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The fiscal commission reports -- sort of

By Ezra Klein

debtfiscalproposal.jpg

The fiscal commission is not going to manage to get 14 of its 18 members to agree on a plan to balance the budget, as was the original intent. That means, among other things, that it isn't assured a vote in Congress. But it doesn't have any intention of going quietly into the night. Today, the commission's co-chairs, Erskine Bowles and Alan Simpson, are releasing their chairman's mark.

What's the chairman's mark, exactly? In Congress, the chairman's mark is somewhere between a discussion document and a piece of legislation that the chairman of a committee releases to give the members a sense of where his or her thinking is. This seems to be much the same: It's a full plan to balance the budget, but it doesn't have the votes of the commission's members, much less the force of law or congressional process, behind it.

The recommendations are fairly radical: The co-chairs freeze 2012's discretionary spending at 2010's levels -- and then start cutting it back further. By 2015, they project discretionary spending will be more than $200 billion less than the president's budget currently envisions. They raise taxes, but rather unexpectedly, cap the revenues the tax system can generate at 21 percent of GDP. They also offer a number of options for tax reform, including one that eliminates all tax expenditures (including the mortgage-interest deduction, the exclusion for employer-based health care, and more) and brings the top rate down to 26 percent. Social Security comes in for both benefit cuts and tax increases -- though there are substantially more of the former than the latter. There are a number of Medicare reforms.

The co-chairs project that the deficit will fall to 1.6 percent of GDP by 2020 if the recommendations are implemented. The vast majority of those savings come from cuts in spending. Tax increases are a relatively minor contributor. You can see the breakdown in this table:

fiscaltable1.jpg

They further project that the recommendations would mean a budget surplus in 2040, rather than the large deficits currently projected. I want some more time with the proposal before I say much more about it, but the overview can be downloaded here, and so can a set of options for reducing discretionary spending.

By Ezra Klein  | November 10, 2010; 1:55 PM ET
Categories:  Budget  
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Comments

It wouldn't make a huge dent in the national debt, but it would curtail at least some wasteful government spending if future presidents committed fewer federal resources to bi-partisan deficit commissions.

Posted by: JPRS | November 10, 2010 2:12 PM | Report abuse

The proposed changes to Social Security appear to be reasonable. Some of those will be difficult to implement like taking physical labor into consideration. But eliminating all tax expenditures? Never happen. And what's so special about only three income tax brackets.

Posted by: tuber | November 10, 2010 2:36 PM | Report abuse

It is a widely held opinion of many economists that the so-called crisis with Social Security and Medicare is blown out of proportion. Some go so far as to call this "crisis" a myth or a hoax. There are ways to address these issues without reducing benefits for those who need them the most. In other words do we really want our elder citizens to live in poverty because we do not make it a priority to make the economics of aging work? A number of things can be readily done. These include means based benefits (those who are well off and so do not need a check should not get one, or at least get a smaller one). End the policy that caps contributions at a certain amount for the highest paid Americans. Raise the contributions for all Americans by 2% or 3%. These simple measures would go a long way to solving this "problem". But because politics are involved the movement now is to reduce benefits to the most vulnerable and neediest of our fellow citizens.

Posted by: MickyD1 | November 10, 2010 2:37 PM | Report abuse

The proposed changes to Social Security appear to be reasonable. Some of those will be difficult to implement like taking physical labor into consideration. But eliminating all tax expenditures? Won't happen. And what's so special about having only three income tax brackets.

Posted by: tuber | November 10, 2010 2:37 PM | Report abuse

Ezra,

Why do you need more time to study it? If it has more spending cuts than tax increases then it should make your liberal partisan gut want to puke. Of course you will come out against this well thought out plan. You will however pick out a few of the tax increases and praise those.

Posted by: cummije5 | November 10, 2010 2:40 PM | Report abuse

Oh, now, I know why Obama left the country.

Posted by: theworm1 | November 10, 2010 2:46 PM | Report abuse

cummije5, Ezra says he wants to carefully consider a proposal before praising or rejecting it, and you cut right to criticizing him as a hack? Couldn't you turn your evidently prodigious mental powers to more productive uses?

To the post, generally: I can't be arsed to look it up at work, but can someone give me an idea of what they did with military spending, both in general in with regard to the current wars?

Posted by: MosBen | November 10, 2010 2:48 PM | Report abuse

21% of GDP cap on revenues and expenditures pretty much assures that health care cannot coexist with the military industrial complex, right?

That's my take on it, and I don't have faith in our politicians to make the right call on that one. They love to blow some stuff up!

Posted by: rat-raceparent | November 10, 2010 3:31 PM | Report abuse

Ezra, I would be deeply grateful if you or someone could honestly quantify the actual impact of tax policy on economic growth. Plainly Simpson and Bowles would rather eat their own children than raise taxes, but, in recent memory, I have seen two events.:

Bill Clinton raises taxes and we get eight years of unprecedented growth, balanced budgets, and a surplus in the Treasury.

George Bush cuts those taxes and we get the slowest job growth in decades and the whole economy collapses.

Tax policy seems like, at best, a marginal way to try to restore the health of the economy, and at worst, just another wedge issue used to distract us from Congress' fundamental inability to fix what's really wrong.

Posted by: Hiker55 | November 10, 2010 3:32 PM | Report abuse

Now won't this through the Teabaggers into a tizzy. You know, the ones who don't realize that SS, VA, Medicare and gov't pension expenditures, etc., ARE big government! Got to celebrate it!

