It’s not clear how many Americans actually want an austerity budget out of Washington. In election exit polls last week, for example, more voters said a stronger economy and more jobs — which may require some mix of deficit-boosting tax cuts and stimulus spending — should take priority over serious deficit reduction cuts in spending and entitlements.
Still, there is a genuine need to bring federal spending and budget deficits under control. But it won’t be easy. The plan issued Wednesday by the chairmen of the Obama administration’s bipartisan debt reduction commission makes it clear that the combination of both spending cuts and tax increases required to bring down federal deficits and cumulative debt will be deep, broad and painful.
The initial proposal issued by the commission’s joint chairmen — former Senate Republican leader Alan Simpson and former Clinton White House chief of staff Erskine Bowles — is not the commission’s final proposal. It represents the chairmen’s main ideas for consideration in the 12-member commission’s final draft due Dec. 1.
Even so, it is a lucid guide to the breadth of cuts and tax hikes that would be necessary to reduce, by $4 trillion, the cumulative annual deficits of some $6.7 trillion that are now projected through 2020. To actually reach a balanced budget by then — not to mention working down the total accumulated debt — would take significantly more cuts and tax hikes.
Regardless, the proposal by the debt-reduction commission’s chairmen would severely challenge Democrats on the left and Republicans on the right to accept stiffer medicine than either side has yet consented to take. Democrats want no cuts in the vital entitlements of Social Security, Medicare and Medicaid. And Republicans and tea party advocates reject any tax hikes equally strenuously.
Their extreme positions are not realistic if debt reduction is to be achieved. The chairmen’s proposal is valuable in showing just some of the hard steps that are necessary to work toward a balanced budget.
n Among the spending cuts they recommend are: Freeze federal salaries for three years (saving $15.1 billion), eliminate all earmarks ($16 billion), slow growth of foreign aid ($4.6 billion), eliminate financing for commercial space flight ($1.2 billion), reduce military procurement ($20 billion), freeze noncombat military pay ($9.2 billion), reduce overseas military bases by one-third ($8.5 billion).
n Significant cuts would be taken across the board in annual discretionary spending, farm subsidies, federal jobs, and tax credits — called tax expenditures — that offer corporate and personal tax credits and exclusions. Ending a range of individual and corporate tax breaks and write-offs, for example, would save $1 trillion, and also allow the plan to reduce the overall corporate tax rate to 26 percent, while increasing revenue from corporate taxes.
n Cuts in Social Security would include: Raising gradually the retirement age for full benefits from 67 to 69 by 2075, cutting benefits for most future retirees, raising the salary ceiling (now $108,000) for payments into the system, and reducing cost-of-living increases.
n Tax increases would include: Raising the federal gasoline tax of 18.4 cents a gallon by 15 cents between 2013 and 2015, limiting or ending the mortgage interest deduction, taxing employer-provided health benefits, limiting or eliminating the child tax credit and the earned income tax credit.
The plan would cut $2 in federal spending for every $1 raised in tax revenue enhancements. It would cut total spending to about 22 percent of gross domestic product, and leave federal revenue collection at 21 percent of GDP, a compromise that accepts some considerably smaller level of deficit spending as manageable and reasonable, much like a mortgage.
Just the mention of many of these proposals, however, elicited immediate howls of condemnation and rejection from both the left and the right. That’s not surprising, but it does suggest the difficulty of attempting deficit reduction in a weak recovery in which reduced tax revenue and the higher cost of aid to unemployed Americans have put state and federal leaders in difficult economic vise.
If Americans really want serious reductions in the annual federal deficit and the cumulative debt, now over $13 trillion, the nation could make significant progress — another $4 trillion reduction over the next 10 years — in one stroke, by ending all of the Bush era tax cuts, which gave the largest benefits to the nation’s super-wealthy multimillionaires and billionaires.
The facts are on the table. If they are not a call to reason together, they at least ought to douse the positions of the extremists on both sides.