Deficit reduction plan flops

In the New Testament, Jesus taught that those of the earthly kingdom would be cast into the darkness accompanied by “weeping and gnashing of teeth.”  Judging by the hue and cry that accompanied the recent release of the draft proposals issued by the co-chairmen of the presidential Commission on Fiscal Responsibility and Reform, many in the nation’s capitol on both sides of the aisle believe themselves already cast out of the kingdom. 

The Commission was set up earlier this year by President Obama, and has conducted its fiscal analysis of the spendthrift ways of Washington under the bipartisan leadership of former Republican Sen. Alan Simpson and former Clinton budget director Erskin Bowles.  Their draft “Co-Chair’s Proposal” was released on November 10th and hit liberal and conservative groups alike with the proverbial two by four.  The resulting weeping and gnashing of teeth arose because the proposal on the surface cuts into programs long-sacred to both sides.  It would in fact reduce the deficit by $4 trillion over the next decade. 

In reality, however, the proposal is hardly the catastrophe many of its critics bewail.  British Prime Minister David Cameron has in fact proposed a much tougher schedule of spending cuts than have Messrs. Simpson and Bowles. The Simpson-Bowles report relies far too heavily on tax increases to achieve deficit reduction, and is far too light on spending cuts. 

The recommendations propose cuts to domestic spending, returning to 2008 levels; and not excepting defense spending. However, it then slides far too easily into the tax-hike realm.  For example, the report  calls for eliminating many popular tax credits and deductions in an effort to broaden the tax base, increasing the federal gas tax 15 cents, and upping the wage cap on taxable income for Social Security. The co-chairs propose a three-tier income tax and a reduced corporate income tax rate. 

Even with lower tax rates and a broadened base, according to Americans for Tax Reform, the net effect is a tax hike of $961 billion over the next 10 years. ATR also points out that the recommendations calls for an automatic tax increase – not automatic spending cuts — when the federal budget is not balanced. 

Dan Mitchell, a senior fellow at the Cato Institute, pointed out that the report offers some unexplained spending cuts, but increases the tax burden and fails to balance the budget.  Mitchell’s colleague, Chris Edwards, agrees; calling the spending cuts “timid,” and reminding us the “federal budget crisis is caused by overspending not undertaxing [sic].” 

The report does contain some good news, in that entitlements are not spared the scalpel – recommending an increase in the retirement age for Social Security to 68 by 2050, and 69 by 2070; cost-of-living adjustments would be reduced as well.  Proposed changes to Medicare would implement cost-sharing among patients, reducing payouts to health care providers, and enacting tort reform. 

The co-chairmen are overly generous in passing off their recommendations on entitlements as “reform.”  As Chris Edwards notes, they simply fail to address the fundamental problems with these programs. 

Predictably, of course, the recommendations were met with scorn by liberals, including Speaker Nancy Pelosi. “This proposal is simply unacceptable,” she sniffed; and reiterated the formula that has been at the core of the Democratic Party’s agenda for decades – never, ever enact, or even advocate cuts to Social Security or Medicare. 

While the chairmen’s recommendations have not been approved by the full commission, and the Congress is unlikely to act on them any time soon, they do provide at least a starting point for an honest debate with Americans.  The danger lies in the fact that because both liberals and conservatives already are finding fault with this early draft, many will conclude the proposals have a great deal more merit that they deserves.  In reality, the report misses the mark badly.

-by Bob Barr, The Barr Code

35 comments Add your comment

J.B.

November 17th, 2010
6:27 am

Amazingly even the C.B.O. has pointed out that the best way to fix the budget, as far as the long term economy is concerned is to cut spending and NOT to increase taxes. The C.B.O. figures show a decrease in the growth of the economy by as much as 6% by the 40 year mark by increasing taxes over cutting spending.

hsr0601

November 17th, 2010
7:35 am

Phase 1 : The reps & jobs
 
1. Even when the economy was on the cusp of entire collapse just like Lehman Brothers ahead of the roll-out of stimulus package, it was held hostage by Audacity of Nope, and the time was running out.
Power first said : Nope ! How do we pay for it ?, Just let him go under exactly like Lehman Brothers.
 
