Presidential Commission Weighs Deep Cuts in Tax Breaks and Spending to Help National Indebtedness

A draft proposal released Wednesday by the chairmen of President Obama’s bipartisan commission on reducing the federal debt calls for deep cuts in domestic and military spending starting in 2012, and an overhaul of the tax code to raise revenue. Those changes and others would erase nearly $4 trillion from projected deficits through 2020, the proposal says.

The plan would reduce projected Social Security benefits to most retirees in later decades ”” low-income people would get higher benefits ”” and slowly raise the retirement age for full benefits to 69 from 67, with a “hardship exemption” for people who physically cannot work past 62. And it would subject higher levels of income to payroll taxes, to ensure Social Security’s solvency for the next 75 years.

But the plan would not count any savings from Social Security toward meeting the overall deficit-reduction goal set by Mr. Obama, reflecting the chairmen’s sensitivity to liberal critics who have complained that Social Security should be fixed only for its own sake, not to balance the nation’s books.

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Posted in * Culture-Watch, * Economics, Politics, Aging / the Elderly, Budget, Economy, Health & Medicine, House of Representatives, Office of the President, Politics in General, President Barack Obama, Senate, Social Security, Taxes, The National Deficit, The U.S. Government

24 comments on “Presidential Commission Weighs Deep Cuts in Tax Breaks and Spending to Help National Indebtedness

  1. TomRightmyer says:

    A good beginning. The ratio of two dollars cut for each one of increased revenue seems reasonable – as does the restriction of Social Security revenue to benefits and funding roads from gas tax.

  2. deaconmark says:

    It’s a great start; but now watch the “rats” from both sides of the aisle fleet from this ship before it even sets sail.

  3. Capt. Father Warren says:

    The context of the comission is faulty: proposing cuts from current spending is a “red herring”.

    The standard should be: what spending would be allowed under the Constitution? What is required to fund those powers delegated to the Federal Govt? Anything beyond that is pure politics. Not to say we might not want some “political spending” but that sets a standard. Don’t let rhetoric blind us to the mess we are in.

  4. Bart Hall (Kansas, USA) says:

    For at least eight years I have proffered that we desperately need the following constitutional amendment:

    “Except in times of declared war, the federal budget of these United States shall remain in balance at a level not to exceed 17 percent of the previous three years’ average gross domestic product. In the fiscal year next after the tenth anniversary of ratification the federal budget limit shall decrease to 16 percent, and thereafter by an additional half-percent each decade until it reaches 12 and a half percent. In any year an additional 3 percent may be collected for the unique purpose of retiring existing debt.”

    We must reduce the central government to a size at which it is no longer worth fighting over.

  5. Capt. Father Warren says:

    Bart, I agree totally with what you propose except for this: where does the 17% come from? If that is inline with the Constitution then I am for it 100%.

  6. Archer_of_the_Forest says:

    No.4 Bart,

    Not that I would not support a Constitutional amendment for a balanced budget (a lot of States have them). My question would be how exactly would it possibly be enforced?

  7. John Wilkins says:

    #4 that would have worked quite well in pre-industrial USA.

    The constitution is a human document, with different strands in it. The federal government supports the general welfare. It depends, however, if you think the general welfare should be more like Somalia, or more like a Western democracy.

    Still, a commission that thinks you can balance the budget without raising taxes is irresponsible. As Krugman noted, make janitors work until 70 because Lawyers are working longer. At some point, the wealthy will have to make some sacrifices, or see the country turn into a third-world country. Not that they would mind. It’s about cheap, uneducated labor.

  8. Mark Johnson says:

    I’m glad to see them acknowledge the necessity of cutting defense spending. There can be no serious discussion of reducing debt without taking into consideration the huge amount of money we spend on defense (as our enemies attempt to bring us down with bombs in their underwear we commission a new aircraft carrier).

  9. Bart Hall (Kansas, USA) says:

    deacon — how about “consent of the governed” ? Maybe we consent to the feds nicking us for one-sixth of the total economy. The extra 3% brings it to 20%. Add in another 5% or so for state and local government and you’ve got one-quarter of everything.

