CAP's Tax Reform and Deficit Reduction Plan

A Synopsis of CAP’s Comprehensive Tax Reform and Deficit Reduction Plan
December 4, 2012
http://www.americanprogress.org/issues/tax-reform/news/2012/12/04/46837/a-tax-reform-and-deficit-reduction-plan/

Earlier this year, with the fiscal showdown on the horizon, the Center for American Progress convened a group of leading economic experts—including former White House chiefs of staff, former U.S. Treasury Department secretaries, and former directors of the National Economic Council—to develop a plan that would address some of the most serious flaws in the federal tax code and achieve meaningful deficit reduction.

The plan addresses some of the most serious flaws in the federal tax code while raising additional revenue to be used for deficit reduction, and at the same time offering changes to government spending. Chief among our tax system’s problems is the fundamental failure to raise revenues adequate to fund the necessary operations, services, public investments, and protections of government. In addition to this most basic of shortcomings, the current tax code is also weighed down with far too many special provisions, loopholes, targeted tax subsidies, and sheltering opportunities. These aspects serve to not only complicate the code and the process of tax filing, but some of them introduce economic distortions and undermine the confidence of the American public that their tax system is treating everyone fairly.

Amending our tax system to raise more revenue progressively, simply, and efficiently, coupled with targeted spending reductions, are the keys to addressing our long-term fiscal challenges. These are challenges we must address or face a future in which critical public investments such as education and infrastructure will go underfunded; key national priorities such as strengthening the middle class, reducing poverty, and building a world-class infrastructure will remain unaddressed; income inequality will continue to rise; and confidence in America’s ability to govern its fiscal affairs will continue to fall. The report being released today outlines a plan that reduces the federal budget deficit by $4.1 trillion over the next 10 years while offering measures to boost the economy in the short run as we recover from the recession.

Our plan accomplishes its deficit reduction primarily through a wide-ranging reform of the personal income tax system that raises adequate revenues progressively while making the tax system more efficient, simple, fair, and comprehensible. The key features of our plan are:

A top marginal rate for the personal income tax of 39.6 percent as it was under President Bill Clinton

Converting tax deductions that tend to favor those in top tax brackets into uniform credits that bestow equal benefits on taxpayers in all brackets

A top marginal rate of 28 percent on capital gains as it was under President Ronald Reagan and throughout much of the 1990s

Closing tax loopholes

Simplifying tax filing

In addition our plan includes targeted spending cuts, most significantly $385 billion in federal health care savings.

The Center for American Progress plan will set the federal budget on a sustainable course, beginning with a comprehensive reform of the tax code. First and foremost, this plan will raise approximately $1.8 trillion more than we would under current tax policies. By the end of the decade, our tax system would match the revenue proposed by the bipartisan chairs of the president’s 2010 fiscal commission, Alan Simpson and Erskine Bowles. Furthermore, our reforms ensure that the additional revenue is raised in a progressive way. The vast majority of the new revenue will come from households making more than $500,000 a year, and households earning less than $100,000 a year will, on average, pay a little less.

Second, our tax plan will simplify the filing process and streamline the code so that everyone can trust that each taxpayer is being treated fairly. Our plan would tax different sources of income much more equally than the current code does. It would remove the alternative minimum tax, repeal other provisions that add complexity, reduce the number of people who have to itemize, and eliminate unjustified tax loopholes. It would also turn certain deductions that currently favor those in higher tax brackets into credits that will bestow equal benefits. A large “standard credit” protects middle-income filers and relieves even more taxpayers of the need to itemize expenses than under the current tax code.

Our plan restores the top rate to the same rate that existed during the 1990s’ economic expansion: 39.6 percent for those in the top bracket (people earning more than $400,000). Most taxpayers would be in the 15 percent tax bracket under our plan. The plan also treats investment income and wage income more equally. It restores the capital gains rate to 28 percent—where it was after President Reagan signed the 1986 tax reform act and where it was for most of the 1990s. And it treats dividends as ordinary income—as they were for decades until 2003. The vast preponderance of the economic evidence shows that tax rates at these levels are no obstacle to economic growth. In fact, the cuts in top tax rates has only led to deficits and increased after-tax inequality.

This tax reform, combined with reasonable spending reforms, will place our federal budget onto far stronger foundations. We identify hundreds of billions of dollars in new spending savings that come on top of the $1.5 trillion in spending cuts already enacted into law. These include nearly $385 billion in mostly Medicare savings, $100 billion in further defense savings, and $100 billion from other programs. And by putting these measures into place, which will reduce budget deficits over the next decade, we make room for critical investments in job creation today.

All together, our combined plan will reduce the projected federal budget deficits by approximately $4.1 trillion over 10 years. Enactment of our plan would reduce the publicly held debt from currently projected levels of near 90 percent in 2022, to below 72 percent and falling.

