Dec 1, 2010
President Obama’s deficit commission, headed by Alan Simpson and Erskine Bowles, appears to have failed.
Its mission was to arrive at consensus on a plan to balance the budget by 2015, agreeable to 14 of its 18 members, and to do it by December 1. The commission’s chairs have already blown the deadline, pushing back a final vote to Friday, and it seems unlikely they’ll succeed in rounding up the required votes.
Some reports have focused on those shortfalls – an AP report leads with “divisions remain” – but others have glossed them over. An LA Times report inaccurately says “the bipartisan debt commission issued its final report on Wednesday.” The Wall Street Journal says “the commission’s vote is largely symbolic.”
A CNN report posted at Chicago Breaking News is a little confused, saying the commission “released its final report” today and “plans to vote on Friday.”
Huffington Post emphasizes the tax cuts for the wealthy contained in the Simpson-Bowles report – the top income tax rate would be reduced from 35 percent (scheduled to rise to 39.6 percent next year) to as low as 23 percent, and corporate tax rates would be reduced as much as 9 percent. A deficit reduction plan that cuts taxes?
Cuts to Social Security
Isaiah Poole of the Campaign for America’s Future points out the the report recommends cuts in Social Security benefits for young people entering the workforce today that will range from 17 to 34 percent, and that raising the retirement age would constitute another 13 percent cut – and an additional hardship to low-income workers and those in physically demanding jobs.
Some 53 million retirees, survivors, and disabled currently receive an average annual Social Security benefit of $14,000. Many near-retirees seen their savings swallowed up in the current crisis. In addition, Social Security’s trust fund is not part of the federal budget.
Senator Dick Durbin and U.S. Representative Jan Schakowsky are members of the commission. Schakowsky issued her own proposal which cut defense spending, cut health costs with a public option, raised corporate taxes and equalized investment and earned income tax rates. (Durbin hasn’t taken a public position on the co-chair’s proposal, according to CAF, though NPR reports he voiced support for raising the retirement age.)
Yesterday Schakowsky told Poole that the commission chairs were “moving the goal posts” (his words) by shopping their plan around looking for at least ten votes — a majority, if not the margin mandated by Obama’s executive order. So far they are falling short of that goal too.
At Working In These Times, David Moberg reports on two alternative deficit plans put forward by Institute for America’s Future (pdf) and by a group including the labor-backed Economic Policy Institute (pdf).
The IAF plan is endorsed by over 300 economists and scores of labor and community leaders. Its endorsers include Lynda DeLaforgue of Citizen Action Illinois as well as economists Ron Baiman of the Center for Tax and Budget Accountability, Joe Persky of UIC, and other members of the Chicago Political Economy Group.
That plan emphasizes “the grave danger that the still-fragile economic recovery will be undercut by austerity economics.” It distinguishes short-term deficits caused by the recession (on top of wars and tax cuts) and long-term issues due not to an “entitlement crisis” but to an unsustainable health care system.
Pointing to previous periods of prosperity and balanced budgets, the plan calls for reducing short-term deficits by growing the economy and creating jobs, in part by addressing a huge “public investment deficit.”
Financial transaction tax
One big revenue proposal in both alternative plans is a financial transactions tax, an idea CPEG has promoted (see their working paper and their fact sheet on the concept). According to CPEG, such a tax – similar to the long-standing stamp tax on stock trades in Britain – could generate $500 billion a year or more with no impact on productive economic activity. (The two new plans project smaller revenues from the tax.)
A securities transfer tax was backed by 61 percent of participants at the America Speaks series of town hall meetings in June focused on the deficit, but was apparently not considered by Simpson and Bowles.
The alternative plans “demonstrate how it is possible to balance the budget with rising government investment, faster growth, more jobs, and create the basis of a new, more sustainable economy,” Moberg writes.