OT - the deficit commission report

[Inuca]

What's going on guys? I am away in Romania and will be here for a month. I have Internet access (obviously :-)), but not much time nor the patience (my mom is not doing well, I have to help her decide what to do from now on, and I don't know what to do :-() to follow what's happening back home. But there seems to be quite an uproar about this. Do you think it's the by now customary reaction from the "professional left" or is really bad? Any help in understanding would be much appreciated.

[karynnj]

1. The proposal, which apparently the co-chairs alone created is a disaster

It has not been put to a vote of the commission - and many accounts say it would not get a majority vote of the commission. I know that Simpson was an ultra conservative Senator. I know less of Bowles - other than he was appointed as Clinton's chief of staff in 1996. Here is how TPM describes him:

Bowles is Simpson's Democratic counterpart. In the 1990s, he left Wall Street and corporate America to work in the Clinton administration, where in 1996, he was appointed Chief of Staff and led budget negotiations between the administration and the conservative Congress. In that role, he entertained and, by numerous accounts, nearly agreed to a Social Security compromise that would have invested money from the Social Security trust fund in the stock market. Bowles eventually left the White House, ran unsuccessfully for Senate in North Carolina, and recently retired as president of UNC.

http://tpmdc.talkingpointsmemo.com/2010/08/meet-the-16-men-and-two-women-who-could-determine-the-fate-of-social-security.php

As only these two chairs had a voice there is no mystery that they came up with a Republican dream proposal. It appears that the rest of that committee was given no say or voice on the proposal. As the original idea was a Congressional committee - with senior officials from relevant committees, why were these two unelected people put in charge?

Paul Krugman's column today is an excellent read on their stated values and proposals. He notes that there first goal was to LOWER tax rates! Krugman makes the case that they do not even do that. They actually raise the taxes on the middle class (by eliminating the mortgage deduction ) and lower them on the wealthy. (An idea Scrounge would have gone for before the ghosts)

The entire op-ed should be read as it is really good, but here is an excerpt:

Start with the declaration of “Our Guiding Principles and Values.” Among them is, “Cap revenue at or below 21% of G.D.P.” This is a guiding principle? And why is a commission charged with finding every possible route to a balanced budget setting an upper (but not lower) limit on revenue?

Matters become clearer once you reach the section on tax reform. The goals of reform, as Mr. Bowles and Mr. Simpson see them, are presented in the form of seven bullet points. “Lower Rates” is the first point; “Reduce the Deficit” is the seventh.
<snip>
Actually, though, what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.

It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans. And what does any of this have to do with deficit reduction?

http://www.nytimes.com/2010/11/12/opinion/12krugman.html?_r=1&hp

[beachmom]

2. Also, I am struck by the timing.

When we finally have a Democratic President and people are seriously hurting, NOW is the time to cut the deficit? Look, I have been screaming about the deficit since the '90s. Clinton fixed it and Bush killed it. Now in a deep recession the deficit is astonishingly high (although Obama has gotten it down a bit from its record high). But when I think about priorities, shouldn't we start by increasing revenue by getting the economy back in shape? Jobs and increasing value in investments and homes plus people buying more stuff is a good way to solve at least part of why we have a big deficit. Then wind down all these wars, trim defense, raise taxes on the wealthiest, plus I am for a phase in tax increase on EVERYONE going back to the Clinton rates which were perfectly fine. But phase it in for a soft landing. Take a HARD look at Medicare and plan for the future because that one really is going to break the budget. I am less convinced that social security is that big a problem, but again, wealthier earners can pay more in taxes than they do now.

A note on housing. Yes, I get it that the mortgage interest rate deduction may not be the greatest tax policy plus I acknowledge the problems with the Fannie/Freddie model. But if this stuff is unwound, well, our housing prices will never recover. I just think maintaining the status quo on housing is what we should do right now until everything has stabilized and recovered somewhat -- as in revisit it in 10 or more years. I remember reading that a McCain plan to eliminate Freddie/Fannie over 10 years would decimate the housing market. People need to get out of la la land and remember this.

Also, let's see how Britain fares -- I am skeptical that their austerity measures are being done at the right time. I guess I am a Keynsian at heart. Spend during difficult times, cut during the good times (cut meaning spending cuts plus tax rate increases).

[karynnj]

4. Brilliant post

Everything you say here makes sense.

The hypocrisy on the deficit on the right is incredible. Greenspan was constantly advising Clinton of the importance of bringing down the deficit and when that was done - the debt itself. Yet, in 2001, he argue in favor of the Bush tax cuts - which of course - on their own even with no 9/11, Afghanistan and Iraq would have caused a deficit.

Here, the most appalling thing is that in finding a way to cut the deficit, these two men found a way to do so while lowering the tax on the top income group beyond the Bush tax cuts.

Eliminating the income tax deduction would not only bring the values of homes down. It on its own could break many who are currently barely making ends meet, who have large mortgages. It is changing the rules mi stream - they bought the house including the tax break in their calculations.

Here in NJ, we have had our own variation of that game. Here, Governor Kean, still held in high regard in the state, hid a huge deficit. His successor, Governor Florio doubled the top income rate and now almost 30 years later is still hated for that. Yet the Republicans say they are the party of fiscal responsibility.

[beachmom]

3. For the sake of balance, I recommend reading Andrew Sullivan's blog:

http://andrewsullivan.theatlantic.com/

He seems to like some of the ideas and is posting many pundits' opinions -- for, against, or a combination of the two.

[Inuca]

5. Thanks karyn & beachmom

off to read Krugman and Sullivan.

[Mass]

6. It strikes me as an attempt to present an atrocious proposition that will get everybody in arms

(left and right), in order to present later something that normally would get resistance normally as reasonable ("see what we could have had otherwise?" ).

Yes, there are some token positive measures (in particular some obsolete weapon programs and getting rid of some duplications), but the bulk of it is an attempt to hurt social security in the long term, as well as a serious lowering of the tax bracket for the higher taxes (35 to 23). There is no way they hoped it would passed.

This does not strike me as a serious proposal because it basically balances the budget (and only in the very long term) on the back of the 97 % poorest, while the rich get their tax lowered and the capital gain canceled while middle class deductions like the child income credit and interest deduction for buying a home disappear, so, as far as I am concerned, it is as bad as it seems, but again, I am a lefty, so who knows.

[wisteria]

7. I second your comments.

When I heard about the drastic suggestions-I almost laughed. These proposals are terrible for the middle class and the poor and politically,they would be a disaster for the Democrats.

[wisteria]

8. I am so sorry to hear your mother is not well. n/t

[Inuca]

9. Thanks!

:hug: