At least the Catfood Commission on deficit report being discussed today will show that spending cuts – without tax increases – makes a minimal dent in the deficit.
But the proposal does cut BOTH domestic and military spending starting in 2012, and does an overhaul of the tax code to raise revenue, for about $4 trillion – about the same deficit reduction as we would get from doing None of the Bush tax cuts for the rich and corporate.
They cover up the 40% reduction in Social Security (20% from age 70, 20% from changing wage history indexing to date of retirement to the gov’s “special inflation index for urban workers”) via a minor improvement for very low income people who would get a higher benefit — as it DOES NOT END WAGE CAP – just lifts it a bit higher – all this to save a system that pays 75% of scheduled benefits if nothing is done.
And it proves that it does this out of love and is not trying to end the deficit on the backs of seniors by not “counting” any savings from Social Security toward meeting the overall deficit-reduction goal set by Obama.
And as to “simplification of the tax code” we get modification or repeal of various tax breaks – including ending/modifying the deductibility of mortgage interest payments and ending the exemption from taxes for employees’ health benefits— so as to do another tax rate reduction (again how does this help the deficit you ask – well that mortgage deduction and health deduction are a lot of money).
The new gift of lower tax rates is a 10% bracket that goes to 8%, with a 23% bracket as the highest rate – replacing the current 35 percent that will go to 39% if Clinton rates start next year. We also reduce corporate tax rate, now 35 percent, to 26 percent.
But through the magic of a lost mortgage deduction we get additional tax income of $80 billion in 2015.
Obama knows the proposals will fail, but as usual he is giving away the store before he starts to bargain with the GOP on deficit reduction – you JUST KNOW that these proposals are the Obama STARTING POINT for the next 2 years – and the song will be “the deficit commission commission made him agree with the GOP – he had no choice”.
There will be other groups giving other deficit reports – and budget deficit reduction via spending cuts alone has yet to be put to bed – and Club for Growth will want the tax cuts and screw the spending cuts because we will use “dynamic scoring” that shows how dropping the tax rate to 5% yields 10 times more than keeping it at 35%.
And remember – this is all caused by Baby Boom generation retirees and all those federal benefits and non-defense discretionary spending. And please do not ask about road and bridge repair.