Our proposed tax reform at a glance

Personal exemptions, standard deduction, itemized deductions: Replaced with a “standard credit” ($5,000 for couples and $2,500 for singles) and 18 percent “itemized credits,” except charitable contributions would generally receive an itemized credit of up to 28 percent. Taxpayers would have the choice of claiming the standard credit or itemized credits. The impact of the effective reduction of the mortgage interest tax preference for those in higher tax brackets is phased in over time.

Dependent exemption: Replaced with an expanded child tax credit of $1,600. Child credit is refundable under today’s rules and the phaseout point is lifted to $200,000. A $600 nonrefundable credit is available for nonchild dependents.

Capital gains and dividends: Tax capital gains at a maximum 28 percent rate (including the Medicare tax that goes into effect in 2013) and dividends as ordinary income.

Health care exclusion: The value of the exclusion is limited for those with earnings in excess of $250,000 per year to 28 percent.

Marginal tax rates: (see Table 3 below)

Earned income tax credit: Recent EITC enhancements are permanently extended.

Personal exemption phaseout, or “PEP,” and itemized deduction limitation, or “Pease”: Eliminated.

Alternative minimum tax: Eliminated.

Estate tax: Exemption of $2 million per individual—$4 million per couple and 48 percent top rate—indexed for inflation. Close loopholes in the estate and gift tax as proposed by President Obama.

Other elements:

50-cent increase in cigarette tax

Tax on alcoholic beverages at a uniform $16 per proof gallon

Regulating and imposing small fees on Internet gambling

Permanent extension of the research and experimentation, or R&E, tax credit and clean energy incentives

Corporate tax reform that increases corporate tax revenues by 4 percent and results in a lower statuatory rate

$12 billion in savings from reforms to tax-preferred retirement and savings plans

Elimination of “carried interest” loophole and “S corporation” Medicare tax loophole

Don't Let Deficit Panel Co-Chairs Hype a Bad Plan

http://www.thenation.com/blog/156831/after-deficit-panel-deadlock-progressives-must-promote-alternative-austerity

Don't Let Deficit Panel Co-Chairs Hype a Bad Plan, Embrace the Progressive Alternative That Saves Social Security
John Nichols
December 3, 2010

The National Commission on Fiscal Responsibility and Reform failed to produce a mandate for assaulting Social Security, undermining Medicare and Medicaid and generally balancing the budget on the backs of working Americans.

But that hasn't stopped its co-chairmen from claiming a sort of victory for their plan to make Main Street pay for Wall Street's failures.

Their goal is obvious. Commission co-chairs Alan Simpson and Erskine Bowles want to spin a win they did not achieve in order to foster the false impression that their ominously titled " Moment of Truth" proposal is the only real alternative to fiscal ruin. That's not the case. There are better proposals—such as the detailed alternative to austerity outlined by commission member Jan Schakowsky. But this is a critical juncture, and progressives need to be conscious that an effort will be made to narrow the range of options and impose key elements of a bad plan that failed to gain required support.

Let's start by getting a few things straight:

The commission was given a clear charge when President Obama cobbled it together in February—after failing to win congressional support for the formal launch of the project.

The commission was to come up with a plan address deficits, debts and the challenge of maintaining a federal government at a point when revenues are not sufficient to keep paying for every war, bailout and boondoggle that comes along.

Proposals for what could be radical, and in many cases painful, change had to attract broad support, so the president said that at least fourteen of the eighteen members of the commission would need to back an initiative before he would promote it. Senate majority leader Harry Reid and House speaker Nancy Pelosi promised to hold votes this year vote a consensus could be reached.

On Friday, the commission co-chairs failed to get to fourteen. Only eleven members of the commission voted "yes," while seven voted "no." And the seven "no" votes came from precisely the members whose votes were most needed if this plan was to have legitimacy. Three House conservatives—incoming Budget Committee chair Paul Ryan, R-Wisconsin; incoming Ways and Means Committee chair Dave Camp, R-Michigan; and incoming Republicans Conference chair Jeb Henserling, R-Texas—voted "no" because they did not think it went far enough in calling for tax cuts and the gutting of entitlement programs.

Two key House Democrats, Xavier Beccera, D-California, and Jan Schakowsky, D-Illinois, voted "no" because, as Schakowsky explained it, the proposed benefit cuts would have meant that "those who have not joined the prosperity party the last couple years are being asked to pick up too much of the tab."

Senate Finance Committee chair Max Baucus, D-Montana, also voted "no," as did former Service Employees International Union president Andy Stern.

Opposition from the right and the left—including that of the legislators who will chair the House Budget and Senate Finance committees in the new Congress—is significant, as is the opposition of the most clearly identifiable representative of working Americans on the panel.

But commission co-chairs Simpson and Bowles, who went rogue last month and started promoting a proposal that lacked broad backing, were going to claim a mandate no matter what vote their got. Bowles declared victory, claiming that the panel had opened an "adult conversation" about cutting the deficit. Simpson, the former Republican senator from Wyoming who was the driving force on the commission, chirped: "I will walk home proudly, with my head held high."

