biggest proposals would discourage corporations' over-reliance on highly leveraged financing and tax capital gains and dividends as ordinary income. She also includes raising revenues from cap and trade, with protections to help low-income consumers, which helps to reach another major policy goal: tackling climate change.

On Social Security, she firmly rejects proposals to cut benefits and instead proposes changes that would not only put the program on a firm financial footing for decades, but allow some benefits to be improved. She does this by raising the amount of income that is applied to Social Security and introducing a legacy tax on earnings above the cap, which would make the tax system a lot more progressive.

Finally, to help get the economy going now, Schakowsky's plan would invest in immediate job creation and protect against growth-killing cuts like shutting off unemployment compensation or federal funding to states for Medicaid.

Is her proposal dead on arrival with this deficit commission and Congress? Maybe so, but that's not the point. You can't win a debate with nothing. So next time someone says that we can't get out of this financial mess without "sacrifice," point to the Schakowsky plan and ask: Sacrifice for who? Here's a plan that will close the deficit by telling big corporations and the wealthy that it's time they pay their fair share. Plus, it will spur the economy, protect average taxpayers, keep Social Security's promise, and while we're at it, help prevent coastal cities from sinking into the ocean.

Time to take the offense. Let's run with that.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute and is writing a book on the progressive campaign to enact health reform.

If the government follows the deficit commission's early report, we really will saddle our grandchildren with burdens.

It all started so innocently: deficit hawks wanted to restore their credibility in the face of the global financial crisis and the comprehensive discrediting of their ideology. They slowly emerged from their caves, trying to re-engage in the policy debate by appearing reasonable. They started saying that "now we should have deficits," but soon (unspecified) "we will need surpluses" to "pay back the excesses."

As time progressed, however, the comeback attempts became outrageous and outright distortion entered the picture. Figures such as Robert Rubin and Alan Greenspan (along with a whole host of Wall Street economists, whose employers had been large, albeit misdirected, beneficiaries of government largess) began to launch revisionist efforts to deny that fiscal policy had any positive impacts. Some went as far as asserting that government intervention actually worsened the recession by virtue of creating great "uncertainty", which allegedly held back business investment.

This latter development has now gathered pace and found its fullest expression through the US National Commission on Fiscal Responsibility and Reform (an Orwellian title if ever there was one) established by President Obama. The Commission has proposed a $3.8 trillion deficit cutting plan that would trim Social Security and Medicare, reduce income-tax rates and eliminate tax breaks, including the mortgage-interest deduction. Yes, there are token cuts in Defense spending in the interests of "fairness", but the cuts are heavily skewed toward middle class entitlements. (Which is a deceiving word because it implies that we're just a bunch of weak supplicants, dependent on the graces of the government. Why don't we call these programs "enablements"?) The priorities laid out by the Commission are truly symptomatic of the degeneracy of our governing class compared to the days of the Great Depression. Grand projects started then are still delivering value to communities and private business interests some 80 years after their completion.

The financial crisis delivered significant empirical blows to mainstream economics, which has consistently downplayed the effects of fiscal policy. Along with the usual ideological hatred of government spending (except, of course, when it favored their particular industries), most of the supporters of this commission continue to trot out the usual fantasies of excessive government spending "crowding out" the private sector. They also cited the perverse idea of "Ricardian equivalence", which says the reason that the private sector is not spending is because it expects higher taxes in the future due to budget deficits, which will have to be paid back sometime -- so they are saving up to pay those bills. And anybody who has the nerve to challenge their ludicrous assumptions is castigated as being "stridently opposed" to any reforms at all.

Yes, some of us remain strident in our opposition to stupid, irrational policy that invokes financial, rather than real, resource constraints. What we need is a policy that puts unemployed people to work to produce output needed by seniors. Providing adequate Social Security benefits to retirees will generate effective demand, which will put labor to work. Just as the rapid growth of effective demand during the Clinton boom allowed sustained growth in the employment rate, even as productivity growth rose nearer to United States long-term historical averages, tomorrow's retirees can provide the necessary demand to allow the United States to operate near full employment. This is a "virtuous combination" of the high productivity growth model followed by Europe and Japan from 1970-95 and the high employment model followed by the United States during the 1960s, as well as during the Clinton boom.

