Wednesday, November 10, 2010

Catfood Commission Makes Its Play

So, what's the story? From the Times:

The plan would reduce Social Security benefits to most future retirees — low-income people would get a higher benefit — and it would subject higher levels of income to payroll taxes to ensure Social Security’s solvency for at least 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.

The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.

Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.

But how low the rates are set would depend on how many tax breaks are reduced or eliminated. Some of them, including the mortgage interest deduction and the exemption from taxes for employees’ health benefits, are political sacred cows.
Yes, they are. There's actually a good case to be made for eliminating the mortgage interest deduction, since it's basically a tax penalty for renters. But renters are far less likely to vote than homeowners.

As for the must be joking. Tax simplification is a good idea, but it doesn't get to the basic problem of the American system, which is that the wealthy 1% earning 25% of the nation's income aren't really paying their fair share for a system that so handsomely benefits them. Certainly the reduction of corporate taxes is going to be a windfall for the upper class. The increased profits will be passed on either to executive management or to shareholders. In either case, that's John. Q. Plutocrat.

The plutocrats are also the reason why the means testing here is a terrible idea. If the wealthy have no stake in social security, they won't support social security. At best they might grudgingly support it out of a sense of noblesse oblige, but even that's unlikely. It's the same problem as you get with the wealthy having no stake in the public school system thanks to their children's ubiquitous private-school education. Raising the ceiling's a good idea, but it would be a good idea anyway.

TPM gets into the details, and they're insane. Never mind the big cuts in defense spending that the Republicans would never go for; it also references a call for a "cap" of government spending and revenue at 21% of GDP. That'd be near-suicidal. The Republicans might go for it, but it'd get busted almost immediately when circumstances warranted.

And then there's this. (Also on TPM)

All their proposals limit Congress to collecting taxes on income made within the United States, reducing or eliminating taxes on American expats and revenues companies earn abroad.
If this went through, expect that no corporation would ever make money in America ever again.

Some of these are just stupid, too. Eliminating earmarks? Eliminate the Office of Safe and Drug-Free Schools? Charging admission at the Smithsonian? All of these would be pittances.

The worst part is that all this is completely unnecessary. The problem in America isn't a structural deficit. It's the cyclical deficit, the long-term threat of deflation, and the skyrocketing income inequality. America stands absolutely zero chance of defaulting on its debt, and the cost of servicing said debt is insanely low. There is NO good reason for these cuts. All it will do is worsen the real problems.

But let's be honest here. This isn't going to fly. The Republicans are the party of angry old people now, and cuts to Social Security/Medicare/Defense will just make them angrier. There's zero chance that the Republicans are going to go along with this.This thing targets military contractors, for heaven's sake. The Republicans aren't going to go for that. They aren't stupid.

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