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Resolutions & Amendments

28th International Convention - Los Angeles, CA (1988)

Government and the Economy of the 1990's

Resolution No. 154
28th International Convention
June 20-24, 1988
Los Angeles, CA


The Reagan years are ending with the appearance of economic prosperity, but they are passing massive unsolved problems to the next Administration. The social policies of the Reagan years have created unequal access to that prosperity, with the rich getting richer and the poor getting poorer. The tax and spending policies of the Reagan years have created the overhang of the federal budget and trade deficits. These twin deficits make the economy fragile and limit the options that will be available to the next Administration to address unmet needs; and


Sustained economic growth and full employment, with price stability, remain the appropriate goals for federal economic policy, as articulated in the Humphrey-Hawkins Act. Retrenchment in the name of deficit reduction is not called for and can only hurt working people; and


Achieving these goals requires a realignment of the priorities that have been followed for the past eight years. Government at all levels must be seen as an active facilitator of solutions, not as the "problem;" and


Federal spending for domestic social and economic development programs has dropped dramatically during the Reagan Administration. Spending on federal programs other than Social Security and Defense dropped from 10.3 percent of GNP in FY 1980 to only 7.8 percent of GNP in 1988. That is $120 billion less than what would have been spent on domestic programs if they had remained at the 1980 share of the economy. Some former federal responsibilities have been dumped onto state or local government; others have been dropped entirely. No significant new domestic programs have been started during the Reagan Administration. As a result, urgent needs in areas such as long-term health care, child care, nutrition, job training, housing and infrastructure have gone unanswered; and


An unprecedented and ineffective peacetime military buildup has taken place during the Reagan years. This buildup has been a major cause of the budget deficit, and has led to the curtailment of social and economic development programs. The U.S. has spent $2 trillion on defense since 1981, the equivalent of $21,000 for each American household. On an inflation adjusted basis, average annual defense spending has exceeded the levels reached during the Korean and Vietnam wars. While much of this spending binge has gone for development and production of new weapons, experts acknowledge that the United States has not meaningfully increased its military advantage. What has increased has been the price of the weapons and the profits of the contractors; and


The federal Tax Reform Act of 1986 created a fairer base for federal taxation, shifting a portion of the tax burden from individuals to corporations and relieving the tax burden on the poor. But it failed to reverse the erosion of revenue-raising capabilities that took place in 1981. And it only partially reversed the 1981 tax cuts for the wealthy; and


There remains significant potential to raise additional revenues through the income tax by closing remaining loopholes and/or increasing the progressivity of the tax. Value-added taxes or other forms of general consumption taxes should not be used to raise federal revenues. They are unfair and inefficient means of raising revenues for federal purposes. In addition, a federal consumption tax would conflict with the ability of state and local governments to raise revenues from sales taxes, as they struggle to meet ever-increasing responsibilities for service delivery; and


Congress has established a "blue ribbon" National Economic Commission (NEC) to recommend to the next Administration and Congress


"(1) Methods to reduce the federal budget deficit while promoting economic growth and encouraging saving and capital formation.

(2) A means of ensuring that the burden of achieving the federal budget deficit reduction goals of the United States does not undermine economic growth and is equitably distributed and not borne disproportionately by any one economic group, social group, region, or State."

This commission will likely play a dominant role in determining the fundamental economic and fiscal policy of the next Administration. While it has been instructed to ensure that its recommendations for deficit reduction not jeopardize economic growth or unfairly burden the poor or working people, the emphasis on "saving and capital formation" may encourage it to recommend a value-added tax or some other form of national consumption tax. Further, its mandate fails to acknowledge that the restoration of economic competitiveness and growth will require new federal program initiatives, not further retrenchment.


As the nation moves into a new presidential administration and the era of the 1990s, a fundamental restructuring of national priorities must take place. Government must take a more activist role in many areas, pursuing the goal of sustained economic growth and full employment, with price stability, in a manner that spreads the benefits of that growth to all segments of the population.



That AFSCME call upon the National Economic Commission to embody these principles in its recommendations. In particular, AFSCME urges the NEC to reject consumption taxes and further cuts in entitlement and other vital domestic programs (which have already contributed more than their share to deficit reduction during the Reagan Administration). It calls upon the NEC to be a true "economic commission" and not merely a "deficit reduction commission," by addressing the need for new federal initiatives in such areas as infrastructure investment, education and training. AFSCME will use all means at its disposal to influence the deliberations and recommendations of the National Economic Commission.



International Executive Board