Thursday :: Nov 11, 2010

A Longer View On Bowles/Simpson

by Deacon Blues

By now, you've already read and heard about the draft recommendations released yesterday by Obama's alleged deficit reduction commission (chaired by former Wall Street hack Erskine Bowles and former GOP Senator Alan "over the transom" Simpson - or BS), a release that was done without White House knowledge and while the president was out of the country. Initial reaction from our side of the aisle, ranging from Paul Krugman to Keith Olbermann was that the recommendations were tilted way too much on the side of spending cuts, rather than tax or revenue changes, to the tune of 2:1.

Because of the recommendations to push up the Social Security retirement age over the next 6-7 decades, and to cut discretionary spending by $200 billion over the next four years, liberals are jumping on the Outrage Bandwagon. It's understandable, because these changes and the 2:1 split between spending/program cuts and tax/revenue changes give the overall package the appearance of being just one more Beltway attempt to shaft the working and middle classes into picking up the tab for more burden-shifting from the wealthy and Corporate America.

Having said that, let me take the contrarian position and suggest that these cuts may not be as bad as things could be under a new GOP House, with a president who has shown himself clueless at negotiation. First, one of the health care cost containment fixes suggested by this set of recommendations calls for the public option if cost containment targets are not met. Second, there are real cuts to defense in this package, and presumably the targets in this package cannot be achieved while we still have 1.5 wars going on. Third, the Social Security suggestions of raising the tax threshold and retirement age were put forward years ago by Democrats as moderate, reasonable options. Lastly, these recommendations do call for the elimination of earmarks and some corporate welfare.

Note that the GOP has been relatively quiet about this so far, and probably for good reason as there may be some real plums for the wealthy and corporations. But these plums come with an elimination of loopholes. There will be another set of recommendations issued next week by a nongovernmental group led by former Senate budget committee chairs, that is likely to be more progressive and expansive when it comes to revenue and tax changes. For that reason, in this environment of shifting policy options and the overall concern about deficits and debt, Obama should hide behind these reports and resist any effort at extending the Bush tax cuts. Instead of cutting any deals and caving in, he should force the GOP to explain the rationale for another $4 trillion in deficits and debt when two bipartisan commissions both agreed that more revenue is part of the mix.

The best course of action for Democrats now is to howl about the BS package, but be willing to take a hard look at next week's release to see if the tax and revenue suggestions in that package are more favorable. Democrats may find that between these two reports, there's a mix of cuts and tax changes that can be an ultimately acceptable endgame to push back against the Tea Party/Corporate lunacy the GOP will be yammering for in the new Congress. As several media outlets have noted, the one major benefit to these outside recommendations is that they credibly undermine GOP demands for total cuts and no revenue increases to deal with the deficit and debt.

Deacon Blues :: 12:02 PM :: Comments (18) :: TrackBack (0) :: Digg It!