2. It is also important to remember a small business bill that was blocked for weeks by a republican filibuster in the Senate.
 
3. Power first now says without hesitation : Extend the tax cuts for the greedy until we’re out of this recession, or for the job creation.
Under the failed Bush tax cut for lavish bonus parties, a sole job plan for the reps, the country already saw millions of job cuts.
And hence it’s the right time to ask themselves as to how they can pay for it.
 
4. Jobs ahead in another Bush era ( = Entire Downfall ) ??
I think D.S. is going to realize vividly how Bush era wrecked economy.

 
Phase 2 : The reps Will Stomp On Middle Class & Economy.
 
The SHAMELESS reps’ principal : No principal & power-only !
 
1. The reps campaigned on their ability to cut spending and balance the budget, so they should be required to make good on that pledge.
 
But, the Bush tax cut for the greedy will add an additional $700 billion to the deficit over a decade.
As for the Democrats, sound investments = deficit hike.
As for the reps, failed giveaway policy = job creation.
 
2. Over the duration of healthcare debate, using the preliminary cost analysis of CBO, the reps opposed the public option stubbornly, but after the release of final score, they have been defiant on the referee.
 
Inaction cost in relation to health care reform totals $9trillion over the next decade.
The nonpartisan Congressional Budget Office estimates that reform will reduce the federal deficit by $143 billion over the next 10 years and as much as $1 trillion during the following decade
 
3. In view of Medicare & Social Security :
 
“Don’t Let Government Touch Your Medicare & Social Security”
“We will instead Stomp On Your Medicare & Social Security”
 
Phase 3 : Shared Sacrifice ??
 
1. The flagship proposal of the commission’s chairmen is to Stomp On Medicare & Social Security, or Middle Class.
 
2. Diagnosis of Cancer, Prescription for Cold ??
 
The deficits have mushroomed not because of Social Security, Medicare and Medicaid but because of “two unpaid wars, tax breaks for the wealthy, a Medicare prescription drug bill written by the pharmaceutical industry, and the Wall Street bailout.”
 
a. The total cost to the United States of the Iraq war at $3 trillion.
But it appears that the $3 trillion estimate (which accounted for both government expenses and the war’s broader impact on the U.S. economy) was, if anything, too low. For example, the cost of diagnosing, treating and compensating disabled veterans has proved higher than expected.
 
b. The country got here because of the bursting of an $8 trillion housing bubble. This bubble was fueled by the reckless and possibly unlawful practices of the Wall Street banks, like Morgan Stanley, the bank on whose board Bowles sits.
Mr. Bowles is a director of Morgan Stanley, one of the bailed out Wall Street banks. He gets $335,000 a year for his work with Morgan Stanley. This may be one of the reasons that the co-chairs report did not mention a financial speculation tax as a possible source of revenue, even though financial sector taxes have been widely advocated by policy analysts around the world, including even the I.M.F.
 
3. It is clear that there are a number of fair, progressive ways to reduce deficits without harming the middle class and those who have already lost their jobs, homes, life savings and ability to send their kids to college.
 
A reeling housing market probably would slide further if, as recommended, Congress were to repeal the tax deduction for mortgage interest
Calls for upping the age of retirement to 68 and later 69, charging more for Medicare, limiting the mortgage deduction and reducing increases in Social Security related to inflation, all measures guaranteed to drive Middle Class into poverty and to further jeopardize the economic recovery.
 