Posted by: whereareweandwhatarewedoinginthishandbasket | November 10, 2010 3:43 PM | Report abuse

tuber,

you asked about what's so special about 3 income brackets.

R's always try to consolidate income brackets, so they can get more people into the bucket they are concerned with. Get doctors and accountants in with CEO's, and you have more political power behind top rate cuts. Simple!

Posted by: rat-raceparent | November 10, 2010 3:43 PM | Report abuse

Didn't we deal with Social Security, for the Boomers, in the 80s? We increased SS taxes and raised the retirement age from 65 to 67.

As a result, we currently have over a $2.5 trillion surplus in the SS Trust Fund. And it's projected to grow to $4 trillion by 2016. We can pay full retirement benefits for about 30 more years and 3/4 of benefits for about 70 more years.

Where's the crisis in SS that a little tinkering wouldn't cure?

Posted by: tslynch27 | November 10, 2010 3:46 PM | Report abuse

Didn't we deal with Social Security, for the Boomers, in the 80s? We increased SS taxes and raised the retirement age from 65 to 67.

As a result, we currently have over a $2.5 trillion surplus in the SS Trust Fund. And it's projected to grow to $4 trillion by 2016. We can pay full retirement benefits for about 30 more years and 3/4 of benefits for about 70 more years.

Where's the crisis in SS that a little tinkering wouldn't cure?

Posted by: tslynch27 | November 10, 2010 3:47 PM | Report abuse

For the results of any idea about mandatory spending cuts, please see the record of mandatory Medicare provider cuts under the SGR formula and extrapolate.

There is no SS crisis, but also no SS trust fund either.

Posted by: 54465446 | November 10, 2010 3:52 PM | Report abuse

It will be next to impossible to make agree the hungry wolves to leave the bloody goats. Republicans and Democrats must take a deep breath and think about the Nation, the Great America, her interest and interest of Americans, young and old who are losing their American dream day by day. Unless, we taxed the rich and cut pork from the poor and old and come to the middle ground, we cannot save our future. It is that simple.

Along with these measures, we must force our law makers to stay away from Nation destroying and Nation building wrong, immoral and unjust behaviour for ever. We must stop all wars and should not start any new war or help others to start war on our behalf anywhere on the Globe. Let the United Nations control the World. Our policeman duties must be ended.

Posted by: citysoilverizonnet | November 10, 2010 3:58 PM | Report abuse

And yet the Republicans still refuse to end the Bush tax cuts for those making $250,000 and above.
The deficit panel is talking about $4 trillion in savings. That's the EXACT cost of the Bush tax cuts.
Buhs's goodies for the greedy are largely what put us in this hole. There is no serious way to look at our fiscal debacle without addressing those tax cuts, as both of those noted socialists, Alan Greenspan and Warren Buffett, have said.

Posted by: mylesgordon | November 10, 2010 4:11 PM | Report abuse

http://mercatus.org/sites/default/files/publication/The%20Truth%20about%20Entitlements.Kling_.11.8.10.pdf

Posted by: justin84 | November 10, 2010 4:13 PM | Report abuse

If there was a problem with the solvency of Social Security (and not everyone agrees there is), then the simplest solution is to raise the cap. Instead of paying into SS on the first $108,000 you earn, raise it to $200,000. Then the program would be awash in money and you won't have to force old folks to spend their last years as Walmart greeters.

The other reason not to raise the retirement age is medical care. Nobody I know can afford health insurance or health care. They all wait and pray to hit 65 so they can get Medicare. I waited 7 years to get a hip replacement so I could walk --because as I and my friends learned, the federal and state governments are in no hurry to qualify people as disabled. As Alan Grayson said, it's not only the Republicans who want you to get sick and die before you cost them any money.

Finally, the rich are always touting the benefits of a flat tax to replace our current tax system. The system needs loopholes plugged and higher capital gains taxes to keep the rich from gaming the system further. But the heads of the cat food commission have no intention of doing any of this. Simpson has already said the entire country sponges off the government--except him, of course.

Posted by: sharonsj1 | November 10, 2010 4:13 PM | Report abuse

"And yet the Republicans still refuse to end the Bush tax cuts for those making $250,000 and above.
The deficit panel is talking about $4 trillion in savings. That's the EXACT cost of the Bush tax cuts."

Talk about flat out deception.

The 'cost' as you put it for the $250k+ portion is $700 billion even according to team Obama, not $4 trillion.

Posted by: krazen1211 | November 10, 2010 4:28 PM | Report abuse

One more:
Cut Congressional salaries by 50%. Seriously. Minimum of $100,000 a piece x 400-500 annually, will result in some savings. They do not need it since they are subsidized by special interest groups. Bought and paid for. I am serious. We are not to be serving Congress; Congress is supposed to be serving our country = us.

Cut salaries of Supreme Court Justices, as well. Across the board cuts on salaries of all those in Federal Departments. SC is also bought and paid for. Koch Enterprises subsidize 5 of them.

Posted by: nana4 | November 10, 2010 4:36 PM | Report abuse

And where is the Cut on Military and defense ?
And where was this chairman when Bush decided to spent over 1 trillion dollars ?

Posted by: tqmek1 | November 10, 2010 5:06 PM | Report abuse

Suggest to see: An Economic Tsunami is Coming http://t.co/8fiGNnw
It will come earlier then.

Posted by: 10082044 | November 10, 2010 7:32 PM | Report abuse

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