I've been critical of critics of the chairmen's deficit reduction plan, so I wanted to highlight this thoughtful and persuasive (and critical!) analysis from the liberal Center for Budget and Policy Priorities.
Below are their six preferred changes. I especially agree with recommendations 1-3. The revenue ceiling of 21 percent is unhelpful, the 2-1 spending cut to tax increase ratio is unbalanced, and I would hope the cuts to Social Security could be less severe for middle-income recipients.
On the topic of Social Security CBPP created a graph highlighting benefit changes across the spectrum (see right). They report that the median recipient of Social Security checks will see a 8 percent cut in scheduled benefits in 2030 and a 15 percent cut in 2050. Those are small cuts, to be sure, but they amount to hundreds of dollars for middle-income seniors, and with cost-sharing increasing in Medicare, we should be mindful of not burdening average seniors with too much extra spending and too few benefits.
- Relax the revenue and expenditure targets. The proposal to cap revenues at an arbitrary level of 21 percent of GDP is highly ill-advised in light of the aging of the population, continued increases in health care costs, and the fact that the United States could face major unforeseen challenges in the future -- at home or abroad -- that require expenditures that cannot be anticipated today. Similarly, limiting expenditures to 21 percent of GDP in future decades will be impossible without draconian and unsound cutbacks in essential areas.
- Address the imbalance between budget cuts and revenue increases. The highly problematic features in the plan stem largely from an effort to extract two-thirds of the deficit reduction from budget cuts and only one-third from revenues.
- Address the overly deep benefit cuts on Social Security beneficiaries of modest means. Here, too, the problems stem from excessive reliance on benefit cuts and inadequate contributions from revenues. It is not possible to take two-thirds of the Social Security savings from benefit cuts --rising to four-fifths by the 75th year -- without doing serious damage to people who can't afford to absorb those cuts.
- Scale back excessive health care cuts, especially those that could harm vulnerable people or endanger health reform. Policymakers should also ensure that any health care expenditure target for future decades is set on a per-beneficiary basis, with adjustment for demographic changes in the mix of beneficiaries.
- Moderate the depth of the domestic discretionary cuts, particularly with an eye to ensuring that the federal government can function effectively. Cuts that would impair federal agencies' ability to perform their assigned tasks should be avoided.
- Avoid instituting cuts 10½ months from now (i.e., in fiscal year 2012) in order to avoid impeding the fragile economic recovery. The cuts should not begin before fiscal year 2013 to give the economy more time to get a point where it can safely absorb them.
Read the full story at CBPP.
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