November 12, 2010, 6:34 pm
A Deficit of Respect
By TOBIN HARSHAW
Here’s this week’s Beltway Best-Seller: Read it while it’s hot.
Weighing in at 50 pages in very large type (all the better for you retirees to see how your Social Security benefits are going to change), the draft report from Erskine Bowles and Alan Simpson, the chairmen of President Obama’s bipartisan deficit-reduction panel, has brought out the inner wonk of bloggers everywhere. It has also, we are told, brought out bipartisan ire.
The Bowles-Simpson commission report got measured praise from the right, a full dose of scorn from the left.
.“Among Democrats, liberals are in near revolt against the White House over the issue, even as substantive and political forces push Mr. Obama to attack chronic deficits in a serious way,” reports The Times’s Jackie Calmes. “At the same time, Republicans face intense pressure from their conservative base and the Tea Party movement to reject any deal that includes tax increases, leaving their leaders with little room to maneuver in any negotiation and at risk of being blamed by voters for not doing their part.”
Certainly, people on both sides of the political spectrum are riled up about the recommendations, but that doesn’t mean they are equally disgruntled. While Grover Norquist’s Americans for Tax Reform warns that “Support for the commission chair plan would be a violation of the Taxpayer Protection Pledge, which over 235 congressmen and 41 senators have made to their constituents,” the Wall Street Journal’s editorial gave it a mixed review and some conservative bloggers are skeptical of the whole idea, the reception from the right has been largely warm. When National Review, Ross Douthat, Greg Mankiw, Commentary and former Senator Fred Thompson all sing the praises of a “bipartisan” report, one can hardly claim there’s been a conservative backlash.
Liberals, on the other hand, have for the most part been scathingly negative. Here’s the economist Brad DeLong:
Well, two things tie for the worst thing about the president’s deficit-reduction commission. The first is Barack Obama’s decision to take a long-time budget arsonist like Alan Simpson — somebody who never found a budget-busting Republican initiative he could not vote for or a deficit-reducing Democratic initiative he could not vote against — and give him a fire chief’s hat. As a result, Alan Simpson’s ideas are now not Alan Simpson’s ideas but instead the “recommendation[s][ from the president's debt commission."
The second is the capping of federal health spending growth at GDP+1%/year. That means that, adjusting the aging of the population, the government is supposed to spend a smaller share of incomes on health care as each year passes. That would require not just the repeal of the Affordable Care Act but the elimination of Medicare as we know it.
The best idea... is it cutting schools for soldiers' kids? Or is it paying for reductions in the top income tax rate by cutting the Earned Income Tax Credit so that there are once again lots of families in America where a parent works full time and yet the kids are still in poverty?
Kevin Drum at Mother Jones:
Any serious long-term deficit plan will spend about 1% of its time on the discretionary budget, 1% on Social Security, and 98% on healthcare. Any proposal that doesn’t maintain approximately that ratio shouldn’t be considered serious. The Simpson-Bowles plan, conversely, goes into loving detail about cuts to the discretionary budget and Social Security but turns suddenly vague and cramped when it gets to Medicare. That’s not serious.
There are other reasons the Simpson-Bowles plan isn’t serious. Capping revenue at 21% of GDP, for example. The plain fact is that over the next few decades Social Security will need a little more money and healthcare will need a lot more. That will be true even if we implement the greatest healthcare cost containment plan in the world. Pretending that we can nonetheless cap revenues at 2000 levels isn’t serious.
And their tax proposal? As part of a deficit reduction plan they want to cut taxes on the rich and make the federal tax system more regressive? That’s not serious either.
Bottom line: this document isn’t really aimed at deficit reduction. It’s aimed at keeping government small. There’s nothing wrong with that if you’re a conservative think tank and that’s what you’re dedicated to selling. But it should be called by its right name. This document is a paean to cutting the federal government, not cutting the federal deficit.
And The Times’s Paul Krugman:
What the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.
It’s no mystery what has happened on the deficit commission: as so often happens in modern Washington, a process meant to deal with real problems has been hijacked on behalf of an ideological agenda. Under the guise of facing our fiscal problems, Mr. Bowles and Mr. Simpson are trying to smuggle in the same old, same old — tax cuts for the rich and erosion of the social safety net.
Can anything be salvaged from this wreck? I doubt it. The deficit commission should be told to fold its tents and go away.
ThinkProgress’s Matthew Yglesias:
The flipside of the Simpson-Bowles document’s unsound aggregate cap on revenue is that they were very uncreative in their exploration of revenue options. For example, what about a tax on greenhouse gas emissions? The mere fact that the conservative movement is currently engaged in a massive fit of pretending that greenhouse gas emissions aren’t a problem doesn’t change the fact that greenhouse gas emissions are, in fact, a problem. Taxing them would reduce the quantity of greenhouse gas emissions and help mitigate the problem. It also creates revenue.
