Erskine Bowles, a Democrat and Alan Simpson, a Republican, were appointed by President Obama as deficit commission co-chairmen. Sen. Tom Coburn, R-Okla., a commission member, helped draft the list of budget cuts. The panel can simply suggest specific cuts while calling for larger caps on spending. Yet the leaders supplied a laundry list of tips to show it can be carried out. “There’s plenty of beef in our proposal,” Bowles said. The panel must report by Dec. 1. To prompt congressional action, the strategy or any component of it must be approved by 14 of 18 commission members. Suggested savings in 2015 consist of:
$28 billion by finding efficiencies and reducing overhead in the Defense Department, partly as it was recommended by Secretary Robert Gates earlier this year. Gates wants to apply the savings to force structure and modernization; this would put the savings toward deficit reduction; $20 billion by cutting back on Pentagon weapons purchases by 15%. It would end programs such as the V-22 Osprey and ship-to-shore assault vehicles and reduce the number of F-35 fighter jets to be purchased; $18 billion by cutting 250,000 contractors for domestic agencies, from among at least 2.5 million; $16 billion by eliminating all earmarks, the parochial or pet projects included by lawmakers in spending bills. There were more than 9,000 in 2010; $15 billion by implementing a three-year freeze beginning in 2012 on non-defense salaries, bonuses and other compensation for federal workers; $13 billion by cutting the federal workforce 10% by 2020, which would be done by hiring two workers for every three who leave the government. The goal would be to cut 200,000 out of about 2 million employees.
Many of the cuts are much more symbolic than purposeful. A 15% cut in the White House and congressional budgets might save $800 million in 2015, much less than 0.2% of that year’s expected deficit. Other people could be controversial, such as increasing out-of-pocket well being costs for some veterans whose injuries aren’t connected to their service. Cuts towards the Smithsonian could force it to start charging fees. Funding for the Corporation for Public Broadcasting, which helps support National Public Radio and public television, would be zeroed out. Some are standbys, like slowing the growth of foreign aid, an Obama priority, saving $4.6 billion annually. Other people are new ideas, such as a $1.2 billion savings by reducing federal subsidies for commercial spaceflight. Airports would see funding cuts. The strategy requires $2 billion in savings by requiring airports to pay more for aviation security, and $1.r billion by eliminating capital investment grants to big and medium airports.
The top tax rate is currently 35 percent and is scheduled to increase to 39.6 percent in 2011. The commission would cut that rate to between 23 and 28 percent, whilst shaving between seven and nine points from the corporate rate. The commission does suggest taxing capital gains and dividends as ordinary revenue, a move that will lead to a higher responsibility for the wealthy. Additionally, it gets rid of some corporate tax breaks. However those deficits for leading earners could be much more than offset by their tax cuts.
The commission also deals with Social Security, although the program doesn’t lead to the deficit and, actually, is operating a multi-trillion dollar surplus. The commissioners would enhance full retirement age to 69 gradually and also the early retirement age to 64. Social Security would be tilted toward a welfare program instead of a social insurance method if the commission’s recommendation to offer poorer seniors having a “special minimum benefit” is enacted into the law. Home Budget Committee Chairman John Spratt (D-S.C.), who lost election in November, pointed out in his comments towards the commission that he’d also help it, but didn’t come flat-out and say he will vote yes.
Even as the deficit hyperbole hits a fever pitch in Washington, leading progressives are strenuously warning of the overwhelming effects a turn to austerity might have on the economy in both the short and long term. There are a high road and a low road with regards to deficit reduction, they argue. The high road method includes robust job-creation measures in the short run and long-term investments in infrastructure, education, and other public goods. Sustained financial growth, after all, will be the best method to reduce deficit spending.
Progressives have presented three of their own deficit-reduction plans, all of these calls for increased spending until unemployment falls to manageable levels, and major public investments to come, paid for via tax hikes for the rich and for financial speculators. One of the couple of areas of agreement in between deficit hawks and progressives, interestingly enough, is the fact that the once inviolable defense budget should take a huge hit — somewhere on the order of $1 trillion over 10 years.
The AFL-CIO can also be out in opposition towards the plan. “With this report the Deficit Commission once again tells working Americans to ‘Drop Dead,’” said AFL head Richard Trumka. “No proposal on fiscal issues is serious that results the Bush tax cuts for the rich in place while raising taxes on the middle class and slashing Social Security and Medicare. All commission members should vote no on this misguided plan.”