« Sounds Like 2008 (but it’s not)… | Main | Matthew Schifrin’s “The Warren Buffetts Next Door” »
Anyone Read the Debt Commission’s Proposals?
By JLP | November 15, 2010
Read it here:
I thought this particular bullet point was interesting:
Throughout our history, Americans have always been willing to sacrifice to make our nation stronger over the long haul. That’s the promise of America:to give our children and grandchildren a better life.
I guess it depends on who the children and grandchildren are. My parents and grandparents haven’t left it in good shape for my generation. Actually, that statement is misleading. It was my parents and grandparents BUT the politicians in charge during those years who have put us in this position. Now some of us are being asked to make sacrifices to right the system.
Overall, I do like their recommendations:
1. Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.
2. Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit. Here’s a brief look at the taxes portion of the proposal, which was taken directly from the proposal (click on the graphic to see a larger version):
3. Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.
4. Achieve mandatory savings from farm subsidies, military and civil service retirement.
5. Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.
It’ll be interesting to see whether or not this goes anywhere. Already, some on the left are calling it a right-leaning proposal (probably due to the tax proposal):
“As far as I’m concerned the proposal is dead on arrival and should be soundly rejected,” [Rep. Jan] Schakowsky told HuffPost in an after-hours phone call. There are a number of ways to achieve fiscal solvency, she said, without taking it out of the hides of Social Security beneficiaries.
Good ol’ politics.
Topics: Economics | 33 Comments »
November 15th, 2010 at 4:52 pm
You have to like a plan that both Republicans and Democrats hate.
November 15th, 2010 at 6:29 pm
Good writeup. I noticed the tax decrease as well. I really don’t see how reducing taxes even further than today’s rates are going to somehow magically fix our deficit.
We need a massive reduction in spending, AND an increase in taxes. Neither one by themselves is going to balance the budget.
For example, just keeping the tax rate flat (for 2010) is going to require cutting spending by 33% to balance the budget — which is impossible by itself.
To put this in perspective, eliminating the entire Dept of Defense, all the branches of the military (and ending both wars), is only an 18% reduction in spending.
You’d need to eliminate COMPLETELY both the Dept of Defense & the Social Security Administrator to get to the 33% cut in spending — and that also requires leaving the SS-tax in place forever.
November 15th, 2010 at 6:34 pm
Problem is, I don’t trust them to make the cuts to go along with these reforms. Unless budget GDP ties are made a constitutional amendment there is nothing to make those yahoos on both sides of the isle stick to it.
November 15th, 2010 at 6:35 pm
Let me add one more comment. If we just eliminate what Bush did during his 8 years:
1) the changes to education at the federal level
2) the Medicare prescription stuff
3) the Bush tax cuts
and Obama’s junk:
1) tax credits for houses, appliances, cars
2) obama’s tax cuts
3) Healthcare for everyone
Our budget would be balanced again. Basically, just turn back the clock and set taxes and spending back to what they were pre-911.
November 15th, 2010 at 9:58 pm
I’d be ok w/ eliminating the child tax credit. Personal exemptions s/b good enough for families like it was pre-Bush. Ditto for college savings credits and tuition deductions. Simplify the code by eliminating this stuff.
I’d also be ok w/ a mortgage interest cap for itemizing. I think $20,000/year in mortgage interest s/b a reasonable ceiling for most families. (The realtors are squealing already…)
BG, I agree w/what you wrote above…except I’d prefer some tweaking of the Bush tax cuts. I believe it’s our money to begin with. Bush was just returning it to whom it belonged by lowering the rates!
Also, a nice bone to toss to the people since the Federal Reserve is screwing around w/the interest rates: let interest income be tax free for a few years…Then our measly 1% returns would go further, esp for the elderly who continue to get the shaft on their COLA (lack of) adjustments.
As a final step, I’d eliminate the ability to write-off vehicle purchases for business people whose only use of it is to commute to and from work like the rest of us (Doctors, Dentist, etc.) There is too much abuse in this area!!
November 15th, 2010 at 10:21 pm
First, let me say that the Democrats (who have written the FY08 through FY10 budgets), have increased spending from under 20% of GDP in FY07 to over 25% in FY10. NOW they want to “compromise” by freezing spending at the current levels. No deal.
