News & Politics

Preliminary Deficit Recommendations: an Opening Gambit to Make The Coming Assault on Our Economic Security Seem Palatable

Recent leaks are intended to lay the groundwork for the Commission’s budget slashing report.

On Wednesday, Alan Simpson and Erskine Bowles, co-chairs of Obama’s deficit reduction commission, released their own recommendations for balancing the budget. It’s being treated as a very serious proposal by much of the corporate media, but it is in fact deeply unserious -- it’s a profoundly regressive, unrealistic set of proposals that wouldn’t get the support of 14 of the commission’s 18 members -- required to spur Congressional action -- much less enough votes to pass on the Hill.

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It should be seen for what it is: a opening gambit in a campaign to shift yet more of the risks of a modern capitalist society off the shoulders of corporations and the highest-earners and on to working families. The chairmen's proposals are intended to lay the groundwork for the Commission’s report, due before December 1, by making them seem reasonable in comparison. It’s all Kabuki theater, but with a nefarious end.

As Dan Froomkin wrote on the Huffington Post, the Simpson-Bowles plan “would have devastating effects on the government and its ability to help the most vulnerable in our society, and it would put the squeeze on the middle class, veterans, the elderly and the sick - all in the name of an abstract goal that ultimately only a bond-trader could love.”

The co-chairs spin their plan as a grand compromise -- they say there’s something in there for everyone to love, and something for everyone to hate. That, supposedly, will insulate law-makers politically. Alan Simpson told reporters that they’d “harpooned every whale.” But the reality is that the recommendations are a collection of “third rail” issues -- everyone will find something in it that is unacceptably odious, that crosses a red line in the sand.

From its inception, the commission skewed to the right, stacked with conservative deficit hawks, and the chairs’ proposals reflect that composition. It raises taxes on gas, cuts Social Security benefits for current as well as future retirees -- and introduces means-testing that would result in deeper cuts for all but the poorest 20 percent of workers -- makes our nation’s veterans pick up part of the tab for their health-care, eliminates schools for active service-members’ kids and would kill off the most effective anti-poverty measures to come along in years, the Earned Income Tax Credit and the child tax credit.

It’d be brutal on the middle class, eliminating the home mortgage deduction and the tax write-off that companies can claim for picking up their workers’ health-care costs. There are valid arguments to be made for killing the mortgage deduction, but any member of Congress who voted to do so would be looking for another job after their next campaign, and they know it.

All of this would inflict great pain, and while it might help reduce the deficit, it would also pay for very deep tax cuts for the highest earners -- dropping their top rate by 34 percent -- and on corporate taxes, which would fall by 26 percent. That’s where the big dollars are, and those cuts, rather than trimming the deficit, appear to be the primary effect. This is supposed to be about deficit reduction, yet according to the Congressional Budget Office, if the far more modest Bush tax cuts, skewed towards those same high-flyers, are renewed, they’d represent the single greatest contributor to the deficit over the next 10 years.

Some measures are also wildly unrealistic -- a deficit reduction pipedream. The clearest example is the chairs’ assumption that future increases in federal health-care spending could be “held” to one percent of Gross Domestic Product. They don’t say how they’ll do it, exactly, and a White House  spokesman insisted this week that the figure was a “guideline,” not a hard cap.

Again, the commission chairs said they’d “harpooned every whale,” but there’s no discussion in the report of the potential for additional revenues to be generated by progressive proposals like making polluters pay for carbon emissions or levying a small transaction tax on Wall Street to curb the “speculation economy.”

But even if there were, the proposal, echoing GOP Rep Paul Ryan’s infamous “roadmap,” would put a hard cap on federal spending of 21 percent of GDP. That’s been around the range of spending for the last 40 years, but as the Center for Budget and Policy Priorities notes, capping it at that level fails “to take account of fundamental changes in society and government — the aging of the population, substantial increases in health care costs, and new federal responsibilities in areas such as homeland security, education, and prescription drug coverage for seniors.” Those factors, CPBB concludes,  “make the expenditure levels of several decades ago inapplicable today.” That limit would mean deep and unspecified cuts in the future, locked in by stealth today.

The proposals offer a few bones for centrists and progressives, taxing investment gains as income, making a small dent in our massive “defense” budget and eliminating a few agricultural subsidies (most of which end up in the pockets of large agribusinesses). 

But the big deal-breaker for the Right is simply that passing any bipartisan deficit reduction plan would give Obama a big win on one of their primary campaign issues in 2012, and as Senate Majority leader Mitch McConnell made clear in a speech last week, the GOP’s primary goal is not to legislate, but to defeat Obama in 2012.

This is the nuts and bolts of the chairs’ plan, an unserious proposal intended to inoculate us against the very serious assault on working Americans’ economic security likely to come from the commission as a whole -- to make it appear more moderate and less brutal in comparison.

The real fight is to follow, assuming that 14 of the 18 commissioners agree on a set of recommendations (which is no sure thing). Stay tuned -- your family’s economic future may hang in the balance.