Expect to have hope rekindled.
Expect your prayers to be answered in wondrous ways.
The dry seasons in life do not last.
The spring rains will come again.
Sarah Ban Breathnach
Bowles-Simpson Deficit Reduction Plan:
A GOOD START: THUMBS UP!
I have to admit I shared Minority Leader Senator McConnell's skepticism of the Presidential commission--I want to hear more about spending cuts. But I have been an advocate of many of these ideas by the commission co-chair in prior posts:
- a simpler, broad-based tax structure for both individuals and businesses, including fewer/lower tax brackets, eliminating the AMT and many deductions and tax credits (including the popular home mortgage interest deduction)
- gradual increased retirement age increases and lowering the benefit rate increase to more of a COLA versus wage growth factor and Medicare/Medicaid cost savings
- reining in federal payroll compensation (a 3-year freeze) and a quarter million contractors (not so great news for me) and retirement costs, farm subsidies
- across-the-board spending cuts starting with $100B-plus cuts in both domestic and defense spending, a 15% haircut for White House and Congressional overhead, and a long-overdue clampdown on travel
- aggressive targets on the deficit and debt relative to GDP
- higher certain excise taxes, e.g., gasoline tax
I've purposely waited to comment on this so I could see or hear the reactions to the co-chairs of the committee; many of the perspectives were highly predictable. Paul Krugman on ABC This Week sees this from a progressive standpoint, complaining that the brunt of savings essentially involves a transfer from the middle class to the upper class. Jan Schakowsky (D-IL, ACU lifetime rating 1.55%), a commission member, made it clear that the entitlement provisions are a non-starter with her. (This is an issue in the sense that the eventual committee proposal requires a vote of 14 out of 18 commission members to carry.)
On the media conservative side, anything remotely looking like a tax increase, including excise taxes like gasoline taxes or implicit tax increases, e.g., elimination of various deductions and credits, draws a knee-jerk reaction. I heard Sean Hannity slam discussion of the mortgage interest deduction, which he described in Draconian terms as effectively the death blow to real estate sector recovery. Let me make myself clear on the Hannity point: first of all, the very fact of mortgage interest deductions is a violation of free enterprise principles. (In fact, I was rather surprised to hear conservative populist Bill O'Reilly point out the facts I already knew that Canada not only doesn't do the same, but they actually have a higher percentage of home ownership.) The government shouldn't be subsidizing consumer purchases. Hannity seems to understand this in terms of last year's morally hazardous mortgage assistance legislation (which resulted in Rick Santelli's famous rant which sparked the Tea Party), and perhaps he understands that government stimuli are a signature policy option in Keynesian economics. Of course, I do understand that consumer spending constitutes two-thirds of the economy, and certainly taking away the stimulus will have some effect at the margins; however, keep in mind Bowles and Simpson are talking about shallower tax rates which offsets some of the drag of losing the deduction, and I would argue that government subsidies muddies the view for business managers as to true supply and demand, and that taking the punch bowl away from the housing market is just as important of cutting the GSE's (Fannie Mae and Freddie Mac) off the federal teat.
My quick take:
- Like Debra Saunders, I find the treatment of Medicare is confused; the whole idea of the "automatic cuts" to doctors and hospitals hasn't worked for several years, with the Congress inevitably passing "doc fixes". The argument is that "doc fixes" should not be paid with fresh debt (spot on), but instead of the usual pay-as-you-go (i.e., cuts elsewhere in the budget), the chairs vaguely suggests they need to cost-share with providers. We need to flesh that out some; I suspect they think that a doctor may have more incentive to limit costs if, say, they pare down unnecessary costs (e.g., generic drug prescriptions, unnecessary medical tests, etc.), so a flat cost per patient versus piecemeal approach. But will the government find providers willing to accept a flat cost (for ordinary patients), and will it sufficiently offset the revenues from automatic payment cuts? At minimum, I think we fundamentally need to get patients involved in cost containment by giving them a vested interest in cost containment, e.g., more of a legitimate insurance concept versus all-inclusive rates, minimizing unnecessary visits to doctors, etc. But I don't think that process reforms will compensate adequately for an aging population.
- I think progressives are intent in socializing social security and will not be honest brokers. We already have an inflation factor raising the wage ceiling for mandatory payroll taxes. Clearly the revenues raised are insufficient. Conservatives should hold firm: it's time to increase both age eligibility criteria and to phase them in. The fact that the age limits are phased in but still get knee-jerk rejections from Pelosi and Schakowsky show they aren't committed to reform, and it's time to marginalize these demagogues. Lifting the ceiling essentially makes social security a de facto tax increase (over and beyond the soon-to-be-reinstituted (versus the typical progressive disingenuous spin of "can't afford tax cuts for the risk"--we are talking about tax hikes after the last 7 years) Clinton tax hikes). We have to ask--where do we get the revenues on a shared sacrifice basis? I think a modest payroll increase may be necessary in exchange for pushing out age eligibility.
- Overall, this does a good job of setting specific goals, it is the first real attempt at spending reform (the current earmark kerfuffle is a trivial percentage of the overall budget), but I think fundamentally we need a more balanced tax system, including a consumption tax.
Barack Obama, not satisfied with trying to give education loan giveaways, not to students choosing employment in the private sector but to the public sector (once again, counterproductively picking winners and losers), already overcompensated, not to mention essentially government service tenure, with better salary and benefits than most in the private sector, decided that too many Indians are choosing private sector jobs and gave the same lecture to Indian young people about pursuing a civil service career. In fact, for years, professional ambitions were to win a coveted spot in the Indian government bureaucracy for life. What Barack Obama is doing is little better than giving an alcoholic a bottle of whiskey.... START PREACHING FREE ENTERPRISE, MR. OBAMA.
Political Humor
A few originals:
- Sarah Palin is unhappy about the fact Alaska GOP Senate candidate Joe Miller dodged questions about her potential Presidential candidacy in 2012. There's a rumor going around that she showed up at her general election precinct with "Mercowsky" written on the palm of her hand.
- I'm not saying the Miller legal team is grasping at straws in the Alaska Senate write-in count, but there's a rumor that that they're challenging the votes cast by people whom brought and used their own #2 pencils to the voting booth instead of using the special indelible pencils supplied in the voting booths.
- I'm not saying that the Miller team is grasping at straws in the Alaska Senate write-in count, but there's a rumor that they are challenging the write-in votes of southpaws like me with a "hook" writing style (which usually results in smudged writing and hands), writing with supplied pencils that aren't lefty-friendly.
- Dick Cheney and his hunting buddy seem to be in a better mood. They managed to hit nearly 70 ducks before Congress convenes tomorrow to serve out the remainder of their terms in office.
BW Stevenson, "My Maria". How can a native Texan fail to mention BW Stevenson? My favorite yodel chorus song. [There was a remake of this song by some country duo years later.] I remember liking another track he released later while I was at UT ("Down to the Station" [not inspirational: a guy fed up with his relationship]), but I haven't located a relevant clip.
