Senate Letter on American Family Economic Protection Act

“Below is a letter sent to the Senate today from the AFL-CIO’s Director of Government Affairs Bill Samuel. Please direct questions to AFL-CIO Media Outreach 202-637-5018

                                                    February 28, 2013

Dear Senator:

Yesterday the Executive Council of the AFL-CIO called on Congress to repeal—rather than replace—budget cuts totaling $1.2 trillion over 10 years that are required by the Budget Control Act of 2011.  If these “sequestration” cuts are to be replaced, in whole or in part, the Executive Council called on Congress to replace them in a way that minimizes harm to the U.S. economy—by raising additional tax revenue from Wall Street and the richest 2% of Americans.  We urge you to support the American Family Economic Protection Act (S. 388) because, although it would not repeal sequestration, it would minimize harm to the economy and would not cut Social Security, Medicaid, or Medicare benefits.

The American Family Economic Protection Act would minimize harm to the economy in two ways.  First, it would eliminate the across-the-board “sequestration” budget cuts for the remainder of 2013.  The Congressional Budget Office (CBO) has estimated that these cuts would cost 750,000 jobs.

Second, S. 388 would minimize economic harm by replacing these cuts, in part, with additional tax revenue from millionaires, which would have a negligible impact on the economy.  Specifically, the American Family Economic Protection Act would adopt the “Buffett Rule,” which raises $54 billion over 10 years by setting a minimum effective tax rate of 30% for taxpayers with income over $1 million.

Replacing sequestration with progressive tax revenue would minimize harm to the economy because the kind of spending subject to sequestration has far more “bang for the buck” than tax breaks for millionaires.  The fiscal multiplier for sequestered spending is $1.40, whereas the fiscal multiplier for top marginal individual income tax cuts is $0.25 and the fiscal multiplier for corporate income tax cuts is $0.32.  The lesson to be learned from these fiscal multipliers is that raising tax revenue from corporations and high-income households is the least economically damaging way to reduce the deficit.


However, as the AFL-CIO Executive Council explained in its statement yesterday, there is no economic need to replace “sequestration” to meet any arbitrary deficit reduction target.  The greatest economic challenge facing America today is the jobs crisis, not the deficit or the debt.  Further fiscal austerity before the United States returns to full employment only would weaken the economy and cost jobs.

We need to use additional tax revenues from Wall Street and the wealthiest 2% of Americans to put America back to work and fix the economy.  We could increase economic growth and reduce unemployment by using progressive tax revenue, and by investing in infrastructure, aid to state governments, rehiring teachers and modernizing schools, unemployment benefits, and food stamps.

Another reason why sequestration should be repealed—rather than replaced—is because Republicans are using it as bargaining leverage to demand Social Security, Medicaid, and Medicare benefit cuts.  These demands are wildly unpopular, which is why Republican leaders keep manufacturing crises to get their way.  Repealing sequestration would avoid the prospect of Republicans using this same leverage next January, and every year after that, to get their way.

As the AFL-CIO Executive Council said yesterday, it is time to put these manufactured crises behind us and focus instead on the urgent business of putting America back to work and raising wages, which has been neglected for far too long.

If sequestration is to be replaced, we urge you to minimize harm to the economy by supporting S. 388, which does not include any cuts to Social Security, Medicaid, or Medicare benefits.  We also urge you to vote against S. 16, the Republican alternative, because providing flexibility with the same amount of budget cuts as sequestration would inflict just as much harm on the economy as sequestration.



                                                                                                                                             William Samuel, Director
                                                                                                                                             GOVERNMENTAL AFFAIRS DEPARTMENT

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply