The deficit commission’s plan

By Felix Salmon
November 10, 2010
here, list of illustrative cuts here) is hilariously depressing on both the big-picture and the little-picture level.

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The pair of deficit commission reports (draft here, list of illustrative cuts here) is depressing on both the big-picture and the little-picture level.

The big picture is in this chart — the proposal gets most of its juice after 2020. Which just happens to be the point at which growth in health-care costs automagically is brought down to GDP + 1% “by establishing a process to regularly evaluate cost growth, and take additional steps as needed if projected savings do not materialize”. But healthcare inflation is a gruesomely difficult nut to crack, and if the CBO simply assumed that it could be solved so easily in 2020, its projections would look much rosier too.

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Beyond that, the biggest savings proposed by the commission are in various parts of the federal payroll. Nothing else remotely moves the needle: the next biggest saving, beyond the punt of the “cut-and-invest committee”, comes from a reduction in the rate of growth of foreign aid. (You’d think that one could find pretty substantial non-personnel costs in the defense budget, but evidently not: a few cuts like the V-22 Osprey don’t even begin to generate savings until 2015.)

Meanwhile, some of the small savings have to be seen to be believed. The deficit commission, charged with coming up with a bold plan to bring the nation’s finances into order, really does propose:

  • Increasing the amount of time spent on instant messenger, to reduce travel costs;
  • “Reduce copying use by putting the default option on copiers to double-sided”;
  • Merging the Commerce Department with the Small Business Administration;
  • Charging a fee to Smithsonian visitors.
  • Etc.

There are some good ideas in this report, and it’s definitely good that people are talking openly in public about raising the retirement age (very slowly: it only hits 69 in 2075) and phasing out mortgage interest tax relief.

On the other hand, bold ideas in terms of new taxes — carbon taxes, wealth taxes, Tobin taxes, consumption taxes, you name it — are nowhere to be seen: as Jonathan Chait says, this is “a plan that’s tilted, overwhelmingly, toward Republican priorities”. Which means a large dash of wishful thinking, a bunch of tax cuts (!), and even a cap on the amount of tax revenues that the government can bring in. How that’s meant to help reduce the deficit I have no idea.

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