Simpson is proud of his plan, and of the fact that he and Bowles won some unexpected votes for austerity—including that of the number-two Democrat in the Senate, Illinois's Dick Durbin. But what they aren't highlighting is the fact that Durbin announced that he was voting for the plan in order to "to kick-start an adult debate," not because he thought it was sound.

Pointing out that opposed many of the proposal's provisions and would not necessarily have backed it if it came to a Congressional vote, Durbin explained that: "I want progressive voices at the table arguing that we must protect the most vulnerable."

So what is the progressive alternative?

Stern offered a credible plan on Wednesday, calling for substantially larger tax increases than Simpson and Bowles proposed, along with a shift in government spending toward infrastructure investment.

But the strongest alternative is a detailed plan advanced by Schakowsky.

The Congressional Progressive Caucus member and key ally of outgoing House Speaker Nancy Pelosi—who has dismissed the Simpson-Bowles approach as a non-starter—has been the sanest voice in the commission's debate about how to balance budgets, reduce debt and grow the economy.

"Lower- and middle-class Americans did not cause the deficit. Just ten years ago the federal budget was generating a surplus as far as the eye could see. That surplus was turned into a deficit due to massive tax cuts—mainly to wealthy Americans; two wars paid for by borrowed money; and a major recession caused by the recklessness of the big Wall Street banks. Over the last decade the incomes of middle-class Americans have actually shrunk, while those of the wealthiest 2 percent of the population have exploded," argues Schakowsky, who says, "The middle class did not benefit from the Republican economic policies that led to the current deficit—they were the victims—they should not be called upon to pick up the tab."

As such, Schakowsky has rejected the Simpson-Bowles scheme, which would weaken Social Security, Medicare and Medicaid while cutting taxes for multinational corporations. "The president's Fiscal Commission has been given a concrete goal: to achieve primary budget balance in 2015, ensuring that all spending is paid for except for interest on the national debt," she explained after the co-chairs laid out their plan. "Their proposal," she explained, "would have serious consequences for lower- and middle-class Americans, and that is why I cannot support it."

But Schakowsky did not just say "no."

She presented an alternative plan to reduce the deficit by $427 billion over the next five years, far surpassing the target proposed by President Obama, and she would do it with an eye toward protecting the poor and the middle class and strengthening the economy.

"Fixing the federal deficit is not an end in itself. The goal of budget policy should be to assure long-term, widely shared economic growth," explains Schakowsky. "Economic growth is not just good for businesses and families—it will reduce the deficit. Sustained, long-term economic growth requires that we end the trend of concentrating more and more wealth in the hands of the rich and less and less in the hands of a middle class that can then afford to buy the products and services that will sustain economic growth."

Notably, Schakowsky preserves Social Security and other programs that protect and serve working Americans. Instead of undermining the program, she would assure its long-term solvency by eliminating the wage cap on the employer side and raising it to 90 percent on the employee side, applying FICA to all wage income below the cap and establishing a modest legacy tax on wealthier Americans.

This is part of a broader plan from Schakowsky, which has five key elements:

1. Increased economic stimulus to spur growth in the immediate term

• Provide $200 billion to invest over the next two years in measures to create jobs and spur economic growth, including passing the Local Jobs for America Act; and funding for education and law enforcement; Unemployment Insurance, Federal Medical Assistance Percentages (FMAP) and Supplemental Nutrition Assistance Program extensions; and infrastructure.

• Adopt the president's proposals to eliminate overseas tax havens and incentives for outsourcing

2. Smart, targeted spending cuts

• Non-defense discretionary—$7.55 billion in savings through increased efficiency and cuts to programs that benefit large corporations that don't need assistance.

• Defense discretionary—$110.7 billion in cuts from the 2015 defense budget, including efficiency savings, reducing our troop levels, cutting weapons systems we don't need and scaling back the wartime increases in the size of the military.

3. Mandatory spending cuts

• Healthcare—at least $17.2 billion in savings by implementing measures to bring down the cost of healthcare to the federal government and lower healthcare inflation overall.

• Other—$7.7 billion in savings by cutting agriculture subsidies in half, and redistributing federal support to offer greater benefits to small family farms and reduce subsidies to large corporate agribusiness.

4. Reductions in tax expenditures

• Raise $132.2 billion by closing tax subsidies for companies that ship American jobs overseas.

5. Increases in revenues

• Raise $144.6 billion in revenue through progressive reforms to the estate tax, treating capital gains and dividends as regular income, and enacting a cap-and-trade proposal that includes protections for lower-income people.

• Enact President Obama's budget proposal to let the Bush tax cuts for the top two brackets expire and return to 2009 estate tax levels.

• Nontax revenue—raise $7 billion by addressing places where the private sector is currently underpaying.

