Democrats & Liberals Archives

Deficit Commission Report Needs Balance

I believe the so-called chairmen’s mark of the Deficit Commission is a good start, but must be modified considerably. The chairmen recommend cuts in spending and cuts in tax expenditures (loopholes). They recommend twice as much spending cuts that affect mostly the poor and middle class than they do tax-expenditure cuts that affect mostly the rich. This is not fair.

The chairmen recommend major spending-cuts for Social Security, federal employment and veteran health. Their Social Security recommendations are not so bad. I would prefer taxing higher incomes rather than increasing the retirement age. Cutting federal employment and reducing the wages of federal employees is the worst thing we can do. To face future challenges we need a better federal workforce, not an incompetent one. I definitely would not cut any veteran benefits; if anything, they should be increased.

The chairmen recommend cutting farm subsidies. I heartily approve of this. But there are lots more susidies, mostly for fossil fuels, that I think should be cut.

However, all such cuts will not make much of a dent because the biggest force behind the ballooning deficit is the extraordinary growth in the cost of healthcare. Kevin Drum feels that the growth of healthcare cost is not addressed too well - merely a cap - in the report.

Ezra Klein agrees that not much deficit reduction can be accomplished without attacking healthcare costs. But he likes the cap. Here's what Ezra says:

In the long term, the savings come from a cap on health-care spending. The commission recommends that we "contain growth in total federal health spending to GDP+1% after 2020 by establishing a process to regularly evaluate cost growth, and take additional steps as needed if projected savings do not materialize." This basically means strengthening the Independent Payment Advisory Board that passed as part of the health-reform law, which readers will know I'm sympathetic to. Republicans and conservative elites who are reacting to the plan positively might want to consider what this means for the GOP's effort to repeal not just the whole health bill, but to start by repealing IPAB. Take that off the table and the long-term balanced budget we see in this plan completely disintegrates.

Note the last line: "Take that off the table and the long-term balanced budget we see in this plan completely disintegrates." Now there's a challenge for conservative deficit hawks.

So much for cutting spending. To equalize the "sacrifice" we should have tax increases. The chairmen provide this by recommending the removal of tax expenditures, such as the deduction of mortgage interest payments. I go along with this for mortgages of over $500,000 and for second homes. Leave the little-guy homeowner alone; he has suffered enough.

The one thing I agree with in a big way is treating all forms of income - employment, dividends and capital gains - the same. Special rates for dividends and capital gains are very unfair. Not only does this policy prefer investors to workers, it is the biggest source of corruption in taxes. Special treatment of different incomes is the basis for the vast majority of tax evasion schemes. Treating all income the same will go a long way toward simplifying the tax code and toward collecting more of the taxes owed by the rich.

After the chairmen ask for a reduction in tax expenditures, they add that taxes should be reduced. I'm leary of this part. In a report whose purpose is to reduce the deficit, they recommend a tax cut. This is ridiculous. At the very least, deficit reduction produced by an increase in taxes (through tax expenditures or otherwise) should be equal to reductions achieved through spending cuts.

The report is a good start, but it is not balanced. Spending cuts should be much greater in healthcare (Medicare and Medicaid) than in other areas. Tax increases should be a bigger part of the mix. There is no need for cutting tax rates since no one asked the commission to do this.

Posted by Paul Siegel at November 13, 2010 7:06 PM
Comments
Comment #313100

Obama had it right when he said that the long term fiscal problems of the US depend on controlling health care expenditures. All other issues pale in comparison. Unfortunately, he and the Democrats got it wrong by caving on “single payer” and the “public option.”

The new proposal of a “cap” on federal health care spending is an fantasy without structural reform in the financing and delivery systems creating incentives for cost reduction. Caps have been tried before without much success. For example, in 1997, Congress passed legislation tying increases in Medicare physician fees to GDP growth. Each year, Congress has to pass legislation increasing physician fees beyond the “cap” formula.

Posted by: Rich at November 13, 2010 9:00 PM
Comment #313103

Simpson’s boondoggle…

Posted by: Marysdude at November 13, 2010 10:42 PM
Comment #313107

Paul,
I agree the Commissioners made an attempt at showing how Americans can work with Congress to lower the debt; however, I do believe Congress should cap or cut their pay as the first step in showing Americas’ Democratic and Republican Civil, political, and Religious Leaders are willing to do what is necessary to reduce the debt.