Instead, we now have a commission where people are invoking a bogus "national solvency" argument to justify cuts in Social Security. They fail to understand that resource availability in the future will be enhanced by the fiscal outlays that are done now. Mainstream remedies to perceived budget blow-outs typically manifest as cuts to education, for example. Nothing could be more counterproductive to growth.

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As far as the national debt itself goes, those who want to paint the scariest picture possible use the larger gross debt to GDP ratio, which is around 90% of GDP. But that is highly misleading, because it includes the debt held in federal government accounts -- in other words, debt the government owes itself. This includes securities held in civil service and military retirement funds, Social Security, and Medicare, as well as unemployment and highway trust funds.

And Social Security has run large budget surpluses since the early 1980s. It has used those surpluses to accumulate treasury debt. In the future, the program will sell the bonds back to the treasury when Social Security revenues are less than its benefit payments. To all intents and purposes, Social Security's treasury holdings really amount to internal record keeping -- a sort of reminder that someday the treasury will have to cover Social Security's shortfall. The relevant debt figure is the treasuries held by the public.

The rationale for creating this actuarial accounting fiction can be questioned, but it helped establish the program's political legitimacy in its early days, by creating the illusion that Social Security was a "pay as you go" system, in which you take out what you pay in. In fact, it bears no reality to a private sector social insurance scheme. Those who argue, for example, that the debt owned by Social Security should be counted as part of our overall debt levels do so because it reflects a future obligation of government to future beneficiaries. However, as Randy Wray and Yeva Nersisyan have pointed out, the government has that obligation whether or not Social Security owns treasuries, and it will meet its obligations in exactly the same manner whether or not it holds treasuries, by electronically crediting bank accounts. That assertion might seem controversial to many (including the members of the Presidential commission on the deficit), but no less than the Chairman of the Federal Reserve himself has conceded the point. Ben Bernanke has long claimed that there are no technical limits to government spending (or, more specifically, to financing the fiscal components of monetary policy). In a now famous 2002 speech before the National Economists Club, he argued that the central bank can always finance government spending at no cost, under modern monetary arrangements:

Under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero. . . . The U.S. government has a technology, called a printing press (or, today, its electronic equivalent) that allows it to produce as many U.S. dollars as it wishes at essentially no cost.

Bernanke recognizes that the Fed finances government spending by electronically injecting reserves into the system and that there is no limit to its ability to do so. The Commission, however, persists in perpetuating the idea that the American government has run out of money. Meanwhile, American families have spent the past several years facing tough choices in their own lives because the market system failed. This was all due to lax government regulation and dishonest, irresponsible, and indeed fraudulent behavior on the part of the private sector, notably the financial sector, which stands to benefit from any attempt to privatize Social Security.

The deteriorating position of most American families has been exacerbated by the failure of fiscal policy to ensure there was enough spending to support their jobs and, hence, generate increased revenues (which would REDUCE the budget deficit). There are no consequences for the people who helped drive us into the ditch that the President loves to talk about. In fact, to extend the President's metaphor, the very car that veered off into the ditch has run over the people trying to climb out of it. Those victims, in turn, are being blamed for having dug the ditch in the first place. To repeat: the private sector should never spend more than they can afford. That means they should only run sustainable debt burdens and probably not be in debt overall as a sector. But the US government has the unique ability to support spending and employment while the private sector restructures its balance sheet. Policies that maintain high employment and minimize unemployment (both officially measured unemployment, as well as those counted as out of the labor force) are critical to maintain a higher worker-to-retiree ratio. Policy can also encourage today and tomorrow's seniors to continue to participate in the labor force. The private sector will play a role in all of this, but there is also an important role to be played by government.

Even on today's payouts, the vast majority of people will have almost nothing but Social Security with which to support themselves on retirement. The value of their homes has declined, their 401(k)s have been decimated, many have lost their jobs. Yet these are the very people being called upon to make sacrifices to preserve our "national solvency", even as the people largely responsible for this crisis sustain their jobs and lifestyle on the back of huge government bailouts. It is a mark of the degeneracy of our political and economic system that it looks set to succumb to the maniacal protests of the deficit hawks, who urge yet more destructive public spending reductions (how's that work out for Ireland, by the way?), which will drive millions more workers out of jobs. If one really wants to talk about "intergenerational theft" (a theme well beloved by the leading actors of this Commission), then it's fair to say that the government that adopts the recommendations of the commission will truly be guilty of crimes against our children and grandchildren.