The plan that Schakowsky has produced is not the final word on how progressives ought to approach debates about fiscal policy, debts and deficits. There needs to be more consideration of the role that the trade deficit plays in destabilizing the US economy and the financial health of the federal government, as Ohio Congressman Marcy Kaptur has noted. There should be consideration of the proposals by Oregon Congressman Peter DeFazio for taxes on speculation and financial transactions. And there should be new approaches to how the Federal Reserve manages bank funds, as economist Robert Pollin has suggested.

But Schakowsky has provided the essential framework for the coming debate.

Simpson and Bowles can claim their hollow "victory."

But when the real debate about deficits and debts gets opens, progressives can say there is an alternative to austerity—an alternative, presented by Jan Schakowsky, that balances budgets, reduces debt, serves working families rather than Wall Street CEOs, protects Social Security and expands the economy.

A biblical solution to the deficit

http://onlinejournal.com/artman/publish/article_6610.shtml

A biblical solution to the deficit
By Michael Hasty
Online Journal Contributing Writer
Nov 22, 2010

People are always talking about how they’d like this to be a Christian nation, but the way the early Christians lived was more communist than capitalist. That’s the way it’s described in the Acts of the Apostles, with all the Christians pooling their belongings, to make sure everyone was taken care of. Karl Marx got “from each according to their ability, to each according to their need,” practically verbatim from the third chapter of Acts.

Christianity in its purest form is a radical idea, born as an antidote to empire, and practically impossible to practice in a competitive economic system like 21st century hypercapitalism. It is built on the ideas of social justice preached by the ancient Hebrew prophets. It’s built on the idea of a community taking care of each other. Humans are meant to live in small groups, not in masses. It is only by empowering communities that America will be able to return to democratic self-governance -- as opposed to our present rule by transnational corporations.

If we were serious about being a “Christian nation,” we could find a simple solution to our deficit “problem” (which is really only a problem for the global elite, who are just trying to figure out how to squeeze more blood from the American middle class turnip) by turning to the book of Leviticus, wherein God says in chapter 25, “The land shall not be sold forever: for the land is mine; for ye are strangers and sojourners with me.”

Since the land shouldn’t be sold forever, I recommend we adopt the solution described in Leviticus, and declare a jubilee year. In Leviticus, you’re supposed to have a jubilee year every fifty years: “And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.”

The solution to our deficit problem is to declare global bankruptcy, and start over. The only people truly inconvenienced would be the high rollers in the investor class, who have been piling up mountains of wealth built on everyone else’s debt. But then they can just work for a living, like the rest of us.

Let’s have a global jubilee. It’s the Christian thing to do.

Michael Hasty lives on a farm in West Virginia, where he wrote a column for seven years for the Hampshire Review, the state’s oldest newspaper. In 2000, it was named best column by the West Virginia Press Association. His writing has appeared in the Charleston Gazette, Online Journal, Common Dreams, Buzzflash, Tikkun and many other websites. He publishes the blog, Radical Pantheist. He plays guitar and harmonica with the folk/gospel trio, the Time Travelers. Email:. radicalpantheist@gmail.com.

New poll: Dire results if Social Security cuts happen with Dems in power

http://crooksandliars.com/john-amato/new-poll-dire-results-if-social-securit

November 20, 2010
New poll: Dire results if Social Security cuts happen with Dems in power
John Amato

I was being interviewed by Cenk on the Young Turks the other day and we spoke about the Cat Food Commission. I told him that it's unfathomable if any cuts to Social Security benefit cuts happened while a Democratic President was in charge. He agreed completely. It would be devastating to the American population and to the Democratic Party.

mcjoan@Dkos has a post up about a new poll conducted by Lake Research Partners on The Cat Food Commission and Social Security..

Overall, of the 1,200 likely voters surveyed, 82% of respondents oppose Social Security cuts to reduce the deficit, including 83% of Dems, 78% of Independents, 82% of Republicans, and 74% of Tea Party supporters.

The implications for Democrats are serious.

•According to national exit poll data, Democrats lost seniors by historic proportions—21 points—in the November mid-terms. Even in 1994, Democrats only lost seniors by 2 points.

•The survey reveals Democrats no longer have the advantage they traditionally have enjoyed on Social Security. However, candidates who made Social Security an issue often saved their seats, and voters who say Social Security was a top voting issue voted more for Democratic candidates.

•As we have seen in previous work, voters see little relationship between the deficit and Social Security.

•Voters strongly oppose cutting Social Security benefits, even under the rationales of reducing the deficit or making the program more solvent in the long run. They strongly oppose cutting benefits for those earning above $60,000, and they strongly oppose raising the retirement age to 69 years-old. This includes voters of all ages and partisan groups, including Republicans and Tea Party supporters.

•There is also strong bipartisan support for lifting the cap to impose Social Security taxes on all wages above $106,800. Support for this is stronger when both employers and employees are taxed.

...Social Security was a particularly important voting issue for independents who voted for a Democrat in this election, voters aged 65 to 74, and older voters who are women, independent, moderate, white and African American.

