Advice the President got in Dec. 2010, unheeded....
Sadly, the report--an assessment of its provisions follows--has been ignored by President Obama, who convened the panel in the first place. Notably, as reported by Politico, the nation's governors are disgusted with the spectacle in Washington. The states have seen creative activity as never before, ranging from very liberal to very conservative, while Washington is mired in stasis.
Contrast this with the recent hilarious exchange (4:10) between ABC WH correspondent Jake Tapper & WH Press Secretary Jay Carney, in which Tapper rakes Carney over the coals re the President's preferring a debt default to a short-term fix that would necessitate revisiting the issue during the upcoming election year. Then add in this exchange between Office of Management & Budget Director Jack Lew and CNN's Candy Crowley, in which Crowley presses Lew to declare that if there is a default the administration will still send out Social Security checks. Lew bobs & weaves, as Crowley presses the point that Scott Pelley of CBS did not press recently when interviewing the President: the government can indeed prioritize checks to ensure that grandma gets her check no matter what happens.
The Report. There are too many specific recommendations to cover in depth, so I will rely on broad-scale numbers, plus illustrative examples, to convey its essence. Putting matters into perspective, the panel notes that in 2001, when G. W. Bush took office, the share of federal government debt held by the public has soared from 33 percent of GDP to 62 percent in 2010. (Note that upon Obama's term of office the figure stood at 40 percent of GDP, a figure that the Commission aims to reach once again in--yes, 2035.) We could be looking at $1 trillion in annual interest costs as soon as 2020.
The panel's recommendations, if adopted in full, would, it estimates, reduce total debt by nearly $4 trillion, primarily by cutting discretionary spending--domestic programs (1/3) + defense (2/3), but excluding entitlements such as Social Security & Medicare-- and by closing tax loopholes. At aims for budget balance at 21 percent of GDP, versus the historical level of 18 percent tax revenues. (Obama is now at 25 percent spending & 14 percent tax revenues, as shares of GDP.)
The plan would cap discretionary spending by returning to 2008 levels by 2013 and limiting later increases to half that for inflation. The result would be some $2 trillion below the current request by the President. Two examples of inefficiency noted by the panel: the federal government funds 44 jobs programs spread across 9 agencies, and has no fewer than 105 pprograms promoting participation in science, technology, education and math. Michael Barone adds juicy examples of wasteful federal programs that merit elimination or deep cuts.
Earmarks are another target for elimination, though one can hardly resist being a tad sympathetic for a $900,000 earmark to enable Oklahoma students--per Dave Barry I am NOT making this up--to "role-play how to make tough choices as members of Congress."
On closing tax loopholes--the classic products of what economist derisively term "rent-seeking" behavior--the panel would close most of the $1.1 trillion worth it identified, and trade for lower tax rates; a clean trade would create a three-tier bracket of 23 - 14 - 8 percent, but the panel would preserve certain key breaks: mortgage interest, child care credit, Earned Income Tax Credit, charity, employer-paid health-care premiums. The panel's preferred tax options would leave a three-tier rate of 28 - 22 - 12 percent. This WSJ op-ed on past higher tax rates notes that they kicked in at higher rates, adjusted for inflation, than today's top rate, and they applied to far fewer taxpayers.
The panel's section on Medicare & Medicaid was dizzyingly complex, and I leave it to readers more patient (masochistic?) than I. Re Social Security I note certain revealing metrics: when FDR signed Social Security into law (1935) average life expectancy in America was 64, versus 78 today; and the ratio of workers to beneficiaries was 16:1 in 1950, 5:1 in 1960, is now 3:1 and is projected to fall to 2.3:1 by 2025. Americans could not collect Social Security before 65 then, versus 62 today under early retirement provisions. Today Americans spend an average of 20 years in retirement.
Added Factors. A historical note re soaking the rich: On Fox yesterday, anchor Gregg Jarrett recalled (he was on the Hill then, on staff) what happened in 1993 with the luxury "yacht tax": a Joint Economic Committee report tallied 25,000 lost jobs in affected industries, 75,000 additional indirect job losses, $24M lost revenue.
A WSJ editorial notes that the fabled Social Security "Trust Fund" is just that: a fictitious creation. Its $2.6 trillion "surplus" is a collection of I.O.U.s from the US Treasury, which pays recipients annually out of tax revenues collected in each current year.
Jed Babbin counsels against tying debt reduction to a Balanced Budget Amendment. "Cut, cap & balance," while appealing, has no chance. It takes years to get an Amendment ratified. Without the White House pushing it, forget it. Bill Kristol says accept a short-term deal and fight the big spending cut battle in the 2012 election. Paul Ryan appeals to his fellow party members for a "united front" in cutting spending while avoiding default.
Moody's threw a curve-ball over the weekend, suggesting that the US eliminate its statutory debt ceiling.
In a broader historical sense, Noemie Emery shows how FDR's expansion of "rights" differs from those in the Bill of Rights protecting citizens from excessive government power to economic "rights" covering provision of goods & services.
Bottom Line. Bowles-Simpson is a serious effort focus national debate. Alas, a president who produced a February budget that was laughed out of town and has not produced a serious one yet is unlikely to accept any of the Commission's important recommendations.
Letter from the Capitol, LFTC, National Security, Economy, Conservative Politics