The government can overcome its trillion-dollar-plus deficit by merely cutting “waste, fraud and abuse”, say, can balance the budget by simply undoing the disastrous policies of the Bush administration. the job-cutting proposals
 
a. Why not stop the Afghanistan war at a price tag of 140 billion a year…why not reduce what U.S. spends for military 800billion a year…U.S. military budget is as big as the next 27 countries COMBINED ! Even overall US intelligence budget tops $80 billion annually.
 
Weapon Sell = Mexican Drug Trafficking = Destroy all, driving global economy in a destructive direction
And Weapon inventory is more likely to provoke constant wars.
 
b. End Bush-era tax breaks for the greedy.
 
c. Eliminate tax credits for big oil companies that have posted the highest profits in history, and the likes.
 
Phase 4 : The choice is clear
 
AS we are all aware, while many of small businesses are in financial trouble, lots of big name companies are reluctant to expand businesses, even with adequate capital.
 
From what I understand, they might take into account that the country is suffering from 9.6 percent unemployment, more than 25 million people are unemployed, or have given up looking for work altogether, tens of millions of people are underwater in their mortgage and millions face the prospect of losing their home to foreclosure, and beyond, say, low demand.
 
Given, the choice is clear, which one is going a long way to desperately needed job boost, tax credit for middle class or others.
 

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SmittyATL

November 17th, 2010
8:07 am

hsr: You say we should “End Bush-era tax cuts for the greedy.” What you’re really saying is, “End the tax cuts for other people, but keep the tax cuts for me.” Who is greedy???

ajcsux

November 17th, 2010
8:07 am

hsr0601, what you’ve just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this blog is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.

SmittyATL

November 17th, 2010
8:11 am

We need drastic cuts in spending; Social Security, Medicare, and Defense are the biggest budget items, so that will make the biggest impact; but there is ridiculous over-reach of government in other areas, so plenty of targets there as well. Unlike social programs, defense is a key mandate of the federal government, so cuts there should be judicious.

And we need to increase tax revenue — not by increasing rates (which would simply stifle the economy and lead to lower tax revenues); but by decreasing rates (to allow the private sector to grow, thereby increasing the taxable base).

Joel Edge

November 17th, 2010
8:26 am

“that the recommendations calls for an automatic tax increase – not automatic spending cuts”

Why does that not surprise me.

zeke

November 17th, 2010
8:30 am

Freeze all spending except military at or 5% below 2005, for 5 years! Then only allow it to increase at the rate of inflation and population numbers, not considering the cost of housing or oil!!!

Either start taxing EVERYONE, or, Constitutionally remove the income tax, fica, unemployment and all other taxes related to employment! Eliminate corporate taxes! Then institute a tax modeled after the “fair tax” proposal, Constitutionally forcing all governments to operate on a balanced or surplus budget based on the revenue from that tax!

Require anyone receiving welfare, food stamps, wic, adc and any other government, taxpayer funds, to work at whatever job is available to receive that money, if they are physically able!

Remove ALL illegals including their children illegally born here! That will free up about
15 million jobs! Unemployment solved!

Put Constitutional limits on all entitlements or eliminate them!

PROBLEM SOLVED!

carlosgvv

November 17th, 2010
8:42 am

It seems the bigwigs never really go after all the corruption and waste in Government spending. A good lean honest Government with little or no wasteful spending would have more than enough revenue at our current tax levels. Since we all know this will never happen, it just reinforces my belief humans are not capable of adequately governing themselves.

Sam

November 17th, 2010
9:00 am

Humans are capable of governing themselves. That’s why this bloated fed bureaucracy is wrong. And forget the empire. If countries want us to”defend” them, they can pay for it, like a hair cut or baby sitting.

jconservative

November 17th, 2010
9:14 am

Until there is a consensus on reducing Defense Department spending this country will do little to reduce spending.

The cry is give the troops the weapons they need. But that is a false cry. The problem is the troops saying we do not want or need this weapon but Congress spending billions on it anyway.

“It seems the bigwigs never really go after all the corruption and waste in Government spending.”

