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.


 


 

30 comments:

  1. 1 in 4 people work for the U.S. Government?

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  2. Umm, according to the BLS, the # of federal employees is at 1.9M (excluding the post office) as of 2008 which is the most recent data available.

    http://www.bls.gov/oco/cg/cgs041.htm

    I'm not sure where you are getting the 1 in 4 number but that's obviously not right given link I provided.

    I am glad you posted a thread about this.

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  3. Truman

    That is 16% of the work force. So let's add in the Postal Workers and all the State and local workers and I bet we are right or maybe above 1 in 4 as Viper has stated.

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  4. Actually, per the 2006 Census Bureau data about 27% of all workers are employed by Government. See report here: http://facultysenate.unlv.edu/budget_memos/Public_Sector.pdf

    Now we all know that the Government has been the largest producer of new jobs as of late. I am not counting the 500,000 temporary Census workers either. So, think about this number 27% - that means that means 3 people in every 4 are working to pay for that 1 person that works for the government. Not to mention their pension and health care benefits.

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  5. I'd wager that a large % of those "government employees" are teachers, light rail engineers, police, road workers, etc? Are you saying we should cut those positions?

    Are you saying all these positions should be cut and privatized? Not even libertarians agree with that argument.

    My question to Viper is this, if you were in congress would you sign the Co-Chair's proposal into law as it stands today, knowing that it isn't perfect and doesn't give you EVERYTHING you want but is a good start?

    Or do you go the way of many conservatives and argue that the entitlement cuts and spending cuts are good, but that taxes cannot be raised in any fashion?

    Would you vote it into law if you were in congress? If no, why not?

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  6. What page did you pull that 27%? I must have missed it.

    Honestly, the number doesn't matter as much as the type of work. If it's 50% and all value added to citizens, who cares.

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  7. Anonymous - Did you read the slides and break out your calculator? I did. And 27% is the deal.

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  8. Truman - I heard today that the Co-chair's proposal is about the change as it was a "rough draft". To answer your question. No, I would not vote in the proposal into law. The main reason is that if we are going to revamp the tax code then let's do it right. Let's go to a Flat Tax and eliminate ALL tax credits just not certain ones like the proposal is looking to do.

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  9. Viper, you're an idiot. "27% is the deal"?!?!?! No, it's not. 27.2% is the percentage of workers in the private and government sector that are age 30 or less. 27.4 of Local Government Workers are between the ages of 40-49. Figure 1 in the report that you cite is "Age Distribution of Workers in Private and Government Sector, 2006".

    From another part of the report: 27 percent of those employed have at least a bachelors degree".

    That's it.

    I know you might say that I'm missing the forest for the trees on your post, but this is just another example of you being imprecise or misleading with your statements. I'm all for supporting arguments with facts, but make sure you have the facts straight. That's what I just did here.

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  10. Slick Willie - Look at the graph called "Figure 3: Knowledge Workers by Age Group by Sector, 2006" that talks about workers younger and older than 40 in the private sector and government sectors. If one adds up the numbers the results are this:


    13,543,668 Government Workers
    36,276,944 Private Sectors Workers
    49,820,612 Total Workers
    27.184868% are Government Workers. I don't see where I am giving misleading information or imprecise data. Or am I reading the slide wrong?

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  11. Calm down Viper, I was only asking where you got it from. Not accussing you of anything.

    Now, I'm accussing. FIgure 3, as you said, is for knowledge workers. Which is defined as "Knowledge workers require
    specialized education, training or skills. Examples include educators, health care workers,
    legal professionals, engineers and managers. Almost 38 percent of all those employed in
    2006 were in occupations that fall into the knowledge worker category."

    That age graph only represents 38% of those employed and excludes non-knowledge base employees. So I'd guess retail and service. Probably some manufacturing.

    So yes, you did read it wrong.

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  12. Anonymous - It does appear that I missed that Knowledge workers aspect. I have sent an email to the group that put together the number to see if they can provide more data. I do recall a Wall Street Journal article that made the 1 in 4 statement. I am still searching their site to get the exact location.

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  13. I've found finding numbers difficult. I've seen between 8%-10% often but I'm not sure about the credability of the cites. However, if I keep seeing the same %, I tend to believe it's close to accurate.

    Again, the I don't think the actual number matters as much as what those jobs are and in reducing waste.

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  14. I agree with you that we need to identify and eliminate waste.

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  15. 13,543,668 Government Workers
    36,276,944 Private Sectors Workers
    49,820,612 Total Workers

    WHAT???? The total Private Sector workforce is only 36.2M? You understand that we have 14M unemployed currently at ~10% unemployment rate right? Simple math shows that your total workforce number CANNOT be right.

    In fact, the total US workforce is ~154M. That means that if we have 13.5M government workers that 9% of the US workforce is government employed. or 1 in 10. THAT IS A BIG DIFFERENCE TO YOUR 1 IN 4.

    This is the second time, in as many threads that I've had to point out flawed math. Please for the love of god, apply some common sense (ie. does it pass the sniff test) before you spit out numbers because this 27% is totally wrong. And a simply bit of math proves it.

