Tag: Tax Reform. Simpson Bowles Commission

Cross posted from The Stars Hollow Gazette

The “comedy team” of former Sen. Alan Simpson (R-WY) and businessman Erskine Bowles trotted out their latest version of their unauthorized report from the “Cat Food Commission” that they co-chaired for President Barack Obama. Not surprisingly, the dynamic duo of austerity and cuts to the social safety net go even further with the 2.0 version of their solution for ending the mythical budget crisis calling for even greater cuts and less revenue all on the backs of those who have the least to contribute:

The corporate austerians released their ‘new’ Bowles-Simpson recommendations today (pdf). They claim that they are building upon their original plan, not replacing it. They framed their recommendations as the last two steps in a four step process. For Social Security followers, Step Three includes the chained CPI. And Step Four includes all of the previous cuts to Social Security which they recommended in their first plan.  Raising the retirement age starting in 2022 slowly to 69, cutting benefits through re-indexing and flattening  all future benefits for our recipients in 2050. [..]

The corporate austerians go for installing the chained cpi first. Why? It could be that they still think that most Americans do not realize that the chained cpi is a cut which keeps on cutting [..]

The language is a vague euphemism for cuts; code words to their rich buddies that the uploading of wealth will not be threatened with significant new taxes. No pesky new scrap-the-FICA cap income taxes which might be used to pay for under-funded social insurance programs.

Meanwhile, President Obama, seemingly ignoring his two side show buddies, called for tax reforms that would increase revenue and a more balanced approach to the looming sequestration that would impose draconian cuts to non-defense spending programs. Taking lessons from Bill Maher, the Speaker of the House, Rep. John Boehner (R-OH), is having none of that and has proposed “new rule“:

“The sequester will be in effect until there are cuts and reforms that put us on a path to balance the budget in the next 10 years.”

At Maddow Blog, Steve Benen points out that Mr. Boehner may not have thought this “new rule” through and it could pose some problems in his caucus:

One of the details that often goes overlooked is that the House Republican budget plan from the last Congress — the one that included all the spending cuts, entitlement reforms, and tax breaks the GOP are desperate to have — didn’t bring the federal budget into balance until 2040. That’s not a typo — under the House Republican plan, written by Paul Ryan, the United States would run deficits every year for nearly three decades, and then might reach a balanced budget 27 years from now if optimistic projections are met.

And that plan included spending cuts so severe, GOP candidates were afraid to talk about them out loud in public.

This year, however, thanks to a new “rule” embraced by Boehner and his cohorts, the new House Republican plan intends to balance the budget by 2023, instead of 2040. Why does that matter? Because trying to eliminate the entirety of the deficit in one decade instead of three necessarily means ridiculously drastic cuts.

A plan from the House Progressive Caucus that presented the unique idea that creating jobs would bring down the already shrinking deficit. But, as Greg Sargent of the Washington Post‘s “Plum Line“, notes it stands little chance of even being considered in the Republican held House:

Needless to say, this plan – the creation of the Congressional Progressive Caucus – has no chance whatsoever of passing Congress. Which is exactly the point: No plan that prioritizes job creation as the best means of reducing the deficit; no plan that cuts defense while determinedly avoiding any cuts that would hurt the poor and elderly; no plan that includes equivalent concessions by both sides – could ever have a prayer in today’s Washington. It’s yet another indication of how out of whack Washington’s priorities are.

Greg sums up the problem of the GOP’s approach in a nutshell:

So, Boehner says House Republicans are not only willing to let the sequester hit, but that the only acceptable replacement for it will be a plan that wipes away the deficit in 10 years – all without revenues. [..]

There’s simply no chance that House Republicans will produce such a budget by March 1st, which is the deadline for the sequester. If Boehner means any of this, he’s confirming that we’re getting the sequester, and it will remain in effect until it is replaced by a plan that is simply never, ever going to happen. Wiping out the deficit in 10 years with no new revenues would be at least as bad as the Ryan plan – probably worse – yet even that plan was loaded up with unspecified cuts and other big question marks. Republicans are never going to propose specific cuts that balance the budget in 10 years with no new revenues – ever. Boehner has, in effect, just taken ownership of the sequester.

No, Mr. Boehner has not thought this “boner” through.  

Cross posted from The Stars Hollow Gazette

President Obama will open deficit reduction talks on Friday with a call for a $1.6 trillion tax hike on corporations and the wealthiest Americans over the next 10 years. Obama and House Speaker John Boehner are sitting down to avert the so-called “fiscal cliff” of expiring tax cuts and automatic spending reductions set to take effect at the end of the year. We’re joined by Guardian columnist Glenn Greenwald, who says the protection of “entitlement” programs will depend on action from Obama’s progressive supporters. “The question is: Will the Democratic Party, and specifically the progressive and liberal component of the Democratic Party, change its behavior from cheerleader, from blindly supportive, partisan apparatchiks … into some kind of a force where they actually fulfill their duties as citizens, which is to hold political leaders accountable?” Greenwald asks.

