Wednesday, November 17, 2010

Another debt commission report

Following on the heels of last week's release of policy recommendations from Erskine Bowles and Alan Simpson, co-chairs of the National Commission on Fiscal Responsibility and Reform, is today's unveiling of a similar plan from the Debt Reduction Task Force co-chaired by Alice Rivlin and Pete Domenici. Rivlin and Domenici provide some highlights from the report in today's Washington Post, two of which in particular caught my eye:
We would dramatically simplify the tax system, establishing individual tax rates of 15 and 27 percent (from the current high of 35), cutting the corporate tax rate to 27 percent (from 35 today), ending most deductions and credits while simplifying the rest, and ensuring that nearly 90 million households no longer have to file returns. To reduce the debt, we would supplement our spending cuts with a 6.5 percent "debt-reduction sales tax."
...We would control health-care costs - the biggest driver of long-term deficits - by reforming Medicare and Medicaid while, starting in 2018, capping and then phasing out the tax exclusion for employer-provided health care (emphasis mine). We would reform medical malpractice laws and help address the health costs tied to rising obesity by imposing a tax on high-calorie sodas.
Thus, two different bipartisan panels within in a week of each other have released reports calling for tax code simplification and rate lowering, along with the elimination of preferential tax treatment for employer-provided health insurance (option one of the Bowles-Simpson plan).

While the response from Republicans has typically been something akin to the cautious and noncommittal statement issued by Representatives Paul Ryan, Dave Camp and Jeb Hensarling which called the Bowles-Simpson plan "provocative" and commended the authors for "advancing the debate," Democratic sentiment was probably best captured by Rep. Nancy Pelosi who immediately dismissed it as "simply unacceptable."

It's also worth noting that both panels' proposal to eliminate the employer health insurance deduction is essentially what John McCain proposed to do during his presidential campaign as a means of reforming the health care sector. The response from the Obama campaign, of course, was to attack the proposal as a tax increase:
The McCain healthcare plan would significantly alter the way many Americans get their healthcare coverage. It would eliminate tax breaks on employer-sponsored healthcare benefits and instead give Americans healthcare tax credits -- a $2,500 credit for individuals and a $5,000 credit for families.
Obama called the plan "radical" several times Saturday.
...He gives you a tax credit with one hand -- but he raises your taxes with the other," Obama said.
"A $5,000 tax credit. That sounds pretty good," Obama said. But he noted that a survey by the Kaiser Family Foundation showed that the average cost of a family healthcare plan is $12,680. "Where would that leave you? Broke," Obama said.
..."Many employers will drop their healthcare plans altogether," Obama predicted.
That last sentence looks pretty rich in hindsight, given that employers are now threatening to drop their health care plans following Obamacare's passage, prompting the administration to hand out dozens of waivers

None of this is to say that Democrats don't have a plan for deficit reduction, with Rep. Jan Schakowsky unveiling her own proposal this week. Among its highlights are $200 billion in additional stimulus spending (this, as part of a plan to reduce the deficit mind you), about $15 billion in discretionary cuts, $110 billion in cuts to the Pentagon and lots and literally hundreds of billions in tax increases. Little surprise that such a proposal would originate from a woman who labeled tea party protests as "despicable" and "shameful."

These latest proposals from the two commissions serve to clarify and illuminate the current debate in Washington. Ideas they have endorsed such as tax simplification, rate lowering and elimination of preferential tax treatment for employer-provided health care are all well within the mainstream of right-wing economic thought. In contrast, Democrats have taken a largely dismissive attitude towards such proposals -- if not their outright demonization -- and have only higher taxes and more government intrusion to offer in response. It's rather apparent who is being serious and who isn't.  

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