    Unless of course, you are arguing that of the 330M americans only 14.8% of them actually work. (49.8 / 330)

    I mean seriously, this is getting to be a joke.

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  16. Viper,
    Now that I've cleared up the math issue, your argument is that we shouldn't reform the tax code at all unless we reform it fully and accept a regressive tax model?

    You won't compromise at all on getting 50% of what you want when the alternative is 100% of nothing?

    Do you really think that a flat tax could get passed in this environment? Isn't this a step towards tax reform? Isn't that step a good thing?

    I can say that, after having read the entire document several times, I'd vote for it in its entirety if I was in congress. And I'd do so unapologetically.

    If the GOP is serious about their "adult conversations" talking point, then they need to be serious about taking a lump of coal with the rest of us and give up some of their dogmatic positions on things like taxes.

    As Reagan's former economic adviser said recently in an interview, "the GOP's near religious adherence to no new taxes is not beneficial to this country nor is it realistic".

    And he's right.

    But sadly, nothing will change as both sides posture and maneuver for the 2012 election campaign. That's because this is about power and control, not about doing what is right.

    We slander the EU for it's socialist ideologies, but even they passed austerity measures with strong bi-partisan support to save their countries.

    We are too caught up in the trees of politics to see the forest.

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  17. Truman

    Hold the phone. The data that Viper is alluding to is from 2006 and was of just knowledgeable worker; which Viper admits that oversight. I too have heard of the Wall Street Journal article that talked about 1 in 4 people employed today work for the government. If memory serves correctly the article was originally published in 2008 or 2009.

    As we all know the size and scope of government has grown and combine that with the rise in unemployment that ratio may be even smaller. To Viper's credit, he did admit the oversight and is seeking more recent data from the group that put out the 2006 data.

    Your 1 in 10 only takes part of the data into consideration as well. So let's see what more data comes out before we all go thrashing about and completely discounting the 1 in 4 number. Agreed?

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  18. Ok, not that I want to but lets dissect this.

    13.5M government employees is reasonable based upon the following:

    http://www.census.gov/govs/apes/

    Download the excel file and sort the data for TOTAL EMPLOYEES (includes part time). Even if you include all state employees, you still only reach 10.6M gov employees. So the 13.5 is likely reasonable when you add local staffing.

    The official census data shows the US workforce at 154M (14.8 unemployed / 0.096 unemployment rate). Therefore, again, 13.5/154 = 0.08766 or 8.8% which I rounded to 9% which I then rounded to 10% to get the 1 in 10.

    http://www.bls.gov/news.release/empsit.nr0.htm

    So how are my figures incomplete?

    All I ask of all sides is that you have your facts right, otherwise we're arguing from ignorance which is pointless. And these facts were very easy to validate.

    I know it's a great soundbite to say that 1 in 4 people work for the government now but it's not true, as I proved.

    Is government too big? Yes, it's likely so.

    Is government spending too high? This is arguable, but yes, it's also likely so.

    Will congress address this issue in any serious fashion? No. And the reason is that it's easier politically to pay it lip service and do nothing than it is to buck the political extremes who are against higher taxes or less entitlements.

    Those two factions hold the purse strings which is why nothing will happen.

    But hey, we'll get rid of earmarks which account for 1/10th of 1% of the budget, which is a start, right?

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  19. Truman

    Not to split hairs here but the http://www.census.gov/govs/apes/ excel you refer to is just State and Local employees. The portion of the United States within are employees still under the State and Local banner and not Federal Government. The site even states "Data for the 2009 Federal Government are not available at this time" So we still have incomplete data.

    What we all can agree on is that Government has too many employees and spends too much money. The question is if the Co-Chairs proposal will achieve the desired results, right? Isn't that what you were looking for when asking Viper for his take?

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  20. Truman - I am not sure if a flat tax would pass but if Conservative's are serious about mounting a charge and harnessing the Tea Party energy then they'd push hard to bring along a flat tax. Here is lies our problem though. Our Government already get's enough revenue which the Debt Commission sort of states by imposing a cap at 22% of GDP. Our problem is spending and entitlement programs.

    I agree with the Debt Commission that we need to keep it solvent but not for the next 75 years. If the cut off were set at 50, we'd only need to keep it solvent for, based on average life cycle, another 25-30 years. Plus, it would slowly diminish in demand as well as attrition takes hold. For all of use under 50, the government can give us a lump sum to place into a private IRA account.

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  21. Don't let the perfect get in the way of the good. That's based upon a quote from Voltaire, but it is in the same vein as what Truman said above.

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  22. @Anon,
    "Not to split hairs here but the http://www.census.gov/govs/apes/ excel you refer to is just State and Local employees."

    Well played, I missed that. :) However, the foundation of my argument was relatively accurate, even though the data behind it was far from precise.

    @Pepe le Pew
    "Don't let the perfect get in the way of the good. That's based upon a quote from Voltaire, but it is in the same vein as what Truman said above."

