Debt Commission Draft Report Calls For Spending Cuts, And Tax Increases
The Chairmen of the National Debt Commission have released a draft report for consideration. It's got some very good ideas, but it's most likely Dead On Arrival.
The final report of the bipartisan Commission On The National Debt isn’t due to come out until next month, but a draft has been released that shows just how far the Commission is likely to go:
A draft proposal to be released Wednesday by the chairmen of President Obama’s bipartisan commission on reducing the federal debt calls for deep cuts in domestic and military spending starting in 2012, and an overhaul of the tax code to raise revenue. Those changes and others would erase nearly $4 trillion from projected deficits through 2020, the proposal says.
The plan would reduce Social Security benefits to most future retirees — low-income people would get a higher benefit — and it would subject higher levels of income to payroll taxes to ensure Social Security’s solvency for at least the next 75 years.
But the plan would not count any savings from Social Security toward meeting the overall deficit-reduction goal set by Mr. Obama, reflecting the chairmen’s sensitivity to liberal critics who have complained that Social Security should be fixed only for its own sake, not to balance the nation’s books.
The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.
Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.
But how low the rates are set would depend on how many tax breaks are reduced or eliminated. Some of them, including the mortgage interest deduction and the exemption from taxes for employees’ health benefits, are political sacred cows.
It’s worth noting that this draft only has the agreement of the two co-Chairman, and it’s unclear how many of these recommendations will make it into the final report:
“This is not a package that I could support,” Representative Jan Schakowsky, an Illinois Democrat, said during a break in a private meeting by the commission. She said any package able to win 14 votes on the panel would have to look “very different” from the options being discussed.
Senator Dick Durbin, an Illinois Democrat, called the plan a “starting point for the conversation.”
“We’re not going to have an up-or-down vote on this,” said Durbin. “There are proposals in there that are painful. I told them I said there are things in here which inspire me and other things which I hate like the devil hates holy water. I’m not going to vote for those things.”
Some Republicans also expressed skepticism that the report would survive in its current form. New Hampshire Senator Judd Gregg called the plan a “starting point.” Representative Jeb Hensarling of Texas said “some of it I like, some of it disturbs me.”
With that in mind, though, it seems doubtful to me that many of the proposals in the draft would make it through Congress if they did make it through to the final report.
Given that the issues surrounding Social Security are separate from the issues surrounding the Federal Budget deficit, I’m not entirely sure why the Commission is choosing to include them in the report. For one thing, the proposals they make will generate enough political controversy on their own, taking a walk along the famed “Third Rail” of American politics doesn’t make that much sense to me. Additionally, while eliminating the mortgage interest deduction and other popular tax deductions (in exchange for cuts in the underlying tax rates) strikes me as a good idea, the fact that they are politically popular means that getting rid of them is going to be next to impossible.
Already, the knives are out on both sides of the political aisle. Jane Hamsher at FireDogLake has been calling the Debt Commission the “Cat Food Commission” for months now, while conservatives have been berating co-chairman, and long-time conservative Republican, Alan Simpson’s membership on the Commission as being a surrender on tax increases.
If we lived in a country with adult political parties, the release of the Commission’s report would serve as the beginning of a long overdue national conversation about how to get our fiscal house in order. Liberals would recognize that social spending would have to be cut, and conservatives would recognize that defense spending cuts and tax increases would have to be on the table. Instead, what we’re likely to see is more of the same political gamesmanship — liberals accusing the GOP of wanting to starve Grandma, conservatives accusing liberals of just wanting to raise taxes so they can spend more. And the debt will continue to rise.
At some point we’re going to be forced to deal with these problems, but it’s not going to happen until we start feeling the pain that we could ward off if we’d just grow up already
Given that it is a reasonable approximation of what needs to be done, I think it’s on us to support it.
I do. Count me in.
This seems to be one of the few serious plans to deal with the debt I’ve seen. It will serve an interesting rorshach test for the new congressional republicans. How they respond to it will say a lot about how serious they are about cutting government spending.