The problem with this argument is that there are no numbers. No one has been able to state a number for the “corruption and waste”. Is it $1 trillion a year or $1 hundred a year. No one knows, so no one knows the potential savings.

But I will offer a starting point. Every member of congress must cut his staff by one full time employee.

ByteMe

November 17th, 2010
9:18 am

The CBO produced a pretty graph showing what was going on with the budget and taxes.

Social Security is not a serious problem, because the fixes to it are the easiest to implement and will keep it sustained past when the balloon of boomers finally die off and our population stabilizes again at a normal growth pattern.

The Federal budget, for all the teeth-gnashing about distractions is fine, except for the military, which has doubled in the past 10 years. Lop $500 billion per year from their budget, end the wars, reduce the bloatocracy that has been created in the military (how many generals do we really need?), and suddenly the structural budget deficit doesn’t look so bad from that angle.

Medicare, on the other hand, is a structural problem and the solutions in the co-chair recommendations and even in HCR are only “bending the curve”, not leveling its impact. It continues to grow and dominate the budget in the next 40 years. Changing some of the rules will help, but it still grows as our population ages and lives longer. We need to do something different there, but no one’s talking about a serious solution so far.

Ragnar Danneskjöld

November 17th, 2010
9:18 am

I cannot imagine any reason not to raise socsec to 66 immediately, and raise it one year every three years thereafter, until the unfunded contingent liability is zero. Probably ought to freeze current benefit rates until the UCL is zero also. Put medicare on the same track. Then start abolishing the worthless segments of government; Energy, Education, Labor, Commerce, SEC, FDA, FTC, OSHA, EPA, FNMA, FHLMC, FHA, and Agriculture would be a good start.

Jeffrey

November 17th, 2010
9:25 am

Bob, thanks for putting it out there. I thought it was bad from the second it came out. Keep up the good work.

Mike

November 17th, 2010
9:42 am

The recommendations propose cuts to domestic spending, returning to 2008 levels; No No we need to spend spend we are not spending spendthrift ways . Recommendations calls for an automatic tax increase. The recommendations propose cuts to domestic spending Just cut all spending and the size of Gov.

retiredds

November 17th, 2010
9:42 am

AHHH, the nation moans and groans for solutions but continues to elect people who don’t have a clue how to manage the large corporation called the US of A.

Common Man

November 17th, 2010
9:42 am

hsr0601 – Either get a job or go back to the shelter

ButtHead

November 17th, 2010
9:43 am

Hsr0601
Funny how you forget to mention why the bill is blocked, seems like you and most liberals forget the reasons. Do you remember when all you leftie losers where saying how Bush would not sign an education bill because the republicans don’t want to have an educated populace. That is and was 100% false, Bush said gets rid of the earmarks and I will sign it. This is a leftie ploy from way back, let’s take a popular bill and stuff it with pork and scream that the right is blocking a popular bill so they are the party of no. Get real lefties, vote to end earmarks, do away with lobbyist if you are really serious. How about putting up a bill that addresses one thing at a time, put it on the internet for 5 days so we can read it, not just lie and say you will do that. How come the democrats blocked the bill that said “you must read a bill before a vote”. Is that because democrats can’t read or don’t want to do their jobs…

Mr. Spock

November 17th, 2010
9:46 am

My earnings are usually capped, so when I can’t balance my budget at home, I resort to spending cuts. Often this means making some tough choices between the things I must have and those that I would like to have. I can’t automatically assume my income will increase in order to balance my budget.

BS Aplenty

November 17th, 2010
9:54 am

I’ve stated before that there’s little incentive, little Political Profit, that encourages politicians to cut spending. When it’s feeding time at the federal trough, I doubt you score points by telling your constituents that you gave their share to another district “in the name of austerity.” The only long-term constraint on federal spending will be the capital markets and the currency markets. You need only look at Greece, Ireland, Portugal, Spain, Italy, etc. to see where our bend towards socialism is headed.