    That's my point. Why not get both sides to sacrifice one sacred cow and take 10 BIG steps forward in the process. The point about changing tax AND entitlements is that no one side feels like they're giving everything. You can't do it all with entitlements and get bipartisanship. You can't do it all with taxes either. But if you use both to a smaller degree, it's more pallatable for both parties to sign off on because they can say "see, I got them to give something too".

    There should be no sacred cows in this discussion. Defense, Social Security, Medicare, Taxes, etc all need to be on the table.

    I'd vote for the good, because the perfect won't happen and we all know it. Our politicians are just that politicians, not leaders. They've become experts in politiking, but are terrible leaders because leadership requires taking risks and being willing to lose while trying to do what is right instead of what is best for yourself.

    This plan takes big steps down the following:
    Tax Reform
    Entitlement Reform
    Spending Cuts
    Fraud reduction

    And that list goes on and on.

    I'll take all of that, even though I'm against some of it, because something good is better than nothing that is perfect.

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  23. PS - if you roll the site "year" back to 2008, you can get federal data which is currently set at 2.798M federal employees for the year. Even if we grow that at the 17% that gov spending grew in 2009, we get 3.27M employees. If I take the 13.5M already known = 3.27 and divide it by the total employee base of 154M, I get 0.10889 or 10.89%. Still a far cry from the 27% stated earlier.

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  24. "What we all can agree on is that Government has too many employees and spends too much money."

    No, we can't all just agree that there are too many employees and it spends too much. Does it spend too much based on what comes in right now? No doubt. But cuts, especially to only one area, isn't the answer. I agree with Truman that nothing should be off limits.

    I have no idea what the right number of employees is. And to just say less, isn't an answer or an approach that solves anything.

    I think we can all agree that there is too much wasteful spending. There is a huge difference.

    The problem is that there is no compromise any more. Politicians fail to remember that they represent 100% of the people in their district, not just the ones that elected them. People fail to remember that their opinions aren't the only ones and aren't always the best options.

    Say what you want about Wellstone's political beliefs, for example, but he understood that he was just one voice in the system and had but one opinion and that compromise was necessary.

    We need more babysteps instead of giant leaps, on both sides.

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  25. Truman - I am with you on trying to get something out of the Co-Chair's proposal. It will be interesting to see if the new pledge of no just lip service or an actual pledge.

    Although I can see a number of Congress members getting pressure to recant especially after the article in the Star Tribune paper talking about all the projects that have started that need the funding to continue. My hope is that Congress, Conservatives that is, stick to their guns and stop earmarks.

    I heard something interesting though the other day about earmarks. Has anyone heard of Presidential earmarks? It baffled me and I have not researched it yet but from the conversation I heard was that the President can add earmarks after the fact if he so chooses. That hardly seems part of the Legislative process.

    Then again Obamacare had to go through as a tax bill instead of standing on it's merits and being required 60 votes in the Senate. We do need leaders in Congress and in the White House. The trouble is that leaders cannot get elected anymore and that is truly tragic.

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  26. Earmarks are hardly the problem. From that same Star Trib article: Ominbus bill=1.1 trillion. Projects="at least $3 billion" That's like spitting at a fire and saying you are trying to put it out. Further, the article said that many of the projects would just go through the regular budget process and be funded.

    Fine, that should probably be the right process but doing so doesn't cut the budget which is what those against earmarks will argue.

    It's political grandstanding and fake problem solving.

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  27. "Then again Obamacare had to go through as a tax bill instead of standing on it's merits and being required 60 votes in the Senate."

    I'm curious, did you complain when Bush/GOP passed 2 consecutive unfunded tax cuts in the early years of 2000's through reconciliation? How about when the passed the medicare prescription drug plan, did you complain about reconciliation then?

    I'm tired of people whining about reconciliation, because both sides use it.

    "he trouble is that leaders cannot get elected anymore and that is truly tragic."

    But this is because of demagogic language on both sides of the aisle. The worst of which this last election cycle came from the tea partiers. The outright lies they told about policies that have been enacted were horrific.

    Example - the 700B economic stimulus plan included 300B in personal tax cuts and another 100B in small business incentives. So out of the 700B, 400B was tax cuts.

    But you'd never know that if you asked a tea partier. According to them, Obama raised taxes to pay for the stimulus.

    It's idiocy and both sides promote it. But both sides also thrive because of a pathetically and WILLFULLY ignorant public that will listen to the likes of MSNBC and Fox news as if it's factual reporting.

    And I'll place my job on the line in betting that things are going to get worse, not better as we approach 2012.

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  28. Truman - I agree that reconciliation has been abused by both Republicans and Democrats. Where has a tea party member said that Obama raised taxes to pay for stimulus?

    Curious question: How does one fund a tax cut?

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  29. No, I was saying that they accuse Obama of raising taxes, when in fact the 700B stimulus was 400B in tax cuts.

    It was just an example. Both sides use that type of mis-information. The problem is, people believe it.

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  30. New report out today. Will take a look over the weekend on it and look forward to hearing the fallout from it as it sounds like some favorable tax credits are going away if passed.

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