The Deficit Commission's Recommendations for Reducing the Deficit

[Big Boss]

A lot of key recommendations are listed here, but the big ones making the headlines have to do with Social Security:

Social Security cuts:
• Index the retirement age to longevity -- i.e., increase the retirement age to qualify for Social Security -- to age 69 by 2075.
• Index Social Security yearly increases to a lower inflation rate, which will generally mean lower cost of living increases and less money per average recipient.
• "Increase progressivity of benefit formula" -- i.e., reduce benefits by 2050 for middle, and, especially, higher earners, relative to current benefits.
• Increase the Social Security contribution ceiling: while people only pay Social Security taxes on the first $106,800 of their wages today, that's only about 86% of the total potentially taxable wages. The co-chairs suggest raising the ceiling to capture 90% of wages.

And as for tax reform:

The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.

Some of the proposed cuts—like the defense cuts—I can get behind if they were proposed as standalone objectives, but overall, this just seems like an assault on the middle class and another example of an out-of-touch Washington. However, it's important to remember that the recommendations are not the final product; they're just going to shape Congressional debate on this issue.

Other opinions?

 

[dudalb]

A lot of key recommendations are listed here, but the big ones making the headlines have to do with Social Security:



And as for tax reform:



Some of the proposed cuts—like the defense cuts—I can get behind if they were proposed as standalone objectives, but overall, this just seems like an assault on the middle class and another example of an out-of-touch Washington. However, it's important to remember that the recommendations are not the final product; they're just going to shape Congressional debate on this issue.

Other opinions?

Most Political Commentators are calling this DOA in Congress with both parties.

 

[KoihimeNakamura]

too many third rails.

 

[Tsukasa Buddha]

This is why psychologists say it is bad to cloister a group together.

 

[The Don]

Index the retirement age to longevity -- i.e., increase the retirement age to qualify for Social Security -- to age 69 by 2075.

Already in train, for men 65 to 66 and for women from 60 to 66 by 2020

Index Social Security yearly increases to a lower inflation rate, which will generally mean lower cost of living increases and less money per average recipient.

Already switched from RPI to CPI both for state and many vocational pensions

"Increase progressivity of benefit formula" -- i.e., reduce benefits by 2050 for middle, and, especially, higher earners, relative to current benefits.

Already in process:

- No child benefit for higher end tax payers
- Reduction in tax credits

Increase the Social Security contribution ceiling: while people only pay Social Security taxes on the first $106,800 of their wages today, that's only about 86% of the total potentially taxable wages. The co-chairs suggest raising the ceiling to capture 90% of wages.ction points noted are being put in place.

Until a few years ago, National Insurance (Social Security) was only applied to the proportion of salary attracting lower tax rates. Now all increases are on all income. Example:

8% on the first £40,000
2% on all salary

 

[eeyore1954]

A lot of key recommendations are listed here, but the big ones making the headlines have to do with Social Security:



And as for tax reform:



Some of the proposed cuts—like the defense cuts—I can get behind if they were proposed as standalone objectives, but overall, this just seems like an assault on the middle class and another example of an out-of-touch Washington. However, it's important to remember that the recommendations are not the final product; they're just going to shape Congressional debate on this issue.

Other opinions?

I suspect this will be ignored for the most part in congress. Especially in the near term. But I always love recommendations to change things in the distant future such as increasing the Social security age to 69 by 2075. After all that is only 65 years away.

 

[Puppycow]

Most Political Commentators are calling this DOA in Congress with both parties.

too many third rails.

This is why it came out after the election.

Curious though, didn't we just have a "wave election" because the American People are fed up with socialism and want to cut the size of government?

Well, here's a group of people who've thought long and hard about how to do that. Governor Christie was on Meet The Press last Sunday saying that now was the time to make hard choices and for republicans to "put up or shut up" or besent back to the wilderness in to years.

 

[Kestrel]

If we really want to cut the deficit over the long term, we should be doing more to stimulate the economy and get Americans back to work.

 

[Random]

More of the same "cut taxes for the rich and get the poor and working class to pay for it" garbage we have been hearing from the wise men of Washington for decades. Of course, that message never goes down well with the people, so they always try to find some way to hide it. This thing is complicated, but no different. The big two items that pop out at me are cuts in Social Security benefits, and dropping the top marginal income tax rate to 23%. Not sure what other message you might get out of that.

 

[Puppycow]

Paul Krugman's take:

It seemed obvious, as soon as the commission’s membership was announced, that “bipartisanship” would mean what it so often does in Washington: a compromise between the center-right and the hard-right.
. . .
It soon became clear that Erskine Bowles, the Democratic co-chairman, had a very Republican-sounding small-government agenda.
. . .
Start with the declaration of “Our Guiding Principles and Values.” Among them is, “Cap revenue at or below 21% of G.D.P.” This is a guiding principle? And why is a commission charged with finding every possible route to a balanced budget setting an upper (but not lower) limit on revenue?