Marshall Auerback is a Senior Fellow at the Roosevelt Institute, and a market analyst and commentator.

Deficit Commission recommendations are a disaster in the making.

The draft proposal released as a surprise yesterday by the two chairmen of president Obama's fiscal commission is conceived and written in panic. It is a profoundly ideological set of policy prescriptions. The co-authors are counting on national alarm over the current budget deficit to make extreme proposals seem reasonable. It is an outrageous, misleading document, unsupported by evidence.

The current deficit of $1.5 trillion is no reason for alarm. It is the result of the recession, which created large reductions in tax revenues, as well as increases in automatic stabilizers like unemployment insurance. The Obama stimulus of $800 billion also is part of the deficit. But as a modeled by economists Alan Blinder and Mark Zandi, the deficit would have been higher without the stimulus.

The longer term deficit is also too often attributed to "big government." The projection of the Congressional Budget Office, adjusted for some realistic policy changes, such as the extension of the Bush tax cuts, is that the deficit will actually fall substantially to 4 percent of GDP and stay there for some time. Debt rises to 77 percent of GDP.

This increase is hardly trivial and a 4 percent deficit may not be sustainable. But increases are not the result of rising outlays for Social Security, Medicare or Medicaid, contrary to what many, including members of the media, seem to think. The higher deficit and debt levels are overwhelmingly the result of three factors: recession, war spending, and the Bush tax cuts of the early 2000s.

In the 2020s and 2030s, Medicare and Medicaid outlays will at last begin to rise rapidly because overall healthcare costs without serious reform will likely rise rapidly-by 2 percentage points a year more than GDP per capita. This compounds to high levels quickly. Social Security, however, adds rather little to this deficit, rising from roughly 5 percent of GDP to 6 percent over the years. Medicare and Medicaid rise from 5 percent to 13 percent of GDP and higher. Along with interest, the debt can mount to 200 and 300 percent of GDP. Healthcare costs are what America must deal with.

But the White House commission draft proposal goes far beyond focusing on healthcare. First, it wants to reduce radically the income tax rate on Americans. One option is to reduce the top rate of 35 percent to 23 percent, or at the least to 28 percent. This is simply right wing ideology at work, and has nothing to do with deficit issues. To the contrary, the authors are using deficit alarms to present a new tax agenda. Is Obama really going to stand behind it? There is no commonly accepted evidence that current marginal tax rates, or even higher ones, suppress economic growth.

Second, the proposal will also reduce to and maintain federal outlays at 21 percent of GDP. The CBO expects them to be about 24 percent. Why the reduction? There is no reason at all to do so, except an ideological one: less government is always better. Again, there is no absolutely commonly accepted evidence that higher levels of government suppress growth. Yet the proposal is willing to make painful cuts in programs to meet this spurious goal. And it will leave no room for more public investment.

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Third, the proposal's goal is to reduce debt levels to 60 percent of GDP and eventually 40 percent. To do so requires a deficit on average of 2.2 percent of GDP. Again, there is no evidence that debt levels of 60 percent are better than levels of 70 percent, for example. Reducing the debt levels to 40 percent is simply Draconian. One argument is to keep them low to be able to respond to emergencies, as the nation just did. It would be far better to devote attention to avoiding the extreme emergencies.

In fact, American can easily live with a debt-to-GDP level of 70 percent and a long-term average budget deficit of 3 percent. With that as a framework, sensible compromises on spending cuts and tax increase can be reached.

But most dangerous part of this toxic package is that it urges cutting federal spending substantially in fiscal year 2012. At best, the unemployment rate will be in the range of 7.5 percent at that time, which many will fairly still consider recessionary. That is not time to administer austerity. A far better tool, if one had to be deficit minded, is to start reigning in spending or raising taxes (my preference) when unemployment is around 6 percent. I'd wait until it is well down into the 5s. That may take more time.

This proposal is not likely to carry the day. But the surprise publication is a calculated political gesture to win support. And it may surprise the doubters. There are in fact some good ideas in it. The mortgage deduction would be reduced. It calls for a higher gasoline tax. The cap on Social Security taxes would be raised. Large cuts in military spending are proposed.

But these are made palatable only by painful cuts in social programs, far lower taxes on income and corporate profits, aggressive pruning of federal employees, and no talk at all of more investment in infrastructure, education or energy technologies.

