Tuesday, November 16, 2010

National Commission on Fiscal Responsibility and Reform raises the ire of all sides

On February 18, 2010, President Obama signed an executive order establishing a bipartisan National Commission on Fiscal Responsibility and Reform during a ceremony in the Diplomatic Room of the White House. Erskine Bowles and Alan Simpson were set as co-chairs of the commission. November 10, 2010, the Co-Chairs Bowles and Simpson put forth their proposal to deal with the United States mid- and long-term fiscal challenges. Here is a link to the Co-Chairs Proposal: http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf and to their $200B in cost cutting measures : http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/Illustrative_List_11.10.2010.pdf.

Some of the headlines that followed the unveiling of the proposal were:

The Debt Commission's Free Ride for Boomers – Business Week

Debt panel head: Congress must 'face up' to issue – The Associated Press

Deficit panel's Schakowsky wants defense cuts, higher corporate
taxes – Washington Post

Stop whining about Bowles-Simpson. Let's make it better – CNN Money

That being said, I did read the entire report to see what all the ire raised by both Liberals and Tea Party members was all about. One particular line I enjoyed was made during the "Our Guiding Principles and Values" section (p. 3) "American families have spent the past 2 years making tough choices in their own lives. They expect us to do the same. The American people are counting on us to put politics aside, pull together not pull apart, and agree on a plan to live within our means and make America strong for the long haul." I couldn't agree more with this assessment the trouble for the commission will be getting lawmakers to agree with it.

The "Five Part Plan" for making America strong laid out by the Commission is:

  1. Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.
  2. Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.
  3. Address the "Doc Fix" not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care costs growth.
  4. Achieve mandatory savings from farm subsidies, military and civil service retirement.
  5. Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.


 

Some of the ways the Commission is looking to achieve the five part plan is through reducing tax rates, cap revenue at or below 21% of GDP and bring spending down to 21% as well. One of the proposals to achieve the $200 billion in cuts goes directly opposite of Obama's recent announcement to give Congressional and White House staff a raise during the lame duck session. The Commission is looking to save $50.4, mind you in 2015, by reducing Congressional & White House budgets by 15% and freezing federal salaries, bonuses and other compensation at non-defense agencies for three years. While I agree with reducing budgets and the freezing of salaries but why are we waiting until 2015? Just a generation ago 1 in every 40 Americans working worked for the government now that number is 1 in 4. This ratio the Commission does address as they propose to cut the federal workforce by 10%.

Proposal #15 – Slow the growth of foreign aid – is a good step as our foreign aid has gotten out of control. I understand we live in a global economy but we need to take care of home first before helping others throughout the world. Per the report, under Obama, our foreign aid will increase another 40% which builds upon the 80% increase since 2008. This spreading of American wealth is something we need to curb.

Proposal #21 – Eliminate all earmarks – now this has been a topic for years. The Commission reports that in FY2010 "Congress approved more than 9,000 earmarks costing taxpayers at least $16 billion." Per the Commission one such earmark included $1.9 million for "a Pleasure Beach Water Taxi Service in Connecticut." Really? I recall a lot of discussion over the Stimulus Bill and the pork that was in it. I how many jobs this study in Connecticut saved or created!

Proposal #29 – Sell excess federal property – I don't get this one. Will this be similar to the garage sale that California had last year?

Proposal #32 – Cut Funding for the Corporation for Public Broadcasting - $500 million dollar savings by eliminating NPR is interesting especially with the rise of talk radio being slanted toward the Conservative thought process. Then again NPR is not suppose to be Left leaning but when one of their own voiced an opinion not of the Left he got fired then promptly hired making big dollars.

Proposal #39 – Apply the overhead savings Secretary Gates has promised to deficit reduction. Defense Secretary Gates goal is to create $100 billion over five years while the Commission only looks to save $28 billion. Then again that makes sense since all of these proposals are for 2015. I will admit I do not nor do I recall hearing about Defense Secretary Gates proposal.

Proposal #40 – Freeze federal salaries, bonuses, and other compensation for the civilian workforce at the Department of Defense for three years - $5.3 billion in savings and Proposal #41 – Freeze non-combat military pay at 2011 levels for 3 years - $9.2 billion. Why not freeze the compensation now? Why wait and allow Congress and/or the President to seek higher increases for these workers?

Proposal #51 – Reduce military personal stationed at overseas bases in Europe and Asia by one-third - $8.5 billion in savings. I'd argue let's reduce it further – say cut it in half. Then again we may need the extra forces in both areas if this new SALT Treaty is passed during the lame duck session.

Proposal #58 – Integrate children of military personnel into local schools in the United States - $1.1 billion in savings. I find this one a bit interesting since it would shift the burden onto the States or other localities where bases exists. I defer more to my military friends for additional information though.

For when it comes to tackling the tax code, I don't think the commission goes far enough. It would eliminate the AMT and some mortgage interest deductions. It is time for America to get serious about simplifying the tax code by implementing a flat tax and eliminating all tax credits. By proposing to eliminate all earmarks, it will be tax credits that will achieve similar ideals that earmarks do. While I agree with many this is a starting point, it will be interesting how things go forward. The 2010 mid-terms resulted in more Conservatives in office and they will have the task of putting up what they ran on.