Wednesday, July 20, 2011

Comprehensive Debt Commission Report Still Being Ignored

Despite being handed a comprehensive and impartial template just seven months ago, somehow Congress still can't agree on a plan to shrink the deficit.

Last December, the president's bipartisan debt commission (aka, The National Commission on Fiscal Responsibility and Reform) issued a detailed report titled, "The Moment of Truth."

The 10 Democrats and eight Republicans on the 18-member commission called for $2 trillion in spending cuts and $1 trillion in tax increases, plus recommended a series of long term deficit cutting measures that would cumulatively:

• Achieve nearly $4 trillion in deficit reduction through 2020, more than any effort in the nation’s history.

• Reduce the deficit to 2.3% of GDP by 2015 (2.4% excluding Social Security reform), exceeding President’s goal of primary balance (about 3% of GDP).

• Sharply reduce tax rates, abolish the AMT, and cut backdoor spending in the tax code.

• Cap revenue at 21% of GDP and get spending below 22% and eventually to 21%.

• Ensure lasting Social Security solvency, prevent the projected 22% cuts to come in 2037, reduce elderly poverty, and distribute the burden fairly.

• Stabilize debt by 2014 and reduce debt to 60% of GDP by 2023 and 40% by 2035.

In total, these measures would:

Cut hundreds of billions from discretionary spending each year over the next decade; institute comprehensive tax reform that would "sharply reduce rates, broaden the tax base, simplify the tax code and reduce the many 'tax expenditures' — another way of spending through the tax code"; contain Medicare costs through a variety of measures; cut agricultural subsidies; modernize the military and civil service retirement systems; and ensure the long term solvency of the Social Security System.

The plan calls for, "Holding spending in 2012 equal to or lower than spending in 2011, and returning spending to pre- crisis 2008 levels in real terms in 2013." Then "limiting future spending growth to half the projected inflation rate through 2020."

The report firmly states, "Every aspect of the discretionary budget must be scrutinized, no agency can be off limits, and no program that spends too much or achieves too little can be spared."

"One of the Commission’s guiding principles is that everything must be on the table," including both security and non-security spending, the report reads.

All security spending, which constitutes about two-thirds of the discretionary budget, would be on the table — including nuclear weapons, homeland security, veterans, and international affairs.

The remaining third of the discretionary budget, which is dedicated to non-security programs, would also be on the table — including education, housing, law enforcement, research, public health, culture, poverty reduction, and other programs.

The report is loaded with specifics for eliminating inefficient, unproductive spending and for consolidating duplicative federal programs. It also calls for the elimination of all federal earmarks.

Also recommended is the elimination of all income tax expenditures and a simplification of the tax code. Closing hundreds of loopholes would allow cuts in overall tax rates.

Eliminating most deductions "could reduce income tax rates to as low as 8%, 14%, and 23%," said the Commission.

Co-commissioner Erskine Bowles emphasizes that tax expenditures amount to a trillion dollars a year. That's substantial.

The corporate tax code would also be reformed, says the report, with the elimination of all tax expenditures and subsidies.

The Commission goes on to warn that, "Federal health care spending represents our single largest fiscal challenge over the long-run. As the baby boomers retire and overall health care costs continue to grow faster than the economy, federal health spending threatens to balloon."

With that reality in mind, the commission calls for numerous reforms to federal healthcare spending to slow the growth of costs and ensure long term fiscal survival.

In total, the commission's report is quite detailed and full of solutions to some very tough problems. There will be much pain, and it will be spread through much of our society. The Commission calls it "shared sacrifice."

The reality is that there are no painless solutions due to the depth of problems this nation faces.

The glaring fault in the report was the omission of a tax on the financial industry, as recommended by the IMF. Such a tax would have been a much needed source of additional revenues and may have acted as a brake on speculation.

Despite all the specifics, this plan has largely been ignored in Washington as the politicians fight, bicker and cling to their ideological convictions.

Currently, there is even discussion about additional blue-ribbon panels, with more suggestions to be overlooked. It's as if the politicians actually believe that some other commission will give them easy, pain-free solutions to the mess they and their forebears have gotten us into.

For example, the Reid-McConnell plan proposed in the Senate would cut a mere $1.5 trillion in spending over 10 years. That's the size of this year's deficit. The plan would also set up a new congressional panel to explore ways to reduce the debt.

That's just what we don't need; yet another debt commission to ignore — just like the last one.

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