Democrats cannot afford to lose these demographic groups. That's the simple political calculus. The policy calculus, is that Democrats cannot betray their moral center and be the party responsible for consigning Americans to an old age of poverty and struggle.

The American people of all political stripes want one thing for certain. Their Social Security and the deficit be damned. If this were to actually take place, no matter how many Alan Simpson gasbags that the administration wheeled out from the right to praise the courage it took to cut Social Security to reduce the federal debt, the right wing noise machine would suddenly pivot and become the party that always believed in it and actually created the program. They would hijack the greatest social program ever created under FDR and the Democratic Party would be in ruins. I'm sick even having to discuss this thought.

Tags: deficit commission, Social Security

Schakowsky Releases Progressive Deficit Reduction Plan

http://news.firedoglake.com/2010/11/16/schakowsky-releases-progressive-deficit-reduction-plan/

Schakowsky Releases Progressive Deficit Reduction Plan
David Dayen
Tuesday November 16, 2010

I’m pleased to see Jan Schakowsky, a member of the Catfood Commission, release her own deficit reduction plan, and in a way I’m also not pleased by it. Let’s give a brief precis on what it entails, first.

Schakowsky has set up a left flank to the right-wing Bowles-Simpson recommendations, and in a negotiation that at least makes some sense. To get to the target number by 2015, she adds 35% in revenues, 31% by canceling tax expenditures, 26% through defense cuts, 6% through “mandatory” spending reductions, and 2% through non-defense discretionary cuts. Most of the non-defense discretionary spending comes from reducing improper payments, mainly through Medicaid. So that’s a waste, fraud and abuse piece, not a cut in services.

Schakowsky manages to get $110 billion annually out of the defense budget, mostly through ending unnecessary weapons systems. She reduces mandatory spending through a robust public option, negotiating drug prices through Medicare and Medicaid, banning anti-competitive “pay for delay” settlements with generic drugs, and cutting farm subsidies by $7.5 billion.

Schakowsky eliminates the tax expenditure that allows corporation to deduct debt interest payments, saving $77 billion dollars. She cuts out tax breaks allowing firms to bring foreign income back to the US, and tax breaks for outsourcing. She eliminates the deduction for meals and entertainment, which is ripe for tax abuse.

On taxes, Schakowsky would treat dividends and capital gains as ordinary income, for a savings of $88 billion. She would add a surtax on corporate income for another $5.8 billion annually. She uses the Sanders bill on the estate tax that adds progressive marginal tax rates at higher levels on estates. She would enact a cap and trade bill for $52 billion in annual income for the Treasury. She would tax high-end bonuses.

On Social Security, she would eliminate the payroll tax cap for employers and up it to capture 90% of income for employees. That takes care of 3/4 of the Social Security shortfall. On the rest, she adds a “legacy tax” on employee earnings over the cap, at a slightly lower rate. That takes care of it.

So this is certainly better than useful idiots like Mark Warner saying “do the math” in order to cut Social Security. And it’s better than the greybeard panels that are stalking horses for entitlements and defenders of the rich. In the main, I like Schakowsky’s plan, though obviously everyone could add and subtract their own bits.

But the problem is that a “deficit reduction plan” doesn’t address what actually causes deficits: namely, recessions. Maybe the DC establishment thinks that the public is being unserious by caring more about jobs than deficits, but they’re actually correct on both counts. It’s not just because one in four Americans are receiving food assistance, though that’s a moral crisis that requires an urgency to act.

If you look over history, reductions in GDP cause deficits to go up, both because of the loss of tax revenue and the increase in automatic stabilizer payments like unemployment insurance and food stamps. So the best way to reduce the deficit really is to grow the economy.

In fact, growing the economy and making the rich pay their fair share will just about do it. We don’t have to wonder about it: that was the Clinton formula in the 1990s. He raised taxes on the rich, and the economy took off. That was enough to balance the budget, and the hole was pretty bad at that time.

In this case, you need to counter-intuitively spend first to increase demand in order to get the growth necessary to cut into the deficit. To her credit, Schakowsky assumes $200 billion in investments in 2011 and 2012, to be spent on measures like the Local Jobs for America Act, which would create a million local government jobs, as well as infrastructure spending and extensions of unemployment insurance and state fiscal aid. But just releasing a deficit reduction plan gives away some of the game. It forces you to play on the turf of the deficit scolds. The plan should be: grow the economy, watch the budget savings, the end.

John Larsen, of the House Democratic leadership, had the courage to say today that the party just didn’t do enough on unemployment, and that’s why a lot of them lost their jobs:

Rep. John Larson (Conn.), the House Democratic Caucus chairman who is expected to keep his position in a vote on Wednesday, said that his party did not do enough in the eyes of voters to help bring down the nation’s 9.6 percent unemployment rate.

“We never did enough in terms of that area for us to have the kind of success we would have,” he said on MSNBC. “We had a Roosevelt moment and responded like Hoover.”

