Tag: deficits

The New York Times buys into the nonsense being peddled by the president’s Fiscal Commission, calling their proposal a dose of fiscal reality and shared pain — though sharing the pain is far from what this plan would do.

The plan, the Times says,

frankly acknowledges what most politicians are too cowardly to admit — that deficit reduction will require shared sacrifice.

It lays out sensible principles, prominent among them that deficit reduction should start gradually, beginning in 2012, to avoid disrupting the fragile economic recovery. It also affirms the need to protect the most vulnerable Americans and to invest in education, infrastructure and research and development.

Then it does what any successful deficit reduction plan must do: It puts everything on the table, including tax reform to raise revenue and cuts in spending on health care and defense. It even dares to mention the need to find significant savings in Social Security, Medicare and other mandatory programs.

But Social Security is not the problem (minor fixes will address a potential problem in the retirement program that has been blown out of proportion) and the kind of tax reform being proposed is the kind that the people who run our corporate state will appreciate, but that those of us in the middle class will be none too happy about.

The focus should be on addressing healthcare costs — which the Obama health-care plan is supposed to do, but won’t because it left the contours of the for-profit corporate system in place. A single-payer system is what is needed, with less of a focus on high-end technology and more on preventative medicine. But that is another debate.

The issue here is the plan on the table, which is a right-wing economist’s dream come true. As Jeff Madrick, a senior fellow at the Roosevelt Institute, writes on Huffington Post, the radical reduction in the federal income tax rate (the bulk of which would go to top earners) “is simply right wing ideology at work, and has nothing to do with deficit issues.”

To the contrary, the authors are using deficit alarms to present a new tax agenda. Is Obama really going to stand behind it? There is no commonly accepted evidence that current marginal tax rates, or even higher ones, suppress economic growth.

He also is critical of the arbitrary slashing of federal outlays — to 21 percent from an expected 24 percent (and the current 22 percent) and what he calls Draconian (and unnecessary) cuts in debt levels.

Why the reduction? There is no reason at all to do so, except an ideological one: less government is always better. Again, there is no absolutely commonly accepted evidence that higher levels of government suppress growth. Yet the proposal is willing to make painful cuts in programs to meet this spurious goal. And it will leave no room for more public investment.

Third, the proposal’s goal is to reduce debt levels to 60 percent of GDP and eventually 40 percent. To do so requires a deficit on average of 2.2 percent of GDP. Again, there is no evidence that debt levels of 60 percent are better than levels of 70 percent, for example. Reducing the debt levels to 40 percent is simply Draconian. One argument is to keep them low to be able to respond to emergencies, as the nation just did. It would be far better to devote attention to avoiding the extreme emergencies.

The spending cuts, as Madrick points out, will be counterproductive in this broken economy, making it more difficult to address stagnant employment or help those dislocated by the damage done by the very economic elites likely to benefit from its medicine.

• Send me an e-mail.
• Read poetry at The Subterranean.
• Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
• Suburban Pastoral, a chapbook by Hank Kalet, available here.

Jane Hamsher of FiredogLake calls it the cat food commission and, given its focus on cutting Social Security benefits, it is easy to see why.

The commission’s chairmen — a conservative Democrat tied to the Democratic Leadership Council (otherwise known as Republicans in sheep’s clothing) and a conservative, anti-Social Security Republican — unveiled the broad outlines of a plan they say will slash $4 billion from projected deficits over the next two years.

The plan has its moments — military spending is on the table — but it is unlikely to pass. And it shouldn’t. It represents an assault on the nation’s middle class and seniors, focusing most of the pain on those who need help right now.

According to an initial report in The New York Times, Social Security benefits would be cut for “most future retirees,” though “low-income people would get a higher benefit,” and the plan “would subject higher levels of income to payroll taxes to ensure Social Security’s solvency for at least the next 75 years.”

None of the “savings,” the Times reports, would be used for deficit reduction “reflecting the chairmen’s sensitivity to liberal critics who have complained that Social Security should be fixed only for its own sake, not to balance the nation’s books.” That’s a gross distortion of the liberal position, of course, which is that Social Security is solvent and that minor tweaks are all that are necessary (such as the expanded payroll tax).

Nevertheless, the commission and the Times continue to run the Social Security con, making it a prime target for budget cutters and privatizers. The chances that enough politicians would get behind changes like this and risk the ire of seniors remain thankfully slim, though I wouldn’t put anything past the corporate lackeys who run things.

More significant in today’s presentation, therefore, is the tax code rewrite being proposed. As described by the Times:

The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.

Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.

Anyone catch that? Lower-income taxpayers will see their rate fall from 10 to 8 percent, but upper-income taxpayers get a much larger break — from 35 to 23 percent. These cuts would be offset by elimination of tax breaks — notably the mortgage tax deduction — that help cut the tax burden of middle class taxpayers.

Without more specifics, it is difficult to see how something like this would benefit the middle class, let alone the poor, though it seems a pretty big win for corporate and high-end taxpayers.

The three-decade framing of this issue as a spending problem has allowed the corporation and their elected lackeys to target so-called entitlement programs and discretionary spending while keeping the need for more revenue off the table.

Paul Krugman sums up the problem with the commission and its report in a blog post here, call it “unserious”:

If you’re sincerely worried about the US fiscal future — and there’s good reason to be — you don’t propose a plan that involves large cuts in income taxes. Even if those cuts are offset by supposed elimination of tax breaks elsewhere, balancing the budget is hard enough without giving out a lot of goodies — goodies that fairly obviously, even without having the details, would go largely to the very affluent.

• Send me an e-mail.
• Read poetry at The Subterranean.
• Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
• Suburban Pastoral, a chapbook by Hank Kalet, available here.