Editore"s Note
Tilting at Windmills

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November 10, 2010

FISCAL COMMISSION WRAPS UP WORK EARLY.... The White House's "National Commission on Fiscal Responsibility and Reform" -- the 18-member panel tasked with deficit-reduction planning -- wasn't scheduled to report on its work for several more weeks. By all accounts it's been a struggle, with the goal of producing a "consensus" report enjoying the support of at least 14 members.

The fact that the commission appears to have wrapped up its work, with a report from its chairs due today, suggests the panel did not reach its goals.

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.

That's all very interesting, I suppose, though the political prospects of any of this are, at best, highly dubious.

But it's worth emphasizing a rather important detail: these recommendations are not the result of a commission consensus. On the contrary, they're reportedly included in a draft published by the commission's chairmen -- former Clinton White House chief of staff Erskine Bowles, and former Wyoming Sen. Alan Simpson (R).

In other words, Simpson and Bowles have all kinds of ideas about raising the retirement age and cutting Medicare benefits, but that's not the collective judgment of the commission they've led.

At this point, the two chairs still hope to get the support of 14 of the 18 members, but that appears to be a stretch, and it's likely members won't even vote at all. One also assumes the chairs would also love the White House to embrace their document, but I'm guessing that's unlikely, too.

Steve Benen 1:25 PM Permalink | Trackbacks | Comments (24)

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If Obama is lucky the commission will save him from the consequences of his really stupid unforced error (i.e., creating it) by self-destructing. We can only hope. If the Democrats can't or won't run on a strong message of protecting SS and Medicare, they're toast in 2012.

Posted by: Steve LaBonne on November 10, 2010 at 1:35 PM | PERMALINK

That report might as well be titled "A Comprehensive List of Recommendations That Will Be Dead On Arrival in Congress." How much was budgeted for this fiasco?

What LaBonne said--this gives the Dems a second, if undeserved chance to run on protecting the middle and lower classes next cycle.

Posted by: dr. bloor on November 10, 2010 at 1:41 PM | PERMALINK

I stopped caring about the deficit when the Democrats (plus some moderate Republicans like George H.W. Bush) did the hard work to bring them down, and the Republicans promptly squandered them all on wars and tax cuts (plus a Medicare Plan D that was deliberately designed as a giveaway to Big Pharma). As George W. Bush once said, fool me once, shame on you, fool me twice, fuck that noise.

Posted by: kth on November 10, 2010 at 1:42 PM | PERMALINK

And to think, I voted for that asshole loser Bowles for Senator in two elections in NC.
Bowles couldn't even beat out a turd like Burr.
I guess his and Simpson's opinions will get outweighed by the 7 Liberals and Progressives on the panel, right?
What, there are none?
Never mind...

Posted by: c u n d gulag on November 10, 2010 at 1:50 PM | PERMALINK

This administration has pinned a lot of their recovery hopes on a resurgent real estate market. If they mess with the mortgage interest deduction they can kiss those hopes good-bye.

Posted by: Bob on November 10, 2010 at 1:52 PM | PERMALINK

THE iDEA of raising the retirement age is illogical at best and opressive at worst.

First, if all those workers keep working what happens to the next generation of employees waiting to advance, be hired, etc. Putting off retirement on a mass scale is the equal of requiring the economy to create a massive number of jobs for new workers.

Second, it keeps older people in thrall to their employers for a longer period with all the additional risks and health care costs that implies.

The only real answer to the deficit problem, if it is a problem, is

JUST SAY YES to tax increases for the wealthy

It is a secular sin to own a Armani suit worth a thousand meals when almost 1/3 of Arizona kids live in poverty. Tax the excess wealth of the über rich now.

Republicans destroyed the economy by lax financial regulation coupled with tax cuts for the wealthy which forced great deficits upon the country.  Now they want to give that 5% of the populations which owns 85% of the country's wealth even more money.

The rich have had a free ride since Reagan when the highest tax rates were cut from 70% to 35%.  Now the country and the economy are in trouble. It is time to tax excessive wealth.  It is time the rich pay their fair share. 

There is no reason to give people like Paris Hilton more $10,000 Hermes handbags, music industry execs another $200,000 Ferrari or Real Estate Barons like Donald Trump more $30,000 Rolex watches when people are unemployed, losing their houses, and cannot afford college or health insurance.

Please, tell your elected officials you not only oppose the extension of the Bush tax cuts for the rich, but would like to see the top rate restored to the pre-Reagan level.

I would be mortified to wear a $1000 pair of shoes when people go hungry in Arizona. Tax the excess wealth of the über rich now.  

Posted by: KurtRex1453 on November 10, 2010 at 1:53 PM | PERMALINK
"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)."

So, their proposal is that middle class families that own their own homes should loose out on the one, reliable, tax credit they have, their mortgage interest payments, so that we can drop tax rates across the board, most notably, drop them 12% for the highest bracket? Oh HELL no!

