U.S. debt panel’s good sense upsets left and right

November 10, 2010

Uncle Sam would tax somewhat more and spend a whole lot less if the co-chairs of President Barack Obama’s deficit commission get their way. Critics on both ends of the political spectrum will carp — but they would struggle to devise a better way to tackle America’s long-term fiscal problems.

Still, a preliminary report released on Wednesday quickly came under heavy fire from both right and the left in Washington. Conservatives slammed panel heads Erskine Bowles and Alan Simpson — respectively a Democrat and a Republican — for concocting a plan that would boost tax revenue to 21 percent of GDP against a traditional average of 18 percent. That would be the highest level in American history. Liberals, on the other hand, accused the duo of cutting the economic safety net for the U.S. middle class by proposing deep reductions in future senior healthcare and Social Security benefits.

The predictable kvetching shouldn’t obscure the many merits of the bold, even radical plan put forward by the commission co-chairs. Taxes probably need to be raised to get Democrats in Congress to approve other deficit-reducing measures that involve cutting spending. The Bowles-Simpson plan would do this mostly by eliminating inefficient tax breaks and loopholes — perhaps even the sacred mortgage interest deduction. In return, marginal tax rates would be lowered for individuals and companies. The top corporate rate, for instance, might drop as low as 26 percent against 35 percent currently, pleasing Republicans.

But spending cuts in the panel’s early plan do outweigh tax increases by around three to one. Overall, the projected ratio of U.S. debt to GDP would fall to 60 percent by 2024 and 40 percent by 2037. By contrast, the Congressional Budget Office forecasts that without dramatic action the ratio would hit 185 percent by 2035. The plan would raise the Social Security retirement age and tweak the government pension system’s benefit formula. As for health spending, it would give Obama’s reforms a chance to prove their deficit-cutting mettle but ax them if spending doesn’t move sharply lower.

Bowles and Simpson still need to sell their plan to 12 of the other 16 panel members. Even if they’re successful at that tough task, members of Congress could still blow off the whole thing. But if it comes to that, election-conscious politicians shouldn’t forget that investors in U.S. assets can vote, too — with their feet.

Comments

Relax, our governments is SMART enough, but not BRAVE enough … to do this.

Posted by misterliu | Report as abusive
 

Yea keep working til 69 or higher, after all there is such a big market for employees at that age, as all those 50 or older, now laid off, are being just overwhelmed with job offers????

Posted by chuck2 | Report as abusive
 

Unquestionably, Congress will “blow off the whole thing.” Look at California’s recent history for an example: a blue-ribbon panel appointed by the Governator studied hard and wrote a sensible blueprint for fixing the state’s chronic budget mess, and the Sacramento gang promptly turned it into a doorstop.

The fixes for us nationally are actually pretty simple: cut military spending by 60 to 80% over ten years, raise the Social Security minimum retirement age to 68 with fuller benefits if you don’t claim until you’re 76, reduce the corporate income tax rate to 15% and make it absolutely flat (thus accomplishing the biggest tax increase in the history of the nation under the guise of one of the biggest tax cuts ever) simplify the personal income tax codes and reduce rates, implement a small VAT on everything except fresh food, eliminate the departments of Homeland Security, Energy, and Education, completely eliminate all agricultural and energy subsidies, and streamline financial regulations (reducing the numbers of regulators required) by focusing on regulation that drives honesty, transparency, and simplicity, making fraud illegal.

Boom. Fifteen years from now, we’re through the crisis and back on a productive pathway. I expect absolutely none of this to happen.

Posted by JackMack | Report as abusive
 

They should just make it 70, or 72 for that matter. I’m 41 and never planning on being able to retire anyway. I’d rather have the system intact than no Social Security system at all.

Posted by johnnyjr | Report as abusive
 

The American electorate has been thoroughly brainwashed by the Right Wing to consistently vote against its own interests.

They’ll take the bullet on Social Security, infrastructure, education, and medical services if Rush, Beck and Sarah tell them to do so.

And nary a mention of the elephant in the parlor: The gargantuan and utterly unproductive military-industrial complex which, like a black hole, is sucking all vitality out of the American economy.

Posted by jrpardinas | Report as abusive
 

For every complex problem there is an egegant and simple solution that is wrong. The solution seems to fit this category.

Posted by Mott | Report as abusive
 

How about a new law that makes all SS retirement age reflect those of all govt employees. What happened to America?

Posted by wannarka | Report as abusive
 

How about a plan to opt out? Id rather have back what I’ve put in so far and a guarentee that I don’t have to pay in ever again. They can keep the interest and I’ll manage my money myself. If I keep giving it to the government they will just keep spending it. It’s sad that we are kicking this can down the road. The boomers now want to push the retirement age for those just nearly able to vote but most likely unwilling to do so. Now the gen xers will have to vote to kick the can just like the boomers did. Why not just cut benefits effective immediately for the boomers. After all it was boomers that spent the money. It’s only right that they should bear the burden and pay the price for their lack of fiscal responsibility.