    Loosely put, that requires all economic activity to net out at 33%, just for the risk-takers and workers to be able to keep a pittance.

    john #7 — yet as Jefferson himself said, “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.” It is not a blank cheque.

  10. BlueOntario says:

    Bombs in underwear won’t bring down the nation (unless we decide totalitarianism will protect us from such things). Leaving a power vacuum in some places in this world may be a bit more tricky to navigate.

  11. Teatime2 says:

    Um, what is good about hitting the elderly and disabled but not cutting foreign aid? Or the perqs of federal employees and members of Congress?

    The cost of living formula is already skewed to provide very limited increases to Social Security recipients and gave no increases for this year or next. (So, can you cut 0?) Conveniently, it’s not the same formula for COLA used for fed. employees or Congress, all of whom have their OWN retirement plans apart from Social Security.

    The government takes care of its own and throws money like drunken sailors around other countries and their pet projects. Now, they want to look like they’re serious about “austerity” by targeting the elderly, poor, and most vulnerable?

  12. Br. Michael says:

    The Constitution does not grant the Congress the power to pass laws for “the general welfare” or that are “necessary and proper”. These clauses have to be read in conjunction with the specific powers given to the Congress. So that the Congress can enact laws that are necessary and proper to the implementation of say coining money, or organizing the Militia or the other Article 8 powers. It’s power to tax in limited to those taxes that promote the general welfare.

    It is completely bogus to suggest that the Congress has the power to pass any law that it thinks necessary and proper to promote the general welfare. That would have the effect of negating entire Constitution. It would render the federal government a government of plenary powers (police power) instead of what was actually created, a government of limited powers.

  13. Br. Michael says:

    I don’t like some elements of the plan, but it is a serious start. It should not be declared “dead on arrival” or rejected out of hand as did Pelosi. I like Bert’s amendment, I like the suggestions to reduce foreign aid. I like cutting back on the President’s ability to commit this nation to a foreign war without a declaration of war. And the Commission does, contrary to some comments, recommend raising taxes.

    I also think we need to get away from class warfare language. Who are the “rich”? Define the term. Is it anyone earning over 250K? 200K? or what. What do we mean by poor? Define the term. An awful lot of loose language is thrown around which can mean vastly different things to different people.

  14. Sarah says:

    RE: “Still, a commission that thinks you can balance the budget without raising taxes is irresponsible.”

    No it’s not. That’s as incoherent as saying “a household that thinks you can balance the budget without making more money at work is irresponsible.”

    People balance budgets all the time with their present income. So can countries.

    RE: “Not that they would mind. It’s about cheap, uneducated labor.”

    No it’s not.

    What a mindless thing to say.

    What made John Wilkins so hate the people who are capable of giving others jobs?

    Who knows. But the mindless incoherence that continues to stream out from the keyboard is bizarre. Is it some form of I-Hate-People-Who-Employ-People Tourettes Syndrome?

  15. Sick & Tired of Nuance says:

    If they are going to raise the retirement age for my generation, then they should freeze all increases now. Share the pain. My generation did not cause the problem with social security and we are stuck paying into the ponzi scheme…so fine, we don’t get to retire until later (I frankly never thought I would ever get Social Security anyway); but freeze all increases until the system is solvent.

  16. Grandmother says:

    Wel, there haven’t been any “increases” (COLA’s) in SS for the last two years,so that should be easy…Now, let’s “freeze” the govt payrolls see how well that works.
    Grandmother

  17. Br. Michael says:

    I think the COLA’s are legitimate increases so long as they are pegged to actual inflation. But we also need an agreed upon objective standard to measure inflation. I think the times that the retirement ages rise are reasonable (2050 and 2075). That gives the younger folks plenty of time to prepare and make their plans accordingly.

  18. Katherine says:

    This is a surprisingly constructive set of proposals. Surprising because the talk has been that this Commission would propose a VAT on top of all existing taxes. Instead, it talks of restructuring the income tax code in a more rational direction and cutting spending.