Posted by: Sisyphus on November 10, 2010 at 1:54 PM | PERMALINK

What the F*** is it with these guys and tax rates? Every time we lower them the deficit balloons and with the exception of JFK and to a lesser extent St Ronnie, the economy btanks while when we increase them modestly the deficits shrink and the economy booms. If they are not going to steal the Social Security Trust Fund, why do anything on social security? It is not broke and it has no impact on the debt--although it could have an impact on the deficit in any given year we can finance that by simply exchanging debt for debt--ie no effect on the total debt. I guess they figure that cutting benefits will let them hide a bit of the annual defict a bit longer with excess social security contributions. The idea of raising the retirement age is unfair to the workers who do not sit at a desk and the means testing turns it into a welfare program which is the way they will eventually get the support to kill it.

Posted by: Terry on November 10, 2010 at 1:58 PM | PERMALINK

I hope there is going to be a minority report from the left on this. The right wingers will use the report as vindication of two of their favorite lies: a) Lowering taxes raises revenue and b) Social Security is going bankrupt.

Turned out to be the stupid waste of time and money we expected.

Posted by: martin on November 10, 2010 at 1:59 PM | PERMALINK

Yes, by all means, hit him (the FORMER Middle Class), while he's down.

The consensus of MY commission is, "Eat the Rich."

Posted by: DAY on November 10, 2010 at 2:01 PM | PERMALINK

ditto Terry: wtf does lowering taxes have to do with deficit reduction?

Posted by: kth on November 10, 2010 at 2:01 PM | PERMALINK

Why am I supposed to be concerned about this commission's recommendations coming to pass? Why is Josh Marshall in Full Eeyore mode? I've never understood the fuss about this thing, except that it gives a lot of people the opportunity to say the word "catfood."

Posted by: FlipYrWhig on November 10, 2010 at 2:06 PM | PERMALINK

Actually (and sorry for the overposting), cue the chorus chanting that the commission's failure to issue a consensus recommendation is Bad News For Obama in 3,2,1...

Posted by: kth on November 10, 2010 at 2:09 PM | PERMALINK

I hope everyone likes cat food. Yum.

Seriously, though, there's an extremely easy way to make Social Security solvent as far into the future as can be possibly seen: remove the cap on earnings. It makes no sense that a billionaire pays no more in SS taxes than does a moderately-successful person making ~$100,000 a year. Get rid of that tax, + you both restore progressivity + fix any potential deficits.

But, of course, that works against the apparent goals of the power elite to impoverish the rest of us, thereby setting up a proletarian revolution. Clearly, they're all orthodox communists.

Not a good thing, incidentally,
-Z

Posted by: Zorro on November 10, 2010 at 2:16 PM | PERMALINK

The nature of and demand for work are changing. We have millions upon millions of people over age 50 chroniclly unemployed. We have lots of young people stuck behind older workers who should retire. All of that and these clowns are recommending we raise the retirement age? Has anybody done any real thinking on this topic? I don't remember seeing anything in the press. Now I remember now the average age of the professional Washington pundit is approaching 80. What do they care about the changing nature of work?

Posted by: Ron Byers on November 10, 2010 at 2:22 PM | PERMALINK
That's all very interesting, I suppose, though the political prospects of any of this are, at best, highly dubious.

Its also a bunch of phenomenally bad ideas because it appears to take as sacred the problematic structure of the tax system which is the source of much of the problem, particularly the preferential treatment of capital income.

Eliminate preferential treatment of long-term capital gains, eliminate separate payroll taxes (although keep "employer share" advance payments against payroll taxes as payments against the new single income tax, to avoid the de facto pay cuts that would result from shifting that to the employee side), subject all income to a single, progressive income tax, of which a share equivalent in rates to the existing payroll taxes (without caps) are set aside for the same purposes as existing payroll taxes, and set the rates for the combined brackets such that the general fund impact in the short term is revenue neutral. At the same time, uncap Social Security benefits (as contributions are effectively uncapped) while maintaining the existing policy that beyond a certain point SS benefits are taxed as income.

(To account for the long-term nature of capital gains, you'll need to create a mechanism which allows people to recognize, and pay taxes on, income in advance of realizing it, so that long-term investment income isn't treated as windfall income except when it really is a sudden, unexpected windfall -- or the asset holder chose not to recognize the income in advance -- which is important for fair treatment in a progressive tax scheme. But this is good, since it also allows people with variable income from non-capital sources to spread their income out for tax purposes the same way.)

This will cut taxes for most people who work, do far more to secure Social Security and Medicare than tinkering with benefit formulas, and foster long-term economic growth by making it less expensive to hire workers in the US without reducing their take-home pay. It will also encourage entrepreneurship (contrary to the Republican position, people don't hold back from investing because taxes reduce the maximum possible gain too much, they hold back from shifting from labor to investing because they don't have the initial resources needed -- which shifting the tax burden off of workers who might choose to be investors, and the workers they might hire, addresses.)