If Alan Simpson’s reason for thinking a tax on greenhouse gas emissions is a bad idea is that Simpson is a nutcase who doesn’t believe that greenhouse gas emissions contribute to climate change, then Erskine Bowles should have made him write that on a piece of paper. Then we could look at the proposal and know it’s co-written by a nutcase. It wouldn’t surprise me. There are a lot of nutcases in Washington life. But it’s important to know these things.
The economist Dean Baker, writing at The New Republic:
Given the state of the economy, the co-chairs’ report reads like a document from Mars. Just to remind those of us who earn their living on planet earth (outside of Wall Street), the country is suffering from 9.6 percent unemployment. More than 25 million people are unemployed, underemployed, or have given up looking for work altogether. Tens of millions of people are underwater in their mortgage and millions face the prospect of losing their home to foreclosure.
We did not get here because of government deficits, contrary to what Mr. Bowles seemed to suggest at the co-chairs’ press conference today. We got here because of the bursting of an $8 trillion housing bubble. This bubble was fueled by the reckless and possibly unlawful practices of the Wall Street banks, like Morgan Stanley, the bank on whose board Mr. Bowles sits.
So, is the left unanimous? No, if you look around you can find plenty of nuance. Here’s Jonathan Chait at TNR, taking issue with Baker: “We have a short-term economic crisis that requires higher deficit spending to boost demand. And we have a long-term deficit crisis that requires, well, lower deficit spending. I wish there was legislation to address both problems. Indeed, I think the structural deficit ranks well below both the economic crisis and climate change. But that isn’t a reason to ignore it.”
Chait also objects to Drum’s statement that health care is the only thing that matters: “We did just pass a major health care reform law that is going to go pretty far in holding down the growth of health care costs. But the Affordable Care Act is not going to solve the deficit by itself. You also need some other budget changes. The commission plan builds upon the cost savings of the PPACA, but focuses its energies elsewhere. First we did the health care piece, shoving as much cost saving through the system as possible. Now we can turn mainly to the non-health care piece.”
His colleague Jonathan Cohn is likewise willing to take a deep breath and keep an even temper:
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.
The plan also calls for the retirement age to be gradually raised to 69, which Dean Baker, in a post at Boston Review, finds odious: “The Simpson-Bowles approach involves raising the retirement age, cutting benefits for middle- and higher-income workers, and reducing the annual cost-of-living adjustment so that retirees would no longer see their benefits rise in step with the consumer price index (CPI). Raising the retirement age seems more than a bit unfair, since most of the gains in life expectancy have been going to workers in the top half of the income distribution. Workers in the bottom half have seen minimal gains in life expectancy over the last three decades.” (Krugman feels that the idea is “basically saying that janitors should be forced to work longer because these days corporate lawyers live to a ripe old age.”)
Derek Thompson of the Atlantic thinks such arguments are “cherry-picking”:
– First, more than 40 percent of the Social Security fix comes from taxing higher income rather than from reducing benefits.
– Second, this plan creates a new minimum benefit for low-income earners at 125% of the poverty line, which grows over time to 200% of the poverty line to ensure that for even the worst-off, Social Security fulfills its fundamental mission to reduce poverty.
– Third, it directs the Social Security Administration to assist the early retirement of physical labor workers. We don’t know what that means yet, but ideally it would protect working class families from draconian denials of benefits.
–Fourth, the retirement age won’t reach 69 until 2075. That’s six decades from now. I will be 90 years old. So we shouldn’t talk about the age 69 as though it’s a rule for today’s economy. Compare the late 1940s economy and today, and that’s kind of time frame we’re talking about.
The time frame, of course, is key here — and I don’t just mean the scope of the reform plan. As we saw with health care reform, any political reform like this is going to develop slowly in Congress and the national mind, and this is a far bigger whale than health care. (As The Washington Post’s Ezra Klein helpfully notes, the report, which is technically called a chairman’s mark, is “a discussion draft of a proposal to balance the budget authored by two people who don’t have a vote in either the House or the Senate.”) Unless liberals succeed in strangling Bowles-Simpson in its crib, they’re going to have to play a long political game to reshape it to their liking or force it onto a slow boat to oblivion. They have serious criticisms worthy of sincere debate. Yet several have begun the battle with ad hominem attacks on the commission’s chairmen as unserious, ill-intentioned, mentally unbalanced, avatars of the “money party.” How far do we think that’s likely to get them?