Matters become clearer once you reach the section on tax reform. The goals of reform, as Mr. Bowles and Mr. Simpson see them, are presented in the form of seven bullet points. “Lower Rates” is the first point; “Reduce the Deficit” is the seventh.

So how, exactly, did a deficit-cutting commission become a commission whose first priority is cutting tax rates, with deficit reduction literally at the bottom of the list?

Actually, though, what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.

It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans. And what does any of this have to do with deficit reduction?

 

[JoeTheJuggler]

• Index Social Security yearly increases to a lower inflation rate, which will generally mean lower cost of living increases and less money per average recipient.

Already switched from RPI to CPI both for state and many vocational pensions

I thought something like that was going on. A buddy of mine who is 72 told me he got no cost of living increase the last year or two. He said they sent out a letter saying that inflation was zero (calculated by excluding energy and housing).

 

[Kestrel]

Budget Puzzle: You Fix the Budget from the New York Times.

 

[tyr_13]

Budget Puzzle: You Fix the Budget from the New York Times.

That's pretty cool. Look, I made a budget surplus! Let's spend it on infrastructure and a cool new national monument.

EDIT: 56% Tax, 44% Spending reduction

 

[jayh]

As long as the Republicrats are in power, nothing will be done.

They are both dedicated to a massive intrusive military with 1000 military installations on foreign soil.

In the western world, birth rates have been dropping, life spans have been increasing. This is viewed as a good thing, but it is heading to make many government funded programs unsustainable (Social security, medicare... government medical care is starting to collapse in parts of Europe and it will not get any better). The whole system is based on lots of young healthy people supporting a small, but expensive population of older ones. That model is being eroded at both ends.

 

[JoeTheJuggler]

Start with the declaration of “Our Guiding Principles and Values.” Among them is, “Cap revenue at or below 21% of G.D.P.” This is a guiding principle? And why is a commission charged with finding every possible route to a balanced budget setting an upper (but not lower) limit on revenue?

And is this even possible? Congress makes budgets and passes tax laws for the coming year, and we don't know GDP until after the year is over.

And setting tax policy isn't an exact science anyway. Rates are set as percentage of income, but we don't know exactly how high incomes will be when we set the rates.

 

[Beerina]

As long as the Republicrats are in power, nothing will be done.

They are both dedicated to a massive intrusive military with 1000 military installations on foreign soil.

In the western world, birth rates have been dropping, life spans have been increasing. This is viewed as a good thing, but it is heading to make many government funded programs unsustainable (Social security, medicare... government medical care is starting to collapse in parts of Europe and it will not get any better). The whole system is based on lots of young healthy people supporting a small, but expensive population of older ones. That model is being eroded at both ends.

...and government jails private individuals that attempt the same thing. They're called Ponzi schemes, and are all about paying off previous investors with intake from new investors.

They are portrayed as a savings plan for retirement, but are legally a welfare system -- a transfer of money from current taxpayers to the favored group.

Previous generations never payed enough, and current generations will never get out of it what they contribute. That inflection point was passed ten years ago, IIRC.

And the SS savings is a joke, as the government just loans it to itself and spends it. This means when it's time to start pulling out this "savings" to use it on retirees, government will have to tax or borrow it anyway to pay itself back.

 

[Tsukasa Buddha]

...and government jails private individuals that attempt the same thing. They're called Ponzi schemes, and are all about paying off previous investors with intake from new investors.

I distinctly remember going over this before...

They are portrayed as a savings plan for retirement, but are legally a welfare system -- a transfer of money from current taxpayers to the favored group.

This seems oddly familiar...

Ponzi schemes are a type of investment fraud. Unless you can provide evidence that Social Security is "sold" as an investment and not a social welfare program for seniors and the disabled, and that the finances are all hidden from sight, please stop trying to smear it.

 

[Kestrel]

Ponzi schemes are a type of investment fraud. Unless you can provide evidence that Social Security is "sold" as an investment and not a social welfare program for seniors and the disabled, and that the finances are all hidden from sight, please stop trying to smear it.

Social Security is best described as an insurance program. If you die and leave behind dependents that counted on your income, they will receive benefits. If you become disabled before retirement age, you will receive benefits. If you live to retirement it provides retirement income.

 

[Magyar]

I distinctly remember going over this before...

And WHY would you think that that would make ANY difference to republican sheepple who are obviuosly incapable or totally unwilling to consider any idea or evidence other then what is spoon fed to them by the likes of Limbough and Culter.

 

[WildCat]

I thought something like that was going on. A buddy of mine who is 72 told me he got no cost of living increase the last year or two. He said they sent out a letter saying that inflation was zero (calculated by excluding energy and housing).

For years the COLA was way higher than inflation, including energy costs.