Deficit Reduction Commission playing a fool's game
by Barbara Anderson


The Salem News
Saturday, November 20, 2010


With Massachusetts having just played "Pin the vote on the donkey" at an Election-Day children's party, let's see what grown-ups are doing in the rest of the U.S.A.

Republicans and tea partiers are preparing to work with their new congressmen to address the federal government's most serious problem: The borrowing of 40 cents of every dollar it spends, which is creating a crushing debt burden for future generations (if the nation lasts long enough to have many of those).

Your own financial situation couldn't survive this ratio of debt to expenditures, and neither can your country's. Left alone, this can only get worse, as the massive baby-boomer generation booms its way into Social Security and Medicare.

Keep in mind that the United States is borrowing from nations that may not have our best interests at heart. (See http://tinyurl.com/cagw-china.)

As the deficits and the national debt grows, options include:

  Inflating the currency, creating play money to pay down the debt and hoping no one notices the money isn't backed by anything of value.

   Defaulting on debt like Greece so no one will lend us more money to pay our operating expenses.

   Facing the fact that we can't spend money we don't have, which will cause a deepening recession because so many people and businesses have become dependent on uncontrolled government spending.

   Or raising taxes to pay for continued overspending and debt service.

Our own congressman has done his part. Just this week John Tierney blamed George W. Bush for all the nation's problems, then announced he will vote for Nancy Pelosi for minority leader, because she has "presided over the most productive Congress since 1964" which, of course, spent a whole lot more borrowed dollars.

Fortunately, Republicans are presently objecting to the Federal Reserve pumping new inflationary dollars into the economy. And "responsible" people are recommending a combination of spending cuts and raised taxes.

The co-chairs of President Obama's bipartisan Deficit Reduction Commission Democrat Erskine Bowles and Republican Alan Simpson have released their draft proposal, which recommends various Social Security reforms like indexing the retirement age to new longevity expectations, assessing the payroll tax on higher income while decreasing benefits to these higher earners, and downward-adjusting cost-of-living increases, while adding a new minimum benefit to keep minimum-wage retirees above the poverty level.

Along with these changes, the chairmen offer some $200 billion a year in domestic and defense spending cuts, including a three-year freeze in the pay of most federal employees and a 10 percent cut in the federal workforce. "Earmarks" would be eliminated.

On the revenue side, the proposal would eliminate some of the mortgage interest deduction and the deduction for high-level health insurance plans; and there would be an additional 15-cents-a-gallon tax on gasoline.

Mostly, this all seems to be a trial balloon to see how the public reacts before the rest of the Obama commission members are asked to approve it and present it to Congress. So far still-Speaker Pelosi has declared the spending cuts "simply unacceptable." And the unions are already gearing up to fight them.

I want to be one of those "reasonable people." But after years as a political activist, cynical trumps reasonable.

We have seen this movie before. If liberals and public employee unions object to the spending cuts, and taxpayers don't object to the tax hikes, then the tax hikes happen, and the spending cuts do not. The tax hikes would then become an incentive for even more new spending.

There is no reason to trust President Obama, who has already broken his health care debate promises. Given trust, the Social Security reforms could be done, in order to give taxpayers who are paying for today's benefits a chance to collect some, too.

Defense spending should be cut; that part of the plan would make sense if accompanied by removal of U.S. troops from places we should not feel obligated to remain. Potential savings that might be yielded by "contracting costs" are inadequate to the point of "ya gotta be kidding."

Certainly the federal government's payroll, which pays more in salary and benefits than comparable jobs