Here’s an idea. For the next year, we can only spend what we took in the previous year — no projections, estimates, or any other hand-waving. The only mandatory spending is our debt payments, so we don’t default. Beyond that, all spending bills are written as a PERCENTAGE of what remains after the debt obligations.
November 15th, 2010 at 10:29 pm
Here’s another idea — ELIMINATE Social Security.
Seriously, folks, there is NO Trust Fund. The money was put into the general fund and worthless IOUs in the “Trust” Fund. Just cut out the middle-man, and take the money directly from your children and grandchildren. That’s who you’re taking it from anyway. Take it directly, and you save a LOT of administrative costs.
Don’t have any kids or grandkids? What the heck have you been spending your money on the last fifty years?
November 15th, 2010 at 11:19 pm
Jack, JLP will have a coronary if he doesn’t get back what he put in. Please come up w/an alternative solution so we don’t have to find another blog to read since his would be RIP…
Anyone remember Gore saying we need to use a “lockbox” for the social security inflows? He was spot on for that one…
November 15th, 2010 at 11:31 pm
Haha…I won’t have a coronary but I do think SS is a huge scam that is coming to a head. I also wish that I could have that money that we contributed over the years. It would be a very large chunk of change.
November 15th, 2010 at 11:57 pm
Amen to that!
November 16th, 2010 at 7:34 am
We can’t get our money back — it’s been spent already. It was spent by the earlier retirees, and any left over was spent by the politicians.
It is a Ponzi scheme, and those on the back end of Ponzi schemes get shafted.
November 16th, 2010 at 8:00 am
Jack) I call BS on eliminating SS. The SS Administration has _always_ taken in more than it has spent. Don’t eliminate the only single government program that is currently self-sustaining.
November 16th, 2010 at 10:34 am
@ BG – Actually, I believe that the Patent Office also takes in more than it spends, technically. The problem for them is that instead of getting to keep their proceeds directly, it goes to the general treasury and then gets re-appropriated back to them (and Congress gets to decide what to do with the surplus).
November 16th, 2010 at 10:53 am
BG, do you really think it’s OK to screw the public so long as the program brings in a little money for the General Fund?
November 16th, 2010 at 11:49 am
I could be wrong, but for all of you that are discussing the tax implications of this proposal (and the original post that characterizes this as a tax cut) – this will actually cause taxes to go up (net). The proposal drastically cuts income taxes, but it gets rid of a whole host of popular tax loopholes. For example, the mortgage interest deduction would be gone. Personally, from what I’ve read, this seems like a pretty solid proposal that combines increased taxes with significant budget cuts while also simplifying the tax system.
November 16th, 2010 at 12:00 pm
Rob,
If you look at the graphic I posted, there are different rates based on different scenarios. The second line from the top details three rates with no deductions, while the bottom line shows the rates with those deductions.
November 16th, 2010 at 2:03 pm
#14 Jack) All I’m saying is that if you kill Social Security (and the SS-tax), the deficit will _increase_, not decrease.
#13 Courtney) good point on Patent Office — I was being a little aggressive saying that Social Security was the only department that makes more than it spend. There are probably others.
I just find it absurd that republicans keep pushing the “reduce SS benefits” argument, like that is the core of our problems.
November 16th, 2010 at 2:21 pm
In the short term, BG, yes. But we have had enough of short-term thinking. Back to the Trustees’ Report: “After 2014 deficits are expected to grow rapidly….”
Social Security has a long-term problem. We need to fix it now. Better yet, eliminate it.
November 16th, 2010 at 6:46 pm
#18 Jack) Social Security is easily “fixed” by adding another year to the age-limits before you qualify for benefits. This has been done before (by Reagan), and will likely be done again. As I said before: the program is self funding in that it has ALWAYS garnished more than enough in it’s own taxes to pay for itself. Even when it runs a deficit, it has a $2 TRILLION buffer due to its surpluses. So please stop using Social Security as some kind of scape-goat for our CURRENT deficits. If anything, it is Social Security that has kept our federal debt lower than it would have been otherwise.
Social Security is NOT the problem.
Look at Medicare and Medicaid if you want to see programs with real FUTURE problems. But, again, they are not the real problem with today’s budget either.
The real problem: Our defense spending has gone from $290b/year (in 2000) to $660b/year. This one item on the federal budget has more than DOUBLED, and is now the second largest item on the federal budget. It is only behind Social Security, which is SELF-FUNDED, so Defense spending is actually the #1 spending item on federal budget.
