Here’s a fuller documentation of the Gang of Six plan, with the $500 billion in up-front cuts. Most of it kicks the can down the road by simply putting in place “statutory discretionary spending caps” (without saying where the cuts will come from) and “numerous budget process reforms” (without saying what they are). But they do get concrete on a couple points:

• The plan would shift to chained CPI, which the document calls “a more accurate measure of inflation.” If by “more accurate” you mean “a way to keep money away from Social Security recipients,” then yes, it’s more accurate. Because chained CPI is nothing more than a benefit cut for seniors, veterans and the disabled. Oh, that, and a regressive tax increase that falls most on the working poor. The plan says that SSI would be exempt for five years and then phase in over the next five, but the end result is a benefit cut that will accumulate as time goes on. And there’s no increase of the payroll tax cap to compensate on the other side. There’s also talk of a “minimum benefit” for Social Security, but this is a typical throw-in to try and distort the issue of a benefit cut.

• It would also repeal the CLASS Act, a Ted Kennedy-authored plan included in health care reform that would provide federal voluntary long-term care insurance. The powers that be have decided that it’s too expensive, even though in the 10-year budget window it doesn’t cost any money.

So there’s your up-front “shared sacrifice”: cuts to Social Security, a regressive tax hike, repealing a benefit for older Americans on long-term care insurance.

The rest of the package is basically worse. The Senate Finance Committee would instruct the committees of jurisdiction to find $400-$500 billion in health savings, mostly from payments to doctors but also possibly through elements like raising the Medicare eligibility age or increasing cost-sharing (i.e. raising co-pays and deductibles). Armed Services would “find” $80 billion. HELP would “find” $75 billion. Homeland Security would “find” $65 billion. The word “find” makes it sound so simple.

Then you have a framework for tax reform with only three brackets, at 8-12%, 14-22% and 23-29% (the ranges depend on how many loopholes would get eliminated). The Earned Income Tax Credit and the Child Tax Credit would stay the same. The claim is that the whole reform would bring in an additional $1 trillion, but I think we saw with the last major tax reform that that’s a temporary condition. We have a President who has touted 16 small business tax breaks since he came into office. Those are the same kinds of evil “tax expenditures” this plan talks about removing. They’ll find their way back in over time.

This amounts to a $1.5 trillion tax cut from current law, with the Bush tax cuts set to expire in 2012. In other words, this effort raises $1.5 trillion less than what would happen if the Bush tax cuts simply went away. And it would enshrine those higher rates into law, which are more formidable than keeping the inevitable loopholes out.

By 2020, health spending has a “global budget,” just like Bowles-Simpson, which means growth cannot exceed GDP +1%. That’s just a magic asterisk, which says “keep costs down” without a plan about how to do it.

You’re basically looking at Bowles-Simpson all over again, with some minor tweaks here and there. It closes the deficit by no more than if you simply let the Bush tax cuts expire and we returned to the Clinton tax rates, which may not be a perfect solution, but which requires zero effort, protects Social Security and Medicare and Medicaid and food stamps and every discretionary policy there is. And that can be built upon in the areas of defense, among other places. I can’t see how this jumble, which makes the poor and the elderly pay for the mistakes of the rich and the connected, improves upon it.

David Dayen

David Dayen