I know it gives you excellent fodder to write about, Mr. Barr, but it’s a dismal realization for most of us or, at least, me.

SmittyATL

November 17th, 2010
10:00 am

Very logical, Spock!

Ezra

November 17th, 2010
10:06 am

Max out wages to 5m and tax 90% after that with no loop holes or deductions. If you want to be a billionair then go to Europe. Tax all wages above 20k with fica. If an employer or corporation can pay million dollar bonuses then tax that corporaton at 90%. Wages for the elitist and employers who believe they must pay millions for the best and brightest only add to the greed and deteriation of the middleclass.

BS Aplenty

November 17th, 2010
10:23 am

Ezra -

All due respect to your “middle-class” lament but the “middle-class” is what it is because there’s an “upper-class” that generates more wealth for themselves and jobs for the “middle-class.” Whatever the “middle-class” is in a country is relative to the number and success of that “upper-class.” That’s the cold economic calculus of it. So when you say your prayers before you go to sleep, you should say a special “thank you” for Mr. Gates, Mr. Buffet, Mr. Ellison, and the millions of other large and small entrepeneurs who define yours (and my) middle class existence.

And being middle-class here certainly beats being middle-class in Africa don’t you think?

ButtHead

November 17th, 2010
10:29 am

Too make matters even worse the lying peace of garbage who you call our president; the first thing out of his mouth was a lie. “I will not raise the taxes on anybody making under $250,000” then he promptly raised taxes on every working American. But you leftie liberals where too dumb, or unemployed, to notice, one of the first pieces of legislation he signed was to remove the tax credit that corporations get by paying a portion of your healthcare costs. Now that money is added to my income, guess what I will not bring home one dime more in my paycheck but I will pay over $3,000 more in taxes.

hryder

November 17th, 2010
10:37 am

D’s, the number one action that your group could take is shuttling Reid and Pelosi. Are you incapable of understanding the human and financial liabilities that these two have created? California is bankrupt and Nevada is a basket case.

Hillbilly Deluxe

November 17th, 2010
10:37 am

recommending an increase in the retirement age for Social Security to 68 by 2050, and 69 by 2070;

People who do physical labor for a living are pretty well used up before then. There will always be a need for people who do physical labor, inspite of technological gains.

Supreme Being

November 17th, 2010
10:39 am

Ezra…it is pretty clear you barely make minimum wage.

DawgDad

November 17th, 2010
12:17 pm

Budget cutting is going NOWHERE until the conservative base of Republicans get control back in 2012. All that can be done in the meantime is to stem some of the arterial bleeding.

At the same time we get the commission report we also hear of plans to unionize TSA and defend ObamaCare, and California, a State headed for Federal taxpayer bailout, will continue to fund college educations for non-citizens. Focus in Congress is on the “symbolic” gesture of eliminating earmarks. They clearly haven’t yet gotten the message, and we’re still saddled with an extreme leftist Senate and Administration pushing the cart over the cliff.

Want to criticize me for “not having a plan”? Let’s start here:

1. Eliminate baseline budgeting. Period.
2. Cut 10% off everything, across the board. Funding, salaries, procurement, entitlements, everything. Period.
3. Set income tax rates at 0% (permanently, not a temporary bill). Pass the Fair Tax.
4. Repeal ObamaCare and start over.
5. Shut down Freddie and Fannie.
6. Eliminate agricultural subsidies.
7. Eliminate all non-essential Federal grants. Get the Federal Government out of the business of funding Science and trash research projects. Completely.
8. Eliminate the DOE. Turn education back to the States.

That’s for starters. Just for starters.

Drifter

November 17th, 2010
12:24 pm

Hillbilly, there are exceptions for some who do manual labor. Honestly though, people need to plan for a retirement without government welfare. If you’re going to be used up by age 68, save accordingly. Everyone is going to have to give up something to fix the problem…at least the Obama administration acknowledges there is a problem. I think the debt commission has made a good start on a solution, but I would be more happy if it was more aggressive on spending cuts.

