The Fiscal Commission’s Co-Chairs’ Plan

The private deliberations of the fiscal commission must be something quite interesting to generate the early release of a blueprint like this by the panel’s co-chairmen.

The blueprint has five main elements:

  1. Reduce discretionary expenditures by $200 billion a year from the Pentagon and other federal agencies
  2. Tax reform — broadening the base and lowering the rates (again)
  3. Cost-cutting in Medicare
  4. Reduced farm subsidies and lower benefits for civil and military retirement
  5. Social security reform — phase in higher maximum taxable earnings, lower replacement rates at higher incomes, and higher retirement ages; add in protections for low-income workers and a hardship exemption at age 62

Here are some reactions from budget observers reported in The Washington Post:

“A White House commission has put out a credible plan to eliminate the deficit and debt. This has changed the rules of the game and, for the first time, things are serious,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, who hailed the blueprint as “a breakthrough.”

“After this,” she said, “the debate simply cannot go back to silly games where people pretend that eliminating earmarks will solve the problem.”

I hope Maya is correct.  What the blueprint is doing is showing tangibly the scale of the changes that need to be made in order to achieve deficit reduction goals that are serious but not extremely ambitious.  I think people understand that.  But that hasn’t motivated them to act.  Consider this reaction, from outgoing Senator Judd Gregg:

Republicans were equally leery of the proposal. Asked whether he could support it, Sen. Judd Gregg (N.H.), the senior Republican on the Senate Budget Committee, said no. “This is the starting point. It shows the size of the problem, which is massive,” Gregg said. “This is the draft for discussion purposes to get us all thinking.”

I hope that while they are all thinking, they dont’ think about weakening the blueprint.  Of course, they may not have to face quite that challenge.  It is not even clear that the whole commission will support the co-chairmen’s blueprint.

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About Andrew Samwick 89 Articles

Affiliation: Dartmouth College

Andrew Samwick is a professor of economics and Director of the Nelson A. Rockefeller Center at Dartmouth College in Hanover, New Hampshire.

He is most widely known for his work on the economics of retirement, and his scholarly work has covered a range of topics, including pensions, saving, taxation, portfolio choice, and executive compensation.

In July 2003, Samwick joined the staff of the President's Council of Economic Advisers, serving for a year as its chief economist and helping to direct the work of about 20 economists in support of the three Presidential appointees on the Council.

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1 Comment on The Fiscal Commission’s Co-Chairs’ Plan

  1. These two Co-Chairs have not respected the President’s Executive Order which clearly delineated their responsibilities to include:

    1) To reach bi-partisan consensus

    2) The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. This result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers. The magnitude and timing of the policy measures necessary to achieve this goal are subject to considerable uncertainty and will depend on the evolution of the economy. In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.

    3) No later than December 1, 2010, the Commission shall vote on the approval of a final report containing a set of recommendations to achieve the mission set forth in section 4 of this order.

    4)The issuance of a final report of the Commission shall require the approval of not less than 14 of the 18 members of the Commission.

    The Executive Order, link below, does not request that media/the public see a rough draft before Commission members, or ask for Social Security to be rewritten, but apparently Senator Alan Simpson has allowed his lifelong obsession (and Rep Paul Ryan’s Roadmap for America) with Social Security to overstep the boundaries laid out by the President. His recommendations are unlikely to get bi-partisan consensus and are, therefore, somewhat a waste of media and the public’s time.

    The draft as a whole is lopsided. The Co-Chairs get into specifics which lean heavily on the middleclass and lower-income taxpayers, while leaving billions of corporate tax favors and subsidies on the table – only a meagre $3B Agriculture bill cut meriting specific comment and nothing re the considerable volume of oil/energy perks & subsidies deserving repeal, or the Cap & Trade Bill blocked by Republicans, which CBO declared would reduce the deficit by $19B and create jobs. Targeting $80 billion in tax savings by 2015 is alarmingly low – $699 billion in corporate tax liability/federal tax revenue was given away in corporate tax breaks from 2002 thru 2009, and $37-$40 billion estimated corporate tax revenues lost annually to offhsore tax havens & loopholes. Plus, allowing Bush tax cuts for the 1-2% richest Americans to sunset would generate $300 billion by 2015 and increasing capital gains would be a factor. The deficit-reducing potential of sound tax reform could easily produce $1 trillion by 2015.

    With that in mind, seems petty to go after interest on college loans, especially since during the last decade USA fell behind Canada, Russia, South Korea, China and some of Europe for college graduations & education attainment; to carry American enterprise forward, we really need to encourage more qualified low-income kids to go to college, not less. However, the President’s Health Care Reform Bill does get truthful recognition for its fiscal responsibility towards controlling health care costs & deficit reduction, and that’s refreshing. ESP+Integrated+List&utm_campaign=2ea6044c9f-T

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