Posted by Bdy2010 | Report as abusive
 

@johnnyjr – we’ll be able to retire as long as we do what the boomers did and kick that can on to those behind us. Notice the panel never mentioned cutting payments effective immediately. That would be the ultimate example of leadership and taking responsibility for ones actions. Of course we both know that that won’t happen and instead they will force us Xers into a corner where we will have to decide between money and good conscience.

Posted by Bdy2010 | Report as abusive
 

Getting rid of the mortgage interest deduction would only hurt new or young home owners, not those who have already paid down their mortgages to the point where it is better to take the standard deductions. As we all know (or should know) the less you owe on your mortgage the less interest you’ll be paying, hence an ever decreasing deduction. This is especially noticeable when you have less than 15 years left on your mortgage.

Posted by IntoTheTardis | Report as abusive
 

The old folks got us in to this mess they can pay for it. They are the ones who overwhelmingly wanted the wars. They are the ones who let the corporatocracy take over. They are the ones who would not let reasonable cuts be made decades ago before we got to this point. Let them suffer for their mistakes.

Posted by anarcurt | Report as abusive
 

So, basically, their recommendation is pray like hell that you don’t lose your job after you’re 45 or so?

We all know how “desirable” older applicants are, right? Wouldn’t it be swell if we had chronic unemployment without any hope of relief for a 25-30 year age range from 40/45-70? That’d be swell! Think of all the fun stuff that elderly homeless people will entail!

It is OBNOXIOUS to undercut the meager social safety net we’ve got in this country while cutting taxes for the mega-rich AND maintaining the most bloated imperial military commitment this side of the moribund British Empire!

Hope y’all enjoyed this thing we called “the greatest country on earth”, because it is a thing of the past.

Posted by BGG | Report as abusive
 

with unemployment at 10%, keeping the “old” at work will just make things worse. Perhaps a reduction of the pension $ amount for the new generations? Not a very popular alternative though.

Posted by robb1 | Report as abusive
 

please not even “a small VAT”… the accounting burden of it is terrible!

Perhaps a Federal Sales Tax, to evade all the tax free intrastate commerce that is booming on the internet.

Posted by robb1 | Report as abusive
 

welcome JackMack; paragraph two, more direct would not be possible!
Are you an insider trying to make your counterparts very uncomfortable?
Anyway I for one say it is time for peace and less subsidies, here and abroad…
thank you

Posted by chapapet | Report as abusive
 

Get real – people this old can’t do work that is physical – not everyone is sitting at a desk. Totally ridiculous. Next thing there will be compulsory Euthanasia as people are no longer useful. Can you imagine a 70 year old man digging the roads, working on a building site.

Posted by kiwibird | Report as abusive
 

As long as mandatory retirement at a certain age is illegal because of age discrimination, and as long as our tort lawyers, who we have to support in perpetuity anyway (they own Washington)are available to sue companies that demote some ‘oldies, but goodies’, Social Security eligibility should go in lockstep with a. life expectancy and b. average age of young people entering the workforce. It seems so obvious.

Posted by dumkoepfe | Report as abusive
 

I like the idea of a flat tax, with no exemptions, for the simple reason that it will significantly increase the amount of taxes paid by the rich.

Right now they can just shuffle their money around into whatever loopholes happen to be the in thing.

That of course is the reason why so many of the rich love our current 86,000+ page tax code. There’s always someplace in there to find a loophole…

Posted by bobw111 | Report as abusive
 

I think raising the age to 69 or 70 is completely fair. When Social Security started, life expectancy was around 60, and the age was 65. By that logic, it would be completely fair to raise that age to 80. Of course, we do need to ensure that there are jobs for these people in order for this to make sense, and it should only take effect for those more than 5 to 10 years from

In addition, we do need to simplify our tax code. Accountants might not want this to happen, as we’ll need fewer of them, but it would be very helpful to everyone else.

Posted by ashwinkn | Report as abusive
 

I hate to break it to everyone…but you can retire whenever YOU WANT. Now if you’ve done such a poor job planning for that that you’ll need to rely on the goverment’s subsidy to do it…oh well…not sorry for you…it was a choice.

Posted by Bitwise | Report as abusive
 

The government must be very brave for such a change!
I do not believe that will occur
nothing that an event such as the French do not solve!
We’re still waiting for good changes in the system!..lets pray hahaha

Posted by maysaribas | Report as abusive
 

Seeing as the average age forecast for a healthy 28 year old male such as myself is 123, I don’t see the problem here. Thanks to advances in health care age increases are inevitable. If such is to happen, we may be thankful if the increase in retirement age goes to 100. We’d be bored to tears otherwise. Enough with the partisan infighting, they’re both as wrong as can be anyway. It’s time that we allowed both the Dems and the Republicans to duke it out so that a policy that satisfies the special interests of neither while doing what is right can finally emerge.

Posted by Spasmodic1 | Report as abusive
 

There are not enough jobs for the young and able-bodied. Where are they going to find work for the old?

Pretty soon we’ll have hordes of the elderly roaming for a handout just as in the 1980′s the mentally ill were flushed onto the streets when Reagan pulled the safety net from under them.

And the intellectual midgets in the Teat Party (some now in Congress – God help us!) can only come up with earmarks as the way to balance the budget. This country has gone, pardon my French, to pure merde

Posted by jrpardinas | Report as abusive
 

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