Larson’s comments are a stinging assessment of his party’s efforts to help create jobs during the 111th Congress. Voters, who swept Democrats out of power in the House two weeks ago, consistently named the economy and jobs as the top two issues during the midterm campaign.

Writing deficit reduction plans when there are 15 million Americans out of work contributes to this problem.

Sanders Calls For Progressive Meeting, Alternative To Fiscal Commission

http://www.huffingtonpost.com/2010/11/12/sanders-calls-for-progres_n_782879.html

Sam Stein
stein@huffingtonpost.com
Sanders Calls For Progressive Meeting, Alternative To Fiscal Commission
11-12-10

WASHINGTON -- Clearly displeased with the initial deficit-reduction recommendations offered by the fiscal commission chairmen, Sen. Bernie Sanders (I-Vt.) announced on Friday that he will craft and introduce his own proposals as an alternative.

The Vermont Independent said that he will work with members of Congress, labor unions, seniors' organizations and others to develop alternative suggestions. And while he didn't get into the weeds, he did offer a few general areas that he hopes to target, including ending Bush-era tax breaks for the wealthiest Americans, chopping off Cold War-era Pentagon programs and eliminating of tax credits for big oil companies.

Of the ideas pushed by the commission co-chairmen -- former Sen. Alan K. Simpson and Erskine Bowles, former President Bill Clinton's former chief of staff -- Sanders offered the following:

"It is no surprise that these two favor draconian cuts to Social Security, Medicare, Medicaid, the needs of our veterans, and education while proposing tax reductions for the wealthy and large profitable corporations... Simpson is a darling of the Republican right wing and Bowles is a former investment banker who made a fortune on Wall Street. Their plan was floated amid reports that the two were struggling to cobble together enough support on their own commission to go forward by a Dec. 1 deadline."

The likelihood that a progressive alternative for deficit reduction would get a vote in the Senate, let alone a hearing, is slimmer than the chances of Simpson and Bowles' recommendations making it to the floor unscathed. But Sander's effort isn't necessarily about getting a vote. Rather, there is, currently, one blueprint being offered for the task of deficit reduction and it's largely anathema to the progressive community. Having a second proposal out there serves the purpose of giving the negotiations a bit of bearing.

"We all know that there are a number of fair and progressive ways to address the deficit crisis that would not harm the middle class and those who have already lost their jobs, homes, life savings and ability to send their kids to college," Sanders writes, in a letter to those he's inviting for discussions. "The time has come to put these proposals into a package so that the progressive view becomes a part of the national discussion."

The Hijacked Commission

http://www.nytimes.com/2010/11/12/opinion/12krugman.html

The Hijacked Commission
PAUL KRUGMAN
November 11, 2010

Count me among those who always believed that President Obama made a big mistake when he created the National Commission on Fiscal Responsibility and Reform — a supposedly bipartisan panel charged with coming up with solutions to the nation’s long-run fiscal problems. 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.

My misgivings increased as we got a better feel for the views of the commission’s co-chairmen. It soon became clear that Erskine Bowles, the Democratic co-chairman, had a very Republican-sounding small-government agenda. Meanwhile, Alan Simpson, the Republican co-chairman, revealed the kind of honest broker he is by sending an abusive e-mail to the executive director of the National Older Women’s League in which he described Social Security as being “like a milk cow with 310 million tits.”

We’ve known for a long time, then, that nothing good would come from the commission. But on Wednesday, when the co-chairmen released a PowerPoint outlining their proposal, it was even worse than the cynics expected.

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?

Let’s turn next to Social Security. There were rumors beforehand that the commission would recommend a rise in the retirement age, and sure enough, that’s what Mr. Bowles and Mr. Simpson do. They want the age at which Social Security becomes available to rise along with average life expectancy. Is that reasonable?

The answer is no, for a number of reasons — including the point that working until you’re 69, which may sound doable for people with desk jobs, is a lot harder for the many Americans who still do physical labor.

But beyond that, the proposal seemingly ignores a crucial point: while average life expectancy is indeed rising, it’s doing so mainly for high earners, precisely the people who need Social Security least. Life expectancy in the bottom half of the income distribution has barely inched up over the past three decades. So the Bowles-Simpson proposal is basically saying that janitors should be forced to work longer because these days corporate lawyers live to a ripe old age.

Still, can’t we say that for all its flaws, the Bowles-Simpson proposal is a serious effort to tackle the nation’s long-run fiscal problem? No, we can’t.

It’s true that the PowerPoint contains nice-looking charts showing deficits falling and debt levels stabilizing. But it becomes clear, once you spend a little time trying to figure out what’s going on, that the main driver of those pretty charts is the assumption that the rate of growth in health-care costs will slow dramatically. And how is this to be achieved? By “establishing a process to regularly evaluate cost growth” and taking “additional steps as needed.” What does that mean? I have no idea.

