The co-chairpeople of the President’s deficit commission (officially the National Commission on Fiscal Responsibility and Reform) have released a draft proposal to start the ball rolling toward the Dec. 1st deadline by which the full commission (nine Democrats and seven Republicans) must agree. So far, the reaction has been neutral/negative from most of the commission members, plus Nancy Pelosi and liberal groups. No real reaction from Republican/conservatives yet (wait for it) but just seeing all the negative response tells me that they’re moving in the right direction: any proposal that’s going to seriously address deficits and debt in a reasonable, long-term fashion SHOULD piss off just about everyone. So way to go, guys!
What I Like:
- Possible elimination of the mortgage interest deduction: If this actually happens, I’ll be shocked, but I would love to see this disappear. It’s terrible public policy that encourages people to buy more house than they need (wasting resources), promotes housing price inflation, and doesn’t do a thing to increase home ownership. More on this in a future post!
- Raise the gasoline tax: Okay, they only want to raise it to 15¢ and there’s no suggestion of indexing to inflation, but it’s a start. (If you want to know why our roads are in so much worse shape than many other developed countries, start with the fact that the gasoline tax hasn’t changed since 1993.) I also like the suggestion to dedicate the revenues from this 100% to the Transportation Trust Fund. A system of usage fees would be better but let’s face it, that costs a lot of implement and raises privacy concerns, so it’s not going to happen anytime soon, at least on a broad basis.
- Defense cuts: You can’t cut the deficit without cutting defense spending, which comprises over 20% of total federal spending.
- Don’t do anything major until after the 2012 fiscal year to avoid disrupting the economic recovery: I’m no economist but virtually everything I’ve read by economic experts is that immediate spending cuts would be disastrous for the recovery.
- Establish a non-partisan Cut-and-Invest Committee: I found this buried on p. 17 of the proposal. It sounds very much like the Base Closing and Realignment process that was introduced to consolidate military bases but provide political cover for those politicians who are unwilling/unable to do it themselves, given the demands of their constituents and special interest groups. Applying this same approach to program spending should help shift the focus to supporting programs that work, and cutting those that don’t, regardless of what interest groups think.
- Implement medical malpractice tort reform: Virtually everyone I know in the health care field longs for this step. In addition to actual cost savings, it would help reduce unnecessary “defensive” medicine (although I suspect less than some people would like to think – we can be very demanding consumers even without the threat of a lawsuit).
- Raising the retirement age: It’s got to happen. I also like that they want to reform Social Security for its own sake, and not as part of overall deficit reduction. It needs to be treated in a proper, actuarial fashion and run as such.
- Raising taxes: I don’t actually see these words in the proposal, but amidst the language of simplification, reduced rates, reduced “tax expenditures” and other phraseology, it’s obvious that total tax revenues are intended to go up. This is a necessary step (and something that should have been done virtually the instant the planes hit the Twin Towers and we realized what we were up against).
What I Don’t Like:
- Possible elimination of the Earned Income Tax Credit: While I support the overall goal of tax code simplification and reduction in credits/deductions, this credit, as I understand, is highly successful at encouraging and rewarding work for those who need the most: the poorest in our society. In an economy in which wealthy inequality is approaching critical levels, this is a crucial goal.
- Lack of major weapon systems cuts: While I’m glad to see the commission tackle defense spending, the $100 bil. in illustrative cuts seems to focus heavily on personnel costs and much less on the real meat of defense spending: extremely expensive weapons programs.
- Early retirement for physical labor jobs: In theory, I like the idea of helping those who work in more physical demanding jobs retire earlier, particularly as many/most of these folks will be earning less to begin with and yet doing some very important, if underappreciated, work. However, this is exactly the type of thing that tends to get abused. Greece, for example, has this type of system (although their categories are far too broad) and look what’s happened there.
Categories: Random thoughts