We have massively increased spending, especially in defense, and (stupidly) CUT taxes at the same time.
What did you think our federal debt would look like when we run around the world fighting TWO UNFUNDED wars for 10 years, while at the same time cutting taxes and increasing spending on other items as well?
Democrats are Tax-and-spend, Republicans are Spend-and-pretend.
I’d much rather have a “Tax-and-spend” government, otherwise NOTHING gets paid for and we are screwing the future generations.
November 16th, 2010 at 6:58 pm
“Even when [Social Security] runs a deficit, it has a $2 TRILLION buffer due to its surpluses.”
Really? Where’s $2 trillion, BG?
I do agree that we should also look at Medicare and Medicaid. Along with Social Security, they are also unconstitutional.
Defense spending is 6.12% of GDP, up from 4.64% when the Republicans last wrote the budget. How do you figure that?
After WWII, defense spending did not get under 6% until 1977. Since 1990, it has STAYED below 6% until 2010.
Now, let’s look at welfare. It’s been hanging out around 2% for a long time. Just this year, it has gone from 2.85% to 3.81%.
Until 1969, federal spending on health programs was below 1% of GDP. Now it is at 5.67%, and climbing.
Long-term, defense spending has, relative to GDP, gone DOWN. Social programs have gone UP.
November 16th, 2010 at 8:41 pm
“Really? Where’s $2 trillion, BG?”
Is Social Security the culprit or the victim? If the trust fund money is not paid back then SS is the VICTIM — yet you continue to attack it.
Your proclamation that the fed steals money from the SS trust-fund, is reason to end social security is a ridiculous argument. To me, that sound like Islamic-countries who make their women where burqas so they don’t get raped.
Here’s an idea: instead of attacking the victim, go after the culprit. If you go along with the Republican talking points of “reduce SS benefits” (and not the SS-tax of course), you are just encouraging even more THEFT of the SS surpluses!
Is this not plain as day to you?
November 17th, 2010 at 3:00 am
You forgot to mention the elimination of the estate tax and the lowering of the corporate tax rate from 35% to 26% which shifts even more benefits to the rich. Looks like the middle class, whatever is left of it, is taking the shaft again.
November 17th, 2010 at 3:03 am
Also no one mentions that if we get out of those two worthless wars in the middle east, we will save about $800 billion a year.
November 17th, 2010 at 8:13 am
“Is Social Security the culprit or the victim? If the trust fund money is not paid back then SS is the VICTIM — yet you continue to attack it.”
Neither. WE — the TAXPAYERS — are the victims. The culprits are the politicians. They have repeatedly shown themselves to be untrustworthy, but you want them to be in charge of our medical care and our retirement income. That makes no sense.
This is not a question of the SSA’s being the good guys and Congress’ being the bad guys. The SSA does what Congress tells them. And what are the options for the surplus? Do you want the SSA to invest the money? Then you have federal employees picking stocks. Plenty of room for corruption there.
If we really want to keep Social Security and handle the surpluses properly, we would have all of the excess money returned to those who paid into the system. If the SSA spends 90% of the FICA taxes, then everyone who paid in that year gets 10% of their FICA taxes returned.
November 17th, 2010 at 8:15 am
“If you go along with the Republican talking points of ‘reduce SS benefits’ (and not the SS-tax of course), you are just encouraging even more THEFT of the SS surpluses!”
But YOU propose increasing the age that one can receive benefits. Is that not reducing benefits, or will people automatically live longer?
November 17th, 2010 at 8:23 am
John, you’ve got your numbers all wrong. The TOTAL since 9/11 is $1,121B:
———————–
Based on DOD estimates and budget submissions, the cumulative total for funds appropriated
from the 9/11 attacks through the FY2010 Supplemental Appropriations Acts for DOD,
State/USAID and VA for medical costs for the wars in Iraq, Afghanistan and enhanced security is
$1,121 billion including:
• $751 billion for Iraq;
• $336 billion for Afghanistan;
• $29 billion for enhanced security; and
• $6 billion unallocated (see Table 1).
————————–
http://www.fas.org/sgp/crs/natsec/RL33110.pdf
The ENTIRE DoD budget is $685.1B for FY2010, including the cost of the wars in Iraq and Afghanistan. (Other defense-related costs, such as military pensions and the VA, run about $350B.)