Yes, it will only tell us if the Republicans are serious about cutting spending. Democrats’ hearts are too pure to even consider putting them on the spot.
As always, this great solution involves punishing the poor and middle class and doling out huge tax cuts to the rich. And yes, taxes are cut on the lower classes as well, but their benefits will be slashed accordingly. Meanwhile, those who can afford to buy polticians — hedge fund managers and corporations — will get all the cookies.
If this is what we have to agree on in order to be declared “serious,” I’ll pass.
Please note I said “new congressional Republicans”. We don’t need to test Democrats or old congressional Republicans because we’ve seen them in action already. There is a big question, however, as to how well the Tea Party election rhetoric will translate into legislative action.
Polyanna’s optimistic sister would be incredulous! [lol]
I think by then it might already be too late. Each year that goes by the fix gets more and more painful. Eventually to the point where nobody will be willing to deal with it because it would be political suicide, not just for the politician who takes on the issue, but possibly their entire party. Yes, benefits have to be cut and taxes raised, but as you can see by the links many aren’t going to accept the reality of both of those outcomes.
“Instead, what we’re likely to see is more of the same political gamesmanship — liberals accusing the GOP of wanting to starve Grandma”
Since the commission was established by a Dem president (and given the way the health care debate went down), I think it’s just as likely the GOP will make as much noise about the Dems wanting to starve Grandma as vice versa.
You might want to take a look at the draft report, which is here. As I read it although marginal rates would go down, actual revenues would be likely to go up not for some Laffer Curve reason but due to the elimination of deductions by which the rich benefit the most.
So, for example, limiting the deductibility of home mortgage interest to first homes doesn’t sound to me like a penalty that will fall hardest on the poor and middle class. Or limiting the deduction to the first $500,000 in interest. I may be kidding myself but I don’t think a lot of poor or middle income people are paying $500,000 a year in interest.
WR is afflicted with wealth envy as he is likely an average producer. Probably someone with acute entitlement syndrome, mixed with victimhood paranoia.
“Yes, it will only tell us if the Republicans are serious about cutting spending. Democrats’ hearts are too pure to even consider putting them on the spot.”
Ahh, but the onus is on the new Republican majority in the House…they are the ones coming in with the messages that they so worried about the deficit and that they are going to change Washington…let’s see them do these things…
Dave S — The home mortgage deduction is not going away. The entire housing sector is already teetering, and this would destroy it for generations. Even if you disagree with that, you must know that the banks, who will certainly see it that way, will never let it happen.
Pete — Is it a requirement that you be a smug moron to join the Tea Party? You know absolutely nothing about me, and yet you decide that you’re more of a “producer” than I am because I don’t parrot Glenn Beck. Funny thing is, I actually am literally a producer — a TV producer and writer, and I suspect I’ve paid more in taxes than you have earned in your entire lives pushing your hot dog cart or whatever you do. (See? I don’t know who you are, either — gosh, it’s fun this way, isn’t it!) If you could pull your head out for five seconds, you might notice that there are people in this country who are actually concerned about their fellow citizens, and think that it’s better for everyone that the wealthier — yup, that’s me, Bucko — pay a little more so that we live in a better society. Some people actually didn’t stop maturing at age four.
Obama has been talking up this commission for quite a while. The best move is for him to support its conclusions, forcing Republicans to do better (lest they come across again as the party of “no”).
But JP, does Obama have the “testicular fortitude” to take on Nancy Pelosi. She says this is simply unacceptable.
Please…no major politician who wants to get reelected will have the testicular fortitude to back too many of these ideas…
PD, I did not see that coming.
Keven Drum doesn’t like it, for reasons similar to Dave Schuler (Medicare), and maybe also for some reasons shared with Pelosi (small government):
I’m all for this even though it means that I will have to retire later and get less. But where is the discussion about reducing pensions of federal workers? Why is there one standard for the private sector getting SS and another for government workers?