It’s no mystery what has happened on the deficit commission: as so often happens in modern Washington, a process meant to deal with real problems has been hijacked on behalf of an ideological agenda. Under the guise of facing our fiscal problems, Mr. Bowles and Mr. Simpson are trying to smuggle in the same old, same old — tax cuts for the rich and erosion of the social safety net.

Can anything be salvaged from this wreck? I doubt it. The deficit commission should be told to fold its tents and go away.

A version of this op-ed appeared in print on November 12, 2010, on page A31 of the New York edition.

Hell, No! Tell President Obama and His Catfood Commission

http://fdlaction.firedoglake.com/2010/11/10/hell-no-tell-president-obama-and-his-catfood-commission-hands-off-social-security/

Hell, No! Tell President Obama and His Catfood Commission: Hands off Social Security
Michael Whitney
Wednesday November 10, 2010

Hands Off Social Security:
Sign the Petition

Tell President Obama and his Catfood Commission to keep their hands off Social Security.

Social Security cuts are coming for “virtually every American alive and those yet to be born,” in the words of Eric Kingson, co-chair of the Strengthen Social Security Campaign.

http://action.firedoglake.com/page/s/HandsOff?source=em20101110

And for what? Corporate tax cuts.

Seriously: the co-chairs of President Obama’s deficit commission want to cut Social Security benefits for everyone making more than $25,000 a year. And then cap corporate taxes at just 26%.

Every member of this commission, every member of Congress, and President Obama himself must reject these insane ideas. We’re starting an emergency petition to President Obama, and his Catfood Commission to take Social Security cuts off the table.

The proposed cuts to Social Security are so deep, for so many people. This is a direct attack on America’s middle class for the benefit of Corporate America.

We have an opening to keep Social Security safe. Today’s report consists of the recommendations of the Catfood Commission’s co-chairs, who were appointed by President Obama. You’ll remember one of them: Alan “Social Security is a Milk Cow with 310 Million Tits” Simpson. He’s the guy who also said the Catfood Commission had to cut Social Security to “help the lesser people of society.”

Simpson’s ideas are so awful, sixteen other members of the Catfood Commission didn’t want to touch it. Problem is, this is the “starting point” for discussions. This will be negotiated, and many of these awful ideas could be in the final proposal.

We owe our citizens better than a retirement with cat food on the dinner table. That’s why we call it the Catfood Commission: the proposed Social Security cuts to virtually every American would mean far less money in their pockets.

It’s bad enough to even think about cutting Social Security – but to do it to pay for corporate tax cuts? That’s insane. We need to make sure they hear us loud and clear: hands off of Social Security.

Cutting Social Security is the New TARP

http://www.huffingtonpost.com/cenk-uygur/cutting-social-security-i_b_782000.html

Cutting Social Security is the New TARP

Cenk Uygur
Host of The Young Turks
November 11, 2010

Politicians who signed off on TARP lived to regret the day they did (especially Republican ones, just ask Bob Bennett and Mike Castle). Those votes will haunt the congressmen who supported the bailouts for years to come. That's the same exact thing that's going to happen to politicians who sell out the middle class by agreeing to cut Social Security.

The chairmen of the Deficit-Reduction Commission just released a report that recommends that we cut benefits for current retirees by 3 to 6% and eventually raise the retirement age to 69. Why not make it 89 while you're at it? At that point, Social Security will be completely solvent forever because only three people will live long enough to collect it. Remember, it's not just that you can't retire till later, it's that you don't get benefits for those extra two to four years - that's a huge cut of your Social Security.

Plus, to add insult to injury they also propose to cap Medicare. Some worry this might even lead to rationing. This helps because the cuts to Social Security didn't hurt enough.

These are all non-starters. Social Security currently has a $2.5 trillion surplus. Anyone telling you otherwise is lying. They have created a fake crisis about Social Security not being able to pay full benefits by 2037. So, the answer is to shred benefits now? How does that help?

Of course, this proposal doesn't help you to collect the Social Security payments that you're owed after a lifetime of paying into the system. It helps them rob you. Now, those are stark terms, but totally justified when you consider the second part of this so-called Deficit-Reduction Commission. Instead of addressing the deficit by doing spending cuts and tax increases (both painful and both necessary to reduce deficits), they actually cut taxes. That's mental. That makes the deficit much, much worse.

They propose to cut the top rate from 35% to 23% for the personal income tax, and the corporate tax rate would get cut from 35% to 26%. What an unbelievable joke. So, you have to cut Social Security and Medicare because you just had to give the rich one more gigantic tax cut? They'll claim they are getting rid of some tax exemptions and credits, but that doesn't come close to making up for the tax cuts they have proposed.

But we have to thank them for making their intentions undeniably clear. This Deficit-Reduction Commission has nothing to do with the deficit. It never did. I was always thought it was an excuse to cut Social Security to pay for the tax cuts that went to the rich and ate up the Social Security surplus. It turns out, it's more audacious than that. It cuts Social Security to pay for whole new round of tax cuts for the rich. The balls on these guys.