    We will need more conservative-to-right-centrist Senators and a conservative or at least right-centrist President to make anything of this, though. The electoral effort just completed is only the beginning.

  19. tgs says:

    Please let’s go back to #3 – “The standard should be: what spending would be allowed under the Constitution? What is required to fund those powers delegated to the Federal Gov’t?”

    And to #9 – yet as Jefferson himself said, “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.” It is not a blank cheque.

    Simple, to the point. Nothing more needs to be said. In short, the only real solution. Anything beyond this just muddies the water. Please, let’s stay focused. Thank you.

  20. sophy0075 says:

    Until the 1930’s and the “New Deal,” the role of the Federal Government was extremely limited – defense, interstate commerce, the national postal service for example. Why not devolve authority back to the 50 states? That way we would not be paying for a bloated federal bureaucracy. The several states could seek different financial solutions – some might work, others not – and then the “unsuccessful” states would have role models from which to copy. The course of the present Administration, which is to increase the role of the Fed, is merely to add more to the Fed workforce. As any savvy businessman will tell you, his greatest cost is the cost of his workforce. As long as the Fed workforce is bloated, any (alleged) reduction/freezing of their pay is a pretense at savings. It’s like dieting – you don’t get rid of fat cells, you’re just shrinking them until you eat a few cheeseburgers and the little demons swell up again.

    Another thought – The Federal Government was established in Washington DC in the late 18th century, when communications and travel were slow and difficult. The continued establishment of all parts of the Fed in the DC area merely supports those crying for “cost of living” increases because the cost of living in the DC metro area is so high. Why not (to the extent a governmental role is not devolved to the several states, relocate the operations of the Fed to parts of the US with lower costs of living/more relationship to the task? For example, does it make sense to have the Dept of Agriculture so far away from the midwestern wheat fields? Why not site the EPA near a national park (or a highly polluted site requiring clean-up 😉 )?

    Finally – how about instituting the flat tax? Simplify the IRC and we can shrink the IRS to a few dozen gov’t workers, at most.

  21. In Texas says:

    #20, it’s the interstate commerce clause that is the culprit here. The commerce clause is the constitutional basis that Congress uses to justify a vast majority of regulations. Sadly, this has been deemed OK by the Supreme Court. Since company A makes band aids, and band aids are shipped across state lines, therefore Congress can enact the sweeping changes of Obamacare, etc.

  22. Capt. Father Warren says:

    #21, if that were the worst case for the IC clause, it could almost be deemed “logical”. But if company A makes bandaids in Mississippi and never ships across state lines, ObamaCare will still apply because there is a secondary effect on IC………that nonsense has been upheld by the Supremes.

  23. Br. Michael says:

    What happened was that the Supreme Court was intimidated by FDR’s court packing scheme. In West Coast Hotel v Parrish (1937) Justice Roberts suddenly started voting with the Roosevelt minority and the expansion of the Commerce Clause began. In effect this expansion granted the Federal Government the same police powers (general plenary powers) heretofore only exercised by the States.

    Through “interpretation” the Court expanded the power of the Federal Government that should only have come through an amendment to the Constitution as provided under Article V.

  24. John Wilkins says:

    The wealthy aren’t the only people who create jobs. Demand creates jobs. And people work for themselves. Not-for-profits and governments create jobs as well. It’s a moral judgment if one decides some jobs are preferable to others.

    I think it’s wonderful that the rich create jobs. But they don’t create enough; nor is it their duty. Their demand does not satisfy the needs of the economy. By and large, they hoard and save. The issue is that they don’t spend enough, nor do they actually create enough businesses. Granted, it’s helpful to make some distinctions: there’s the wealthy (say, net worth of seven figures) and the uberwealthy. As people make more money, their money becomes less dynamic.

    But I do think it’s optimistic to think that all owners would prefer to give their employees middle class salaries rather than minimum wage.

    [i] Slightly edited by elf. [/i]