Gang of Six Back from the Dead: Contemplating the Good, the Bad, and the Ugly in Their Budget Plan

Cato Institute ^ | 07/20/2011 | Daniel J. Mitchell

[SeekAndFind]

The on-again, off-again “Gang of Six” has come back on the scene and is offering a “Bipartisan Plan to Reduce Our Nation’s Deficits.”

The proposal is quite similar to the one put forth by the President’s Simpson-Bowles Commission, which isn’t too surprising since some of the same people are involved.

At this stage, all I’ve seen is this summary (A BIPARTISAN PLAN TO REDUCE OUR NATIONS DEFICITS v7), so I reserve the right to modify my analysis as more details emerge (and since I fully expect the plan to look worse when additional information is available, the following is an optimistic assessment.

The Good

• Unlike President Obama, the Gang of Six is not consumed by class-warfare resentment. The plan envisions that the top personal income tax rate will fall to no higher than 29 percent.
• The corporate income tax rate will fall to no higher than 29 percent as well, something that is long overdue since the average corporate tax rate in Europe is now down to 23 percent.
• The alternative minimum tax (which should be called the mandatory maximum tax) will be repealed.
• The plan would repeal the CLASS Act, a provision of Obamacare for long-term-care insurance that will significantly expand the burden of federal spending once implemented.
• The plan targets some inefficient and distorting tax preference such as the health care exclusion.

The Bad

• The much-heralded spending caps do not apply to entitlement programs. This is like going to the doctor because you have cancer and getting treated for a sprained wrist.
• A net tax increase of more than $1 trillion (I expect that number to be much higher when further details are divulged).
• The plan targets some provisions of the tax code – such as IRAs and 401(k)s) – that are not preferences, but instead exist to mitigate against the double taxation of saving and investment.
• There is no Medicare reform, just tinkering and adjustments to the current system.
• There in no Medicaid reform, just tinkering and adjustments to the current system.

The Ugly

• The entire package is based on dishonest Washington budget math. Spending increases under the plan, but the politicians claim to be cutting spending because the budget didn’t grow even faster.
• Speaking of spending, why is there no information, anywhere in the summary document, showing how big government will be five years from now? Ten years from now? The perhaps-all-too-convenient absence of this critical information should set off alarm bells.
• There’s a back-door scheme to change the consumer price index in such a way as to reduce expenditures (i.e., smaller cost-of-living-adjustments) and increase tax revenue (i.e., smaller adjustments in tax brackets and personal exemptions). The current CPI may be flawed, but it would be far better to give the Bureau of Labor Statistics further authority, if necessary, to make changes. A politically imposed change seems like nothing more than a ruse to impose a hidden tax hike.
• A requirement that the internal revenue code maintain the existing bias against investors, entrepreneurs, small business owners, and other upper-income taxpayers. This “progressivity” mandate implies very bad things for the double taxation of dividends and capital gains.

This quick analysis leaves many questions unanswered. I particularly look forward to getting information on the following:

1. How fast will discretionary spending rise or fall under the caps? Will this be like the caps following the 1990 tax-hike deal, which were akin to 60-mph speed limits in a school zone? Or will the caps actually reduce spending, erasing the massive increase in discretionary spending of the Bush-Obama years?
2. What does it mean to promise Social Security reform “if and only if the comprehensive deficit reduction bill has already received 60 votes.” Who defines reform? And why does the reform have to focus on “75-year” solvency, apparently to the exclusion of giving younger workers access to a better and more stable system?
3. Will federal spending under the plan shrink back down to the historical average of 20 percent of GDP? And why aren’t those numbers in the summary? The document contains information of deficits and debt, but those figures are just the symptoms of excessive spending. Why aren’t we being shown the data that really matters?

Over the next few days, we’ll find out what’s really in this package, but my advice is to keep a tight hold on your wallet.

[DarthVader]

They should contemplate the end of their careers and facing lynch mobs.

[EGPWS]

Shuffling deck chairs...

[The Sons of Liberty]

The RINO Saxby Chambliss was on Fox this morning and as much admitted that their "plan" revolved around raising taxes and budget sleight of hand.

Take Back AMERICA!
FUBO GTFO 2012 !

