My take (and that of a fiscally conservative mouse) below. The basics:
Their recommendations are more or less a list of the third-rail issues of American politics, including cuts in the number of federal workers; increasing the costs of participating in veterans and military health care systems; increasing the age of Social Security eligibility; and major cuts in defense and foreign policy spending. They also encompass a range of tax system reforms that have been floated by many in Washington for years to little effect, including funding tax rates reductions by eliminating many beloved credits and deductions.
Yay! David Kurtz gives important context:
The commission's final recommendations aren't due until December 1. The commission can basically recommend whatever it wants, but if 14 of the 18 commissioners agree with the recommendations, then Congress has agreed to take them up. So that's basically the key charge of the commission co-chairs: create enough of a consensus plan that 14 commissioners can support it. Without that, the recommendations become just another report gathering dust on a shelf.
So today Bowles and Simpson unveiled their proposal to the commission in a closed meeting. To paraphrase, the reactions of commissioners leaving the meeting ranged from 'over my dead body' to 'like hell we are.' ... it appears that the co-chairs are laying down their markers to get the ball rolling on negotiating among the commissioners a series of final recommendations that will achieve a consensus. The commission has been at work now for months, but the real work will be over the next 3 weeks as they try to hammer out some kind of agreement amongst themselves. This appears to be the opening salvo in that effort.
Mankiw is happy, Krugman and DeLong are upset. The home mortgage interest deduction goes and income tax rates are 8, 14, and 23 percent. No one thinks this is the final deal. I would say evaluate this as you would a movie trailer: will it get people to take the next step of thinking about a ticket purchase? ... As a movie preview I judge this as "good enough." It basically declares that some major deductions have to be on the table and it gets us to the next step.
The co-chairmen have some interesting policy ideas for how to balance the budget, but as of yet, they've not made any discernible progress on the political deadlock preventing us from balancing the budget. And it's the deadlock, not the policy questions, that they were asked to solve.
Yes and no. This draft proposal is part of solving the political problem - and pushing these concrete proposals onto the laps of the public, the administration and the GOP is a great start.
Perhaps the most significant recommendation and one that health care economists have been making for decades is a strict cap on the amount of employer-provided health insurance expenses that are tax deductible. The ACA sets an extremely high cap that won't kick in until 2018. The proposal from the debt commission goes much further, recommending that health insurance tax exclusion be capped at the actuarial value of the standard option available to government workers in the Federal Employee Health Benefit Plan.
The idea I like is to revisit the tax break for home interest mortgage payments--a tax break that is as misguided as it is large. It gives bigger tax reductions to people with more expensive homes. And it skews government resources away from renters, who, on the whole, need more help than homeowners anyway. It's part of a strategy for tax simplification, a goal that responsible members of both parties can embrace.
The idea I don't like? It's actually a number: 21. The two chairmen recommend that, over the long term, the federal government limit both taxes and expenditures to 21 percent of the gross domestic product. I don't know what makes 21 percent a magic number. I do know that taxes and government spending reach 50 percent in Scandinavian countries. Their economies have not suffered, while their societies are more equal and their citizens have more economic security.
Of course, I love the idea of restraining government to one fifth of the economy. The question will be: why would the Tea Party oppose this? Calculated Risk:
I doubt the mortgage interest deduction will be eliminated, but maybe it could be reduced over time. Same with the exemption for health benefits. I'd prefer if they left Social Security out of this proposal completely, and just addressed the General Fund deficit. Then, after reaching agreement on the General Fund deficit reduction, they could return to Social Security in the future.
It’s worth noting that the co-chairs’ proposal actually goes beyond achieving primary fiscal balance by 2015, and that the plan is focused on spending. The action on the revenue side comes from deep cuts to tax expenditures.
The commission’s co-chairmen, former GOP Senator Alan Simpson and Clinton White House Chief of Staff Erskine Bowles, go much further than Defense Secretary Robert Gates in cutting the defense budget. Gates wants to trim out $100 billion in overhead and administrative costs over five years and put that cash back into shipbuilding, gun-buying and plane-purchasing.
But the two chairman, who released their non-binding plan this afternoon, want to put that money “to deficit reduction instead,” with an annual savings of $28 billion. And there’s much more on the chopping block: their plan calls for reducing $100 billion from the Defense Department’s non-war budget, a little less than 20 percent. War-related expenses aren’t touched.
But we get a proposal to cut a third of the forces stationed in Europe. Doug Mataconis:
Already, the knives are out on both sides of the political aisle. Jane Hamsher at FireDogLake has been calling the Debt Commission the “Cat Food Commission” for months now, while conservatives have been berating co-chairman, and long-time conservative Republican, Alan Simpson’s membership on the Commission as being a surrender on tax increases.
If we lived in a country with adult political parties, the release of the Commission’s report would serve as the beginning of a long overdue national conversation about how to get our fiscal house in order. Liberals would recognize that social spending would have to be cut, and conservatives would recognize that defense spending cuts and tax increases would have to be on the table. Instead, what we’re likely to see is more of the same political gamesmanship liberals accusing the GOP of wanting to starve Grandma, conservatives accusing liberals of just wanting to raise taxes so they can spend more. And the debt will continue to rise.
Not if more and more people get behind the proposals. And by people, I mean the tea-partiers. Are you anti-debt or anti-Obama? We shall soon find out.