Nov 02 2010

A very serious proposal

Debt Panel Pauses Until After Elections

By JACKIE CALMES, The New York Times

Published: November 1, 2010

Dean Baker is alarmed about this part-

WASHINGTON – The bipartisan debt-reduction commission that President Obama created eight months ago will begin meeting privately soon after Tuesday’s elections, with just three weeks to try to agree on cutbacks to Americans’ favorite tax breaks and benefit programs.

The group, which has a Dec. 1 deadline for recommending how to reduce the annual deficits swelling the federal debt, purposely has done little to date beyond five public hearings, and it has decided nothing lest any decisions leak and blow up in the flammable mix of a campaign year with control of Congress in the balance.

which I think a little late on the realization front, but whatever.  I’m more alarmed about this part-

Mr. Bowles has suggested that perhaps two-thirds of total deficit reduction come from spending and the rest from new revenues. The panel is not considering higher income tax rates given Republicans’ resistance. It is exploring ways to shave the roughly $1.2 trillion annual cost of “tax expenditures,” the tax breaks for individuals and businesses.

…

Four of the most expensive tax expenditures also are the most popular. Those are deductions for mortgage interest, state and local taxes, and charitable giving and the exclusion from income taxes of the cost of employer-provided health insurance. One option would be to keep such breaks but reduce them or phase them out, supporters say. The Committee for a Responsible Federal Budget, a bipartisan group of policy experts, has proposed changes to save $1.7 trillion over a decade.

It’s certainly worth reading.

Update: More from Dean Baker

Erskine Bowles: Social Security’s Enemy No. 1?

By: Dean Baker Monday November 1, 2010 1:57 pm

While Simpson has seized the spotlight, it may prove to be the case that Erskine Bowles, his co-chairman, poses the greater threat to Social Security. The reason is simple: Bowles is the living embodiment of the rewards available to politicians who would support substantial cutbacks or privatization of the program.

…

(C)ontrary to the Washington fear mongers, Social Security is in solid financial shape by any reasonable definition. The Congressional Budget Office projects that it can pay all scheduled benefits for the next 29 years with no changes whatsoever (.pdf). Even after it first is projected to face a shortfall in 2039, the program could still pay nearly 80 percent of benefits into the next century without any changes at all.

Modest changes, such as raising the cap on taxable income (currently $106,000) would eliminate much of the projected long-term shortfall. Changes of the size implemented by the Greenspan commission in 1983 would make the program fully solvent long into the 22nd century. Remarkably, virtually no policy wonk seriously disputes these numbers in spite of the near universal hysteria among the chattering class over Social Security.

On policy grounds, Social Security is a smashing success. It scores even better politically. Poll after poll finds that everyone from Tea Partiers to actual socialists strongly supports the program. Yet, many members of Congress stand prepared to vote for substantial cuts to Social Security or even a partial privatization of the program.

Why would members of Congress be prepared to take a vote that is both bad on policy grounds and also could hurt their own political survival? Erskine Bowles is a large part of the answer.

rustymancuso581

2 comments

  2. the only transcript is from the White House and does not identify the questioner but Duncan Black, aka Atrios, has said that he asked this question:

    Q Mine is an easy question. Will you rule out raising the retirement age to 70?

    THE PRESIDENT: We are awaiting a report from the deficit commission, or deficit reduction commission, so I have been adamant about not prejudging their work until we get it.

    But I think you can look at the statements that I’ve made in the past, including when I was campaigning for the presidency, that Social Security is something that can be fixed with some modest modifications that don’t impose hardships on beneficiaries who are counting on it.

    And so the example that I used during the campaign was an increase in the payroll tax, not an increase – let me scratch that. Not an increase in the payroll tax but an increase in the income level at which it is excluded.

    And so what I’ve been clear about is, is that I’ve got a set of preferences, but I want the commission to go ahead and do its work. When it issues its report, I’m not automatically going to assume that it’s the right way to do things. I’ll study it and examine it and see what makes sense.

    But I’ve said in the past, I’ll say here now, it doesn’t strike me that a steep hike in the retirement age is in fact the best way to fix Social Security.

    Pretty clearly not an answer

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