[truthkeeper]

I thought Coburn bailed from these losers a couple of months ago. Now he’s back. What’s up with this??

[Free Vulcan]

Well I like the good part, but the reality is that as much as we need tax reform, spending reform is even more urgent. A turd with whipped cream and a cherry on top is still a turd.

[Eagle of Liberty]

This is a HORRIBLE deal. If the House votes this one through, there will be an incredible uproar. It won’t be Cut, Cap and Balance......it will be Raise, Increase and Spend!

Thank you Nevada for voting Reid back to the Senate! Thank you Arizona for voting McCain back to the Senate! And McConnell has already announced his retirement so he feels ZERO pressure on voting for this deal designed by DICK DURBIN!!

[mewzilla]

For anyone who missed it....

America's Ruling Class -- And the Perils of Revolution By Angelo M. Codevilla

[McGruff]

Based upon what I heard on F&Fs the AM

Just Say NO!

[Gaffer]

I don't give a rat's a$$ what the CATO institute thinks about it.

I, along with hundreds of thousands of other Republican and Conservative votes here in Georgia put Saxby Chambliss back in office to STOP OBAMA, PERIOD!.

Chambliss has failed on his backstabbing/redemption McCain/Bush Illegal Alien Amnesty, AND he has failed us in joining this group.

I sent him an email last night unleashing holy hell on him. Budget initiations are the House's purview, not his Senate. Additionally, if it were his business, he's collaborating and pandering to Democrats and moderates.

I ended up telling him that I hope God lets me live long enough to vote against him - even at the unpleasant prospect of voting for a damned Democrat.

[MinuteGal]

Isn't it amazing that every time a crisis with a time-limit comes up there pops up a bipartisan "gang" at the last minute as if by magic?

This new "deal" the gang is offering immediately caught the approval of the media, the RINOS, even Obama himself....though none of them know all what's in it yet.

Therefore, I figure that when all these geniuses are for it, it means it's bad news.

And, we must remember the immortal words of Nancy Pelosi concerning ObamaCare, bad bills must be passed first so we can find out what's in them.

See my tag line.

Leni

[Eagle of Liberty]

Well I like the good part, but the reality is that as much as we need tax reform, spending reform is even more urgent. A turd with whipped cream and a cherry on top is still a turd.

I also don't mind giving up a little in the tax reform side, but like everything else this and past Congresses do, it is all in THEIR best interest? So, they will take away the mortgage interest deduction, will allow for all of the other deductions and "credits" (another term for sharing the wealth), and will STILL not spend any less or make any meaningful reforms in the economic-strangling entitlement programs. What a useless waste of space our Senate is.

Boehner will be done if he declares this Senate deal as the "backup plan" he is now announcing in the media.

[Eagle of Liberty]

Also, why can’t ANY Dems just act in a responsible way, write bills to cover one topic and sign them? Like the AMT. Would be a simple bill. Repeal the AMT. Take the vote. It was bad when it was concocted, they KNOW that it is about to affect people it was never intended to affect and they still need to tie this in with other things. Sickening.

[Georgia Girl 2]

It does not suprise me. GA RINO senator Shifty er I mean Saxby Chambliss never saw a Liberal piece of legislation he didn’t like. The guy should be required to change his political affilliation to Democrat. We are going to get rid of that POS next go around.

[comebacknewt]

Without entitlement reform, it is worthless.

[Arm_Bears]

What do you call the Gang of Six Swinging from the end of ropes?

A good start.

[Free Vulcan]

Because having grown up in a Dem controlled county that has had 30 years of bad economy, what I can tell you is Dems don’t care if they ride it into the ground, as long as they are in control when it all crashes and burns.

[Don Corleone]

The “Keating 5” plus one..or maybe two now.

[Iron Munro]

“The Gang Of Six With Three Useful RINO Idiots”

Their main product is to provide cover for Obama.
They are helping the media portray house repuhlicans as the extremists and to build Obama up as the moderate.

They are stabbing republicans and conservatives in the back.

[lonevoice]

I can’t imagine why Mike Crapo is committing political suicide by being a part of this, singing Kumbaya with the likes of Dick Durbin, and severely undermining the efforts of conservative House members. He needs to hear from his constituents. Here’s the URL to send him an email:

http://crapo.senate.gov/contact/email.cfm