Deficit Panel: Cut Taxes, Increase Taxes, Slash Spending

Last February President Obama called for a Deficit Reduction Commission to come up with a plan to reduce the deficit and balance the budget. Since that is Congress’s job, I felt Obama’s call for such a panel to come up with a way to reduce the very problem he worsened by historic measures was laughable, but maybe I was being too critical. An 18-member panel was summoned to take on the monumental task of solving the single-most problem that faces our nation today. The December 1st deadline is fast approaching and a draft report has been made public detailing the proposals so far.

First let me say it is a pleasure, albeit a small one in this case, to see the government actually entertaining ideas to reduce deficits and balance the budget. Some of the ideas that have been made public today are a good start, while others will likely only push the problem towards future generations.

Erskine Bowles, co-chairman of the panel, made a draft copy of the proposal public. The draft outlines ideas to reduce $3.8 trillion of deficit spending from 2012 to 2020. Apparently, the panel decided starting it next year was too risky. The savings comes primarily from a hybrid of income tax reductions, the removal of some tax breaks, and spending cuts including Social Security, Medicare, and Medicaid. According to Bowles, 75 percent of the savings comes from spending cuts and 25 percent comes from tax increases.

Discretionary spending and mandatory spending were both addressed in the draft. Reports indicate that $1.4 trillion in discretionary spending were cut and $733 billion in mandatory spending, including Social Security, Medicare, and Medicaid.

Currently there are six income tax brackets. According to Bloomberg, the commission is proposing an option that reduces the tax brackets down to three: 8 percent, 14 percent, and 23 percent. Other sources stated the same percentages, but in the copy of the draft I obtained I was only able to find a proposal of 15 percent, 25 percent, and 35 percent. The corporate income tax was suggested to be reduced from 35 percent to 26 percent.

The draft includes reducing or eliminating most tax breaks, including interest on mortgages and student loans. Bowles says the elimination of tax breaks makes up about 25 percent of the overall savings.

A $0.15 tax increase on gasoline starting in 2013 is suggested to fund transportation spending

To reduce the governments health care costs, suggestions have been made to pay doctors and lawyers less while improving efficiency in Medicare and Medicaid. Some costs will be passed down to the individual to encourage them to make proper health choices.

Other various spending cuts are detailed, including reducing farm subsidies by $3 billion per year.

The tax cuts proposal is definitely a step in the right direction (the rates that the media is stating), although I did not see what incomes would fall in which brackets. While I personally believe that the federal income tax should be repealed and replaced with an excise tax that the federal government relied on for most of the countries existence, I would like to see a flat tax option seriously considered. Not only is it the fairest income tax plan, but it allows the market to adjust to a stable tax system free of changes in political winds.

Reductions or eliminations of tax breaks should be staunchly opposed! You can bet that there will be a time in the future that Congress will decide to jack up the income tax rates, but do not think they will remember to reestablish the tax breaks.

One of the two key items that jumped out at me in the spending cuts section was the authority given to the FCC to auction radio spectrum licenses. I am not sure how that will reduce spending, but I can think of some reasons why that may lead to some conflicts with the 1st Amendment in the future. Is this a backdoor way to implement the Fairness Doctrine?

The second thing that jumped out at me was the provisions suggested if the government’s expectations for health care costs grow higher than expected. One of the suggestions stated in that case is to implement an all out public option. Did they not get the news about the election results?

This entire plan can be thrown away by Congress or the President in the case of “low economic growth, unanticipated military conflict, or major disaster.” I’d like some definitions of those items, but dare I ask why “low economy growth” was included when this very panel is being drafted in a period of low economic growth. Are they considering that the ideas they are being asked to come up with do not even apply to the economic period we are in right now?

As I stated before, it is somewhat nice to see the federal government looking at ways to reduce the deficit. Unfortunately, due to its history of disregarding such measures I am not holding my breath on much of this actually being implemented anytime soon.

Tax cuts are definitely a great place to start, but they absolutely must follow deep spending cuts. And anything short of a fair tax plan should not include tax break reductions.

The reforms suggested for Social Security, Medicare and Medicaid are also a good place to start. However, they miss the fundamental flaw with the whole problem. They are not simply sustainable and are soaking up the budget. Even with the reforms mentioned there is no proof that those problems will not reemerge, perhaps being even worse, decades from now. They need to be phased out or privatized in a way that provides benefits for those who have paid into the system most of their lives.

Overall, this is just a draft of the proposal. Some panel members have already stated that they are happy with some ideas and staunchly opposed to others. It shouldn’t be a surprise that Democrats are opposing spending cuts while Republicans are opposing tax increases. That being said, you can bet that the final copy will end up looking much different than the draft.

Increasing our taxes = “savings” for the government??

Letting us keep our incomes is a governmen “cost”??

The less of our income the government has to let us keep, the better for government “revenues”? Govt revenenues which of COURSE the liberal dems and RINOs intend to use to reduce the deficit (cough cough).

moooo.

Fifteen cents more for a gallon of gas so the sheeple will blame the price on the Big Oil companies being greedy.

Oil companies would love to make that much profit on every gallon of gas and now the feds and states will make even more on the backs of oil companies and service stations as they become tax collectors for the government.

What a bunch of effing cowards!

Raise taxes and shift blame!

And no drilling or new oil production to offset the tax increase.

Just keep on screwing the people who have to drive to work and deliver goods and services.

Points made are spot on...verb-age concludes it is govt money.
Too many citizens have accepted this false premise. But the grassroots which removed the Democratic leadership has not been quiet.

This is blog I created...but still a work in progress, comments encouraged.

http://anationatrisk.blogspot.com/

What was disturbing about the Debt Comm. draft was their inability to offer new solutions. Two examples I submitted to op-ed in Raleigh, NC paper...

I went through the fifty page draft and found some good and bad recommendations. But, what stood out the most was the lack of new or creative alternatives to current
mechanisms which have been driving the national bankruptcy train.

Two which stand out are the reliance of COLAs to provide salary increases to Federal employees, and the payroll tax to bring in the revenue to provide Social Security
benefits. Both need to be replaced.

First, Federal workers should be paid as most Americans are paid, on merit. This would reward the superior worker, provide an incentive to excel, and limit the growth
of labor to only the most deserving.

Additionally, the Federal workforce should not be organized. This is a costly impediment which has been recognized by the most successful private sector companies who are not. Note, less than 10% of the private workforce is organized while 30% of Federal workers are.

Secondly, the payroll tax has proven to be insufficient in providing the revenue to support Social Security obligations, which is confirmed each time the ceiling is raised.

The alternative is to eliminate the payroll tax and calculate the percentage of increase required to meet the yearly $500 billion obligation (est. 1-2%). This simple change will reduce the employee cost of every business, increase the take home pay of every worker, and eliminate the income ceiling which Congress raises to counter projected shortfalls.

When Congress begins to apply creative alternatives we will be closer to getting the accelerated debt and deficit under control.

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