The federal deficit commission, a bipartisan group tasked with figuring out how to decrease the national deficit, has released a final report, aptly entitled The Moment of Truth. If the report is approved, then the commission can make official recommendations to Congress. If it’s not voted in, then Obama could still use some of these recommendations to inform his 2011 budget, which will be released early next year.
The proposals in the report, if they are implemented and work, would reduce the deficit by $4 trillion in 10 years, “more than any other effort in the nation’s history.” As the report’s own preamble states, “After all the talk about debt and deficits, it is long past time for America’s leaders to put up or shut up.”
There’s a lot in the report. Here’s what caught my eye about how the deficit commission thinks the national debt can be cut (via CNN and the report itself):
Spending and taxes should each be capped at 21% of GDP.
Cap federal health care spending at rate of economic growth + 1%. This is in addition to several other health care cost-cutting measures.
Reduce the budgets for Congress and the White House by 15 percent. Impose a three-year salary freeze on Congress. Do the same for federal employees and Defense Dept. civilians. Cut the government workforce by 10%, or 200,000 people (then worry about how to stop them from rioting). Eliminate all Congressional earmarks. Reduce federal travel, printing and vehicle budgets. Sell off excess federal real estate.
Cut agricultural subsidies (sorry, lobbyists).
Cut about $200 billion in domestic and defense spending. “The security category would include all defense spending, although for purposes of the caps we address war spending separately,” the report says. This could translate into spending a lot on war (no caps) and cutting out non-war defense spending on veterans, homeland security, and nuclear programs. There’s also a proposal to cut “redundant” weapons from the Department of Defense’s inventory–wonder who’s going to buy them?
The other 1/3 of discretionary spending has to do with housing, education, the arts, science, etc. Here’s the report’s attitude on that: “The government funds more than 44 job training programs across nine different federal agencies, at least 20 programs at 12 agencies dedicated to the study of invasive species, and 105 programs meant to encourage participation in science, technology, education, and math. Many of these programs cannot demonstrate to Congress or taxpayers they are actually accomplishing their intended purpose.” So cut ’em is the message.
Abolish Alternative Minimum Tax. Reduce or remove tax breaks. No more itemized deductions; all deductions must be standard. Consolidate entire tax system into three tax brackets; put simply: 12% for the poor, 22% for the middle class, and 28% for the rich. Turn deductible mortgage interest into a flat tax credit w/no credit for interest or equity on second homes. Turn itemized charitable giving deduction into a flat tax credit.
Increase proportion of earnings subject to payroll tax in order to fund Social Security. “…The amount of one’s earnings subject to the payroll tax would rise to $190,000 in 2020, about $22,000 higher than it would be under current law,” according to CNN.
Corporate tax rates would be no higher than 29%, with a minimum of 23%. This, I assume, is to incentivize companies to stop offshoring and making creative tax breaks. The report also says no more corporate subsidies.
Increase gas tax by 15 cents/gallon.
Make Social Security solvent by 2085. Give fewer benefits to wealthy recipients and give lower cost-of-living adjustments.
Retirement age, now 67, will increase to 68 by 2050 and 69 by 2075. Early retirement age will go up from 62 to 64 by 2075. There will be hardship exemptions and a new, welfare-like minimum benefit that isn’t below 125% of the poverty line for workers with 30 years of earnings.
Social security recipients would have their benefits “bumped up” by 5% of the average benefits paid after receiving benefits for 20 years (it’s like a bonus for getting really old).
Establish a disaster fund and tighten restrictions on emergency spending.
None of these changes would start before 2012, and the tax changes wouldn’t begin until 2013.