Transcript can be read here

They don’t call it the “cliff” for nothing. It’s the fiscal spot where a nation’s representatives can gather and cry doom. It’s the place – if Washington is to be believed – where, with a single leap into the Abyss of Sequestration, those representatives can end it all for the rest of us.

In the wake of President Obama’s electoral victory, that cliff (if you’ll excuse a mixed metaphor or two) is about to step front and center. The only problem: the odds are no one will leap, and remarkably little of note will actually happen. But since the headlines are about to scream “crisis,” what you need to understand American politics in the coming weeks of the lame-duck Congress is a little guide to reality, some Cliff Notes for Washington.

As a start, relax. Don’t let the headlines get to you. There’s little reason for anyone to lose sleep over the much-hyped fiscal cliff. In fact, if you were choosing an image based on the coming fiscal dust-up, it probably wouldn’t be a cliff but an obstacle course – a series of federal spending cuts and tax increases all scheduled to take effect as 2013 begins. And it’s true that, if all those budget cuts and tax increases were to go into effect at the same time, an already weak recovery would probably sink into a double-dip recession.

But ignore the sound and fury. While prophecy is usually a perilous occupation, in this case it’s pretty easy to predict how lawmakers will deal with nearly every challenge on the president’s and Congress’s end-of-year obstacle course. The upshot? The U.S. economy isn’t headed over a cliff any time soon.

A peek at the obstacles ahead makes that clear. [..]

Among all the spending and tax changes in the queue, and all the hype around the cliff, the great unknown is whether it’s finally farewell to the Bush tax cuts for the wealthy. And that’s no perilous cliff. Letting those high-end tax cuts expire would amount to a blink-and-you-miss-it 0.003% contraction in the U.S. economy, according to Moody’s, and it would raise tens of billions of dollars in desperately-needed tax revenue next year. That’s no small thing when you consider that federal revenue has fallen to its lowest point in more than half a century. Ending these tax cuts for the wealthy would bring in cash to reduce deficits or increase funding for cash-starved priorities like higher education.

It’s impossible to say how Congress will come down on this final issue, though we do know how lawmakers will arrive at their decision. At least Congress is consistent. On this, as on all other matters in the fiscal obstacle course, it’s not the economy.

It’s the politics, stupid.

Cross posted from The Stars Hollow Gazette

In a speech to the National Press Club, Senator Charles Schumer (D-NY) rejected the current compromise for a bipartisan deficit reduction plan that would prevent the trigger of tax increases and automatic spending cuts that go into effect on January 1. He stated that the compromise could not bring in more revenue by lowering the top tax rate and still protect the middle class from tax increases:

Specifically, he’s publicly urging Democrats to abandon a tax reform model that calls for ending tax expenditures, many of which benefit middle income earners, in order to finance a large tax rate cut for wealthier people. It’s a framework that’s popular among economists, particularly conservative ones, but that a group of Democrats negotiating with Republicans to avert large tax increases and sharp spending cuts next year have also embraced.

Instead, he proposes targeting tax loopholes and deductions that benefit top earners and raising their top income tax rate, while simultaneously narrowing the tax code’s preference for capital gains by ratcheting up the capital gains rate from its current, historically low rate of 15 percent. Taken altogether it’s a call for significantly more revenue from high-income earners than Dems have sought by proposing to allow the Bush tax cuts for top earners to expire; and an attempt to strengthen Dems’ negotiating posture, lest they get lured into conceding another large income tax cut for the wealthy.

Sen. Schumer proposes to freeze the top two tax bracket, cut the loopholes and deductions that benefit the top earners and raise the capital gains tax.

David Dayen at FDL News Desk notes that this would be a “major blow” to the Simpson-Bowles plan that would see the tax rates reduced to 23% for the top earners.

So how would Schumer get the Republicans to sit down at the table? As David point out, simple by dangling “entitlement” reform:

But there’s a giant caveat to all of this, based on the excerpts (haven’t yet found the full speech):

  But he says that Republicans should be drawn to such a deal by the prospect of a bipartisan bargain that also includes changes to improve the sustainability of entitlement programs. Those programs – such as Social Security and Medicare – are expected to run substantial shortfalls in the future, adding dramatically to budget deficits.

   “The lure for Republicans to come to the table around a grand bargain should be the potential for serious entitlement reform, not the promise of a lower top rate in tax reform,” Mr. Schumer is expected to say, according to excerpts of his speech.

So Schumer wants to trade unworkable “tax reform” for deeply unpopular “entitlement reform.” That’s not really a great trade. It’s good to acknowledge that tax reform will never work the way its most passionate advocates suggest. But if that doesn’t exist as a “get” for Republicans in a grand bargain, and entitlement cuts are the substitute, we have a whole different problem.

While Schumer claims that the concession on “entitlement” reform would not include privatization or a voucher program,  Atrios noted the Republicans have no interest in “reform” of entitlements unless it includes privatization and tax cuts for the wealthy. In other words, the chances of getting anything done have greatly increased.