A new poll out by PPP indicates that when asked how to balance the budget, 43% of real Americans said tax the wealthy, 22% said cut defense spending and only 12% said cut Social Security. They didn't stutter. That's crystal clear. If some of our current politicians make the mistake of backing these cuts for Social Security, those numbers are going to come back to bite them. And they'll be our former politicians. I, for one, will work the rest of my life to kick out of office anyone who signs off on this robbery. I don't give a damn what party they claim to be from. That includes the president.

Through all of my frustrations with the president, I have never called for a primary opponent against him in 2012. And I don't know any other established progressive that has. If he pushes for this plan, he should definitely get a primary challenger. Because I couldn't vote for a guy who agreed to rob the middle class like this. This is definitely the last straw. If he does this, then he was never on our side to begin with.

Obama commission: Slash Social Security, reduce corporate taxes

http://www.rawstory.com/rs/2010/11/obama-slash-social-security-reduce-corporate-taxes/

Obama commission: Slash Social Security, reduce corporate taxes
Daniel Tencer
Wednesday, November 10th, 2010

Progressives across the US are condemning President Obama's deficit-reduction commission for its proposal, released today, to cut Social Security payments while lowering corporate taxes and the highest income tax bracket.

The commission, put together by the White House in February, released a draft report Wednesday that proposes deep cuts to domestic and military spending that would reduce the deficit by $4 trillion over the next 10 years. But the way in which the proposal goes about achieving those reductions has come in for heavy attack from progressive politicians, labor leaders and commentators.

"If you’re sincerely worried about the US fiscal future — and there’s good reason to be — you don’t propose a plan that involves large cuts in income taxes," economist Paul Krugman wrote in the New York Times. Krugman pointed to an article in the Times outlining the commission's strategy:

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.

The commission is also proposing that Social Security payments be increased, so that 90 percent of income is taxable, as opposed to 82.5 percent as is currently projected. Despite the increases in payments, the plan calls for a reduction in benefits for most Social Security recipients.

Additionally, the retirement age would be raised gradually, reaching 68 in 2050 and 69 in 2070.

The commission's proposals aren't binding, and may not necessarily end up as law. Proposals will only be sent to Congress if they garner the support of 14 of the 18 commissioners on the panel. The Hill reports that at present there isn't that level of support on the commission for the proposal to reduce Social Security.

BERNIE SANDERS: SOCIAL SECURITY CUTS 'REPREHENSIBLE'

Sen. Bernie Sanders (I-VT), a self-described democratic socialist, called the commission's proposal "reprehensible," reports The Hill.

“The Simpson-Bowles deficit reduction plan is extremely disappointing and something that should be vigorously opposed by the American people," Sanders said.

He was joined by Richard Trumka, head of the AFL-CIO labor umbrella group.

"The chairmen of the Deficit Commission just told working Americans to 'drop dead,'" Trumka said. "Some people are saying this is plan is just a 'starting point.' Let me be clear, it is not."

President Obama established the commission in February of this year, in response to growing concerns about the US government's budget deficit, which is hovering above $1.3 trillion for the second fiscal year in a row.

"These are tough times, and we can't keep spending like they're not," the president said. He appointed former Clinton White House chief of estaff Erskine Bowles, and former Republican Sen. Alan Simpson as co-heads of the commission.

Followers of the commission's progress had been expecting something along the lines of today's preliminary proposals for some time now. In August, ex-Sen. Simpson was criticized for referring to Social Security as a "milk cow with 310 million tits!" in an email.

The comment was widely interpreted as a sign that the commission would move towards reducing Social Security benefits.

Unserious People

http://krugman.blogs.nytimes.com/2010/11/10/unserious-people-2/

November 10, 2010
Unserious People
Paul Krugman

OK, let’s say goodbye to the deficit commission. If you’re sincerely worried about the US fiscal future — and there’s good reason to be — you don’t propose a plan that involves large cuts in income taxes. Even if those cuts are offset by supposed elimination of tax breaks elsewhere, balancing the budget is hard enough without giving out a lot of goodies — goodies that fairly obviously, even without having the details, would go largely to the very affluent.

I mean, what’s this about? There is no — zero — evidence that income taxes at current rates are an important drag on growth.

Oh, and they’re talking about raising the retirement age, because people live longer — except that the people who really depend on Social Security, those in the bottom half of the distribution, aren’t living much longer. So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever.

Still, I guess this is what it takes to get compromise, if by compromise you mean something the center-right and the hard right can agree on.

Update: It’s here. And it really is that bad. The idea that co-chairs of a commission whose charge is fiscal sustainability should take it upon themselves to (a) declare that federal revenue must not exceed 21 percent of GDP — that’s right, putting a cap on receipts and (b) call for reducing the top rate from 35 to 23 is just awesome.