Reality

November 17th, 2010
12:39 pm

This economy is a no-win situation for any party.

Cut spending and the other side will cry out to not touch social security, etc.

Cut taxes and the other side will cry out that it mean larger deficit.

I don’t care if you are republican or democrat, it is a no-win situation for anyone trying to come up with a real solution. However, I do give credit to the democrats – at least they are trying to come up with a solution rather than to just say “no” like the republicans seem to have done over the last 2+ years.

cut spending gaffe -can I get an Amen?

November 17th, 2010
2:21 pm

You have to understand what politics be. Remember it’s not how you walk the walk, but only how you talk the talk. In politics, it’s not what you cut or when, or even whose nose you cut to spite whose face. No. It’s simply proposing that Uncle Sam “cut spending” that elevates the candidacy and conforms to the avuncular red white and blue patriotism necessary to win votes.

That’s why I excoriated Kyle Wingfield after his very earnest piece on how to fix the economy. I am widely read, and sure enough, my influential readers have made issue #1 about spending cuts that don’t end political careers. Guess what? Nobody has a clue what those might be. Nobody can get traction by mentioning one department. Nobody can get a second, or even an amen.

That’s because no politician will play sacrificial lamb and accept their states federal revenue decrease? No one is that debunkular.

I propose we start with newspaper cuts, no, silly, not the kind you get when you run your finger along the paper’s edge. No, sir. I’m talking about cutting out evil blogs like this one. And how dare Barr invoke Jesus’s holy name to glean style points. This clown usually screams the loudest about the separation of church and state and then performs a cheap stunt like this.

Finally, that’s not what Jesus said, nor is it what he meant. Jesus was referring to those who love evil. He said that he will not recognize them in the kingdom of heaven. Weeping and gnashing of teeth” is mistranslated out of the Aramaic and into the Greek. What Christ really said was, “The sky will fall upon those who won’t conform to the word. Not even the big brother of those evil doers can save them. They will be cast out into the soil and green with envy, the soil will be made from people. ( People! Oh!) and there will be “whining”, and is there anything worse than adults “whining”, I don’t think so.”

The problem with bloggers like Barr is that they refuse to adjust for the mistranslations that have tortured the intrinsic message encoded throughout all of biblical lore.

nelson

November 17th, 2010
2:37 pm

What is in the deficit reduction plan, I know, a tax on soda and charging admission to the Smithsonian. This will do it. The national debt will be reduced. The IRS has decided that the “fat cats” with offshore accounts will not have to divulge their names, that will let the mega, mega bucks guys rest easy. That being said, the deficit will be reduced to nothing without the help of the suuuuuper rich. Reducing the minimum wage to 2 bucks an hour like China and adopting China’s work ethic will do it.

ATF

November 17th, 2010
9:22 pm

Oh, how easy to criticize. But what would you cut, Mr. Barr?

And, we have to stop funding state roads, state budgets, schools, urban renewal, housing for the poor. Do you know the U.S. Army has a program to promote math and science education in America?

McConnell got over $1 trillion in earmarks for Kentucky. Chambliss claims $500 million for Georgia, including a lot of our military bases.

The problem is what the heck is spending for the military that the military needs and what is senatorial largesse? We don’t know any more. Isakson and Chambliss will go along with banning earmarks but they don’t like the fact that that leaves the Executive Branch with the responsibility to decide where money is spent. As if that wasn’t the job of the Executive Branch.

Whether we like the current Dems or the past Pub ruling of the Executive Branch, we won’t get out of the “earmark” mess until we restore the Congress to passing the laws and leave the Executive Branch to the administration of the laws.

Road Scholar

November 18th, 2010
9:02 am

Just cut the federal assistance to Alaska, the most aided state in the union!