November 17th, 2010 at 12:44 pm
My understanding is that raising taxes decreases tax revenues to the government. that is why reducing taxes encourages more economic activity which broadens the tax base and actually results in an increase in tax revenues.
That’s why reducing government spending and taxes will improve the economy. Monetizing the debt only creates inflation. Reducing government spending is the best solution. The government is the most inefficient way to stimulate the economy. Even if it works there are much better alternatives.
November 17th, 2010 at 1:45 pm
Jack) I am ok with making changes to SS for it’s own sake (like adding a year if need be). I am NOT ok with making changes to SS to deal with budgetary problems OUTSIDE of Social Security.
Personally, I don’t agree with social security (in concept or taxation) — but I draw the line when the majority of SS-taxes are paid by the bottom 2/3rds of this country, and republicans want to swoop in and raid this money for non-SS related things: the damn wars.
If Social Security is not responsible for a SINGLE DAMN PENNY of our current $13.4 trillion federal debt — then I am absolutely not happy with cutting SS benefits to deal with our debt.
November 17th, 2010 at 3:27 pm
@ Ivan Kirkpatrick: your understanding of the effect of tax rates on government revenue is wrong. See (e.g) the Congressional Budget Office publication “Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates” (2005). Here is a quote from the summary:
“Under those various assumptions, CBO estimated effects on output ranging from increases of 0.5 per- cent to 0.8 percent over the first five years on average, and from a decrease of 0.1 percent to an increase of 1.1 percent over the second five years. The budgetary impact of the economic changes was estimated to offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years.”
So cutting taxes by 10% across the board led to a net reduction in revenue under a broad variety of assumptions, which is of course exactly what you would expect if you weren’t living in upside-down world.
@ JLP: you should do a post where your commenters could submit their budge-balancing plans using tools like the one recently published by the NYT (there might be other better ones elsewhere, I haven’t looked around too much). That might lead to some interesting discussion.
November 17th, 2010 at 5:03 pm
Dan) cool idea! I’d immediately raise income/dividend taxes back to pre-bush levels. Then I’d create an extra / new tax to pay the costs for fighting two wars. I’d call the new tax the “War-Tax” and make it a flat tax on a percentage of all income/dividend/capital gains and it’d have it’s own box on everyone’s 1040.
I’d also go along with Jack’s idea and _lower_ the social security tax so as to not generate any more surpluses that can be stolen. Setting it a little lower than needed to ensure the $2 trillion is paid back over 10 years.
After that, adjust the income taxes to reflect our current spending (PAYGO).
The outcome: an immediate end of both wars (cause no-one will want to actually pay for them), and also a cut to whatever spending programs the citizenry finds ‘wasteful’ as everyone screams that taxes are too high.
November 17th, 2010 at 10:21 pm
Well, BG, we have finally found an area of agreement. Neither of us likes the idea of Social Security, and neither of us like that that “Trust Fund” has been stolen by our untrustworthy congresscritters. However, we cannot get the money back. That would just take it from our children and grandchildren, who had nothing to do with it. In a Ponzi scheme, those who come in last are the ones who get screwed.
We also agree that Social Security “fixes” (Remember the old adage, “Congress fixes problems like veterinarians fix cats.”) should not just generate more revenue to be stolen through the “Trust Fund.” Hence my idea that excesses be returned to those paying FICA taxes, in direct proportion to the taxes they paid.
That said, the Trustees do tell us that we will have deficits in Social Security in the near future — this year and next, and again after 2014. That problem needs to be solved soon.
Still, you are correct that there are more pressing problems. Certainly cuts can be made in Defence spending. Medicaid and Medicare should be scrapped completely, and 0bamacare with them.
November 18th, 2010 at 10:59 pm
What impact will there be on non profits, charity giving, retired military. Many types of Non Profits should be taxed such as AARP, those that shield political agendas, etc. The non profit is merely a shield. You can spend as much as you want in salaries and benefits and other items but remain non profit. Where is the details for items 1 thru 5
November 20th, 2010 at 10:27 am
#32 pete) You can read the PDF that JLP linked to — but there isn’t much detail in there.
The commission’s plan is to have a balanced budget by 2037, which sounds a lot like “we don’t have a plan”. We had a balanced budget just 10 years ago, yet now we can’t balance it again for 27 years.
This commission is a joke.