Care to wager if the Democrats, Republicans, or Tea Party Members of Congress will be the first to offer such a proposal?

Posted by: Henry Schlatman at November 14, 2010 1:37 AM
Comment #313116

not taking that bet…lol

Posted by: JOHN IN NAPA at November 14, 2010 9:47 AM
Comment #313117

It’s critical to resist the agenda of the Cat Food Commission. Cutting taxes for the rich and corporations have nothing to do with deficit reduction. The Cat Food Commission’s sole purpose of existence is to promote the transfer of money and wealth from the middle class and the poor to the rich.

Posted by: libhomo at November 14, 2010 10:35 AM
Comment #313118

I’ve said it before, and I’ll say it again…if tax cuts for the wealthy was going to help our job situation and the economy in general, it would never have come to this point at all. Those tax cuts were put in place more than ten years ago, and look where we ended up. We are in the mess we are in because of several factors, one of which is cutting the nations income with tax cuts. Allowing those cuts on middle income folks makes a little sense, as that money will be spent right back into the economy…not so those cuts for the wealthy. Alan Simpson had an agenda, and his agenda never wavered while chairing his “COMMISSION”.

Posted by: Marysdude at November 14, 2010 11:24 AM
Comment #313130

Here is something interesting to read.
I’m pretty sure who will be the first to respond and it won’t be anything but negativity.
Too bad…..blind eyes and closed minds will be the death of us.

http://www.alternet.org/story/148826/16_of_the_dumbest_things_americans_believe_—_and_the_right-wing_lies_behind_them

Posted by: jane doe at November 14, 2010 4:42 PM
Comment #313153

jane doe,

Interesting indeed. Not anything we did not know, but strung together it does lay down a damning picture of the American electorate.

Posted by: Marysdude at November 14, 2010 10:41 PM
Comment #313162

There is NO SUCH ANIMAL as a FAIR deficit reduction plan. Every dollar cut will affect someone negatively, and there will be objections to ALL and ANY proposed cuts.

The only proposal that even has a chance of passing is one which BOTH Parties in Congress can agree to pass, regardless of how unfair it will appear to the special interest groups crying FOUL.

Posted by: David R. Remer at November 15, 2010 2:01 AM
Comment #313175

The proposal does not need to be balanced. Most people have concluded it is fairly conservative but it actually needs to be even more conservative if there is any chance of the bullies - I mean Republicans - entertaining anything serious at all.

Posted by: Schwamp at November 15, 2010 1:06 PM
Comment #313181

While we are on the topic of balancing the budget, I wanted to share that the New York Times has an interesting feature. You can pick from a variety of measures, mostly those taken from the Debt Commision and try to balance the budget.

This is my plan for balancing the budget; I’m curious how it compares to what other WatchBlog commenters have in mind.


Personally, I think the commission’s plan should be implemented. Although it has its imperfections, it puts us on the right path. If Congress does this and adopts PAYGO rules, then modifications to the plan could be made without ruining the fact that it puts us on the road to self-sufficiency.

Posted by: Warped Reality at November 15, 2010 2:27 PM
Comment #313183

Warped,
That was a nice exercise.
I had a nice surplus in about 5 minutes with little effort. Makes me wish the office of president had a bit more power.

Posted by: Schwamp at November 15, 2010 2:56 PM
Comment #313186

My Plan

Posted by: Marysdude at November 15, 2010 3:15 PM
Comment #313189

Schwamp,
I’m glad you liked the New York Times feature. I’m curious as to how you eliminated the deficit.

MD,

I’m actually suprised that you used a greater percentage of spending cuts and a smaller percentage of tax increases than I did.

I’m also suprised that you chose to raise the eligibility age for MediCare & Social Security to seventy, considering that will probably have a greater impact on someone of your age than it would on a twenty-one year old. In a similar vein you took the draconian measure of capping medicare at GDP growth+1% after 2013.

Nevertheless, thank you for sharing. The key lesson from this exercise that both of the partisian viewpoints are wrong. We cannot eliminate the deficit solely through spending cuts or tax increases; only a combination of the two will be able to do it. Also, we cannot have any sacred cows in this debate over cutting spending; nothing should be spared the possibility of being cut. This goes for the Left’s entitlement programs as well as the Right’s defense programs.