In fact, the priority now is to get the economy moving again with a stimulus. Once that is accomplished, the nation must turn its attention to reforming healthcare, and raising tax revenues to support the public investment that will truly prove a foundation for future prosperity.

The current White House proposal is not merely preposterous, it will be a disaster economically if anything remotely like it is passed. It is a nation running backward in defeat, not looking forward to the challenges of a new century and rising competition around the world.

Roosevelt Institute Senior Fellow Jeff Madrick is the author of The Case for Big Government.

It's not just about expanded care. It's about proving our government can be a force for the common good.

Why are John Boehner, Eric Cantor and Mitch McConnell so intent on stopping health care reform from ever taking hold? For the same reason that Republicans and the corporate Right spent more than $200 million in the last year to demonize health care in swing Congressional districts. It wasn't just about trying to stop the bill from becoming law or taking over Congress. It is because health reform, if it takes hold, will create a bond between the American people and government, just as Social Security and Medicare have done. Democrats, and all those who believe that government has a positive place in our lives, should remember how much is at stake as Republicans and corporate elites try to use their electoral victory to dismantle the new health care law.

My enjoyment of the MLB playoffs last month was interrupted by ads run by Karl Rove's Crossroads front group against upstate New York Rep. Scott Murphy, who was defeated last Tuesday. Rove's ads rained accusations on Murphy, including the charge of a "government takeover of health care." Some might have thought that once the public option was removed from the health care legislation, Republicans couldn't make that charge. But it was never tied to the public option or any other specific reform. Republicans and their allies, following the advice of message guru Frank Luntz, were going to call whatever Democrats proposed a government takeover.

There's nothing new here. Throughout American history, health care reform has been attacked as socialist. An editorial published in the Journal of the American Medical Association in December 1932, just after FDR's election, claimed that proposals for compulsory insurance "were socialism and communism -- inciting to revolution." The PR firm that the American Medical Association hired to fight Truman's push for national health insurance succeeded in popularizing a completely concocted quote that it attributed to Vladimir Lenin: "Socialized medicine is the keystone to the arch of the Socialist State."

In 1961, Ronald Reagan made an LP recording for an AMA front group called Operation Coffeecup entitled "Ronald Reagan speaks out against SOCIALIZED MEDICINE," in which the future President says that Medicare will be the foot in the door to a totalitarian takeover. Almost half a century later, Sarah Palin quoted Reagan's words during her speech accepting the Republican nomination for Vice-President.

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The famous "Harry and Louise" ads that helped sink the Clinton health plan railed against "new mandatory government health alliances run by tens of thousands of new bureaucrats" and concluded "if we let the government choose, we lose."

The Right has always understood how high the American view of the role of government would be lifted if people came to rely on government for something as essential to a person's well-being as health care. This year, the animus that the Right maintains toward the New Deal and Great Society programs and philosophy -- Social Security, Medicare, the constitution allowing the federal public to regulate commerce -- has become visible in the Tea Party movement. The last thing that the corporate and ideological Right want is for health care to be a new pillar added to the foundation of government social insurance.

While Republicans are wrong to call the Affordable Care Act a government takeover of health care, they understand more than many critics on the Left that the new law does profoundly change the relationship between Americans and the government and health care. The heart of the law is a government promise that health coverage will be affordable to almost all Americans, through expanding Medicaid to the poor, providing subsidies for private insurance to working and middle class families, or placing responsibility on medium and large employers to help pay for coverage for their employees. If the ACA is fully implemented, Americans will come to see they will no longer have to worry about going bankrupt, or being locked into a job, or going untreated for serious illness. And they will see that government, and Democrats, did that.

Now that Republicans control the House, they will do everything in their power to delay, defund and disrupt implementation of the Affordable Care Act. They will be assisted in that by another huge wave of advertising and Astroturf lobbying funded by groups like Rove's Crossroads, which will now have to spend as much on lobbying as they spent on political ads in order to maintain the tax status that allows them to operate in the dark, without disclosing donors.

President Obama and Democrats in Congress understood the historical importance and profound moral underpinnings of the new health care law when they enacted it earlier this year. And they knew that the right-wing attack had soured the public in swing Congressional districts and states on reform. They stood up then. They will have to stand up again, understanding that if they give way to Republicans, they lose more than the expansion of health coverage. They lose the best opportunity in half a century to prove to Americans that government can be a force for the common good.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute and is writing a book on the progressive campaign to enact health reform.