It also prepares the currently payroll-tax funded safety net program for the hoped-for transition over time to a broader investor class with more people making all or a significant share of their income (even if the income is only a middle-class income) from actively managed investments rather than wage labor.

The Republicans used to like to (and still sometimes do) talk about an "ownership society", which is, to an extent, a good goal. OTOH, Republicans always use that line to sell policies which reward the current, narrow ownership class while making it harder for those who currently derive their income primarily from labor to become owners, which is exactly the opposite of what must be done to promote an "ownership society" in the only sense that such a thing would be desirable.

Posted by: cmdicely on November 10, 2010 at 2:40 PM | PERMALINK

Off the top of my head-The decrease in the Corporate tax rate to a flat 26% with no deductions renders this nonsense DOA. Corps have a sticker tax rate of 35% but no large corp. pays anywhere near 26% after deduction- health insurance, R&D, general business expenses. That's an economy killer of mammoth proportions. Not to mention how many people would be tossed off company insurance plans.
As for the top rate deduction I can't figure out why at all. Most who have deduction are still forced to pay the minimum 25%, if they can get it that low. Really, really silly to give them more.

Posted by: KK on November 10, 2010 at 2:45 PM | PERMALINK

If I were Obama I'd raise holy hell with Bowles and Simpson. Their job as chair-persons was to complete the work, arrive at a consensus report. They weren't hired to produce their own private plan and promote is as if it's important.

This plan looks like they cribbed from the Peterson "work" didn't even try to look at a plan that could be used to actually reduce the deficit.

Posted by: c. on November 10, 2010 at 2:51 PM | PERMALINK

The day Obama appointed Simpson was the day I knew this exercise in "debt reduction" was a joke. It's turned out that way. Most of today's stuff was SS, which is not part of the deficit problem. The one good thing was raising the earnings rate Cap on SS - which if eliminated altogether would make SS solvent forever - but the idea of raising it at all will be torpedoed by the GOP.
This commission is a joke and will do NOTHING to help with the debt for two reasons: 1- it was proposed by Obama and therefore the GOP will reject it (even if it contains things they want) and 2- it is a joke.

Posted by: T2 on November 10, 2010 at 2:54 PM | PERMALINK

I guess that even supposed Democrats don't see any reason to expect the wealthiest among us to pay a little more.

I hope that Obama is loudly disappointed by the Republican character of the recommendations.

Posted by: freelunch on November 10, 2010 at 3:02 PM | PERMALINK

The country would have been better served by giving every American a free Ashford & Simpson download instead of chartering these stale wankers to share their views. Pierre Salinger had a better grasp on Wikipedia than these fossils have on our current problems. They added a fracking TAX CUT to their deficit reduction plan. It's like giving Derek Jeter the Gold Glove because he's the most respected shortstop. Bowles and Simpson are all reputation and for them to continue making a good living on the stale fossil circuit they have to parrot elite conventional wisdom.

Posted by: joejoejoe on November 10, 2010 at 3:12 PM | PERMALINK

Support by 14 of 18 members is 77.8%. Is there anything more controversial than "We Like Mom" that could draw that level of support in our current politics? Imposing payroll taxes on all of a high earner's income will be a deal breaker for 30-35%. A similar percentage will walk away from any SS benefit cut or postponement. So just there you've lost a majority of members. And these are commission members, who presumably have no concern about being reelected. If this proposal ever got as far as Congress, it wouldn't get 15% support.

As an aside, note the recommendation to cut the lowest tax bracket from 10% to 8% (a 20% decrease) and the highest from 35% to 23% (34.3%, or if the Bush tax rates on the highest bracket expire first, 41.9%), undoubtedly to redress the iniquitous imbalance between the privileged poor and the overburdened rich.

Posted by: tamiasmin on November 10, 2010 at 5:17 PM | PERMALINK

This is nothing more than the Proposal of Erskine and Simpson, two Republican members of an 18 member commission. I wonder why two of the Democrats don't issue their own proposal. That would have just as much validity as this one does.

The most egregious recommendation regarding Social Security is the suggestion to tie the benefit to the inflation index rather than the wage index. Over time, that will decrease the benefit to a level that will make it most unacceptable. Notice that they also want to increase collections going into the trust fund by raising the taxable base. The Social Security surplus hides a huge amount of the budget deficit, because of Unified Budget reporting. That alone indicates they are not really serious about cutting the deficit.

Social Security is OFF BUDGET, has its own source of funding, and it operates in the BLACK. It should be off the table when the talks are about deficit reduction.

Posted by: anon, too on November 10, 2010 at 5:58 PM | PERMALINK

What a waste of hot air, even for Washington. Canada is starting to look better and better. I can go to Florida as a visiting alien every year to thaw out whenever winter ends. At least half the population up there isn't crazy.

Posted by: max on November 10, 2010 at 7:24 PM | PERMALINK




 

 

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