Posted by: Warped Reality at November 15, 2010 3:57 PM
Comment #313191

Warped,

Two qualifiers:

1. I am over seventy now, so the impact on me would be minimal. I could have waited, because my health would have allowed it. Some would not be so fortunate, and my being still in the workforce may have kept a younger person out of a job. There are too many things I don’t know about where the example information came from.

2. My choices all depended on that the proposals/example given allowed for the job loses of the cuts being made as to savings. When cutting military spending, for instance, did the examples factor in the impact of job loss? If not, and we throw several hundreds of thousands more into the unemployed category…wellll?!?

Doing these little exercises is kinda fun, but without enough information, it’s more like a game than budgeting.

Posted by: Marysdude at November 15, 2010 4:30 PM
Comment #313228

Marysdude and WR,
I like your ideas; however, I do wish it would allow me to cut the federal workforce by 15% which I would make 10% come from higher adminstration jobs. For the military I would start by reducing Black Ops Projects by 5% and General Contracts by 20% except for those items and services directly related and proven to be needed in our war on terror.

Than I would introduce a bill which would freeze Congessional Pay of our Representatives and Senators as well as reduce their Staff by 5-10%. Additionally, I do believe cuts in office supplies by up to 50% can be achieved with the use of I-Pods and I-Notebooks.

Now, as far as Medicare I would increase the number of auditors so that all bills presented monthly for payments could be checked and verified within 30 days. However, to offset the cost and provide incentives I would increase the fines and payout depending on paperwork recieved.

Additionally, I would provide 911 Responders with tools needed to help lower all medical cost since most citizens use the 911 Services and Emergency Rooms to deal with their Health Issues an not Life or Death.

So I would like to thank the New York Times and others for saying what they would do in order to get Americas’ Budget under control. Nevertheless, I do believe it will take a National Effort of Individual Citizens calling their Representatives and Senators everyday on the Budget and Debt before the Special Interests in America and Humanity realize the Status Quo cannot remain silent.

Posted by: Henry Schlatman at November 16, 2010 1:24 AM
Comment #313229

Warped Reality, there is no Debt Commission plan, yet. Only a proposal by the two chairs of the Commisssion as a point of reference and comparison for the REAL plan adopted by the entire body of the Commission which is not due out until December 1.

There is no plan possible of passing that can achieve zeroing out the deficit in 5 years. A 10 year plan would require a herculean political effort by both parties. I think the 5 year period was political and psychological in nature, to demonstrate to the public just how excruciating deficit elimination is going to be; which will allow both parties to champion their constituent’s cries that this and this should not be cut by this much or this soon - opening the door to a less draconian and more realistic 10 year plan.

If they started out with a 10 year window, public outcry would have demanded a 15 or 20 year window. Viewed this way, the 5 year window was very clever and shrewd politically, and one of the best moves I have seen from our government in 10 years.

Posted by: David R. Remer at November 16, 2010 1:36 AM
Comment #313250

my plan

Posted by: j2t2 at November 16, 2010 4:31 PM
Comment #313257

Not too far off subject:

A new non-partisan report finds that the cumulative effects of President Obama’s health care reform package would be beneficial for the government’s efforts at debt reduction if the law is implemented fully.

The U.S. Government Accountability Office put out a report on Monday afternoon that provides some welcome news for defenders of the Affordable Care Act and, perhaps, a bit of pause for those eager to overturn or de-fund the legislation. The debt is an increasingly dire crisis, the investigative arm of Congress found. But one thing alleviating the problem, though by no means eliminating it, is the health care reform package passed this past spring.

From an article by Sam Stein.

Posted by: Marysdude at November 16, 2010 7:07 PM
Comment #313310


I am surprised that no one has mentioned the fact that the salaries of many of the staff members on this commission are being paid by special interests.

Posted by: jlw at November 17, 2010 3:55 PM
Comment #313314

jlw,

Special interests paying off officials in Washington? Surely not…;)

Posted by: Marysdude at November 17, 2010 5:10 PM
Comment #313329


Marysdude, no, just good Samaritans helping to defray the costs of the commission because of the governments fiscal crisis.

Posted by: jlw at November 17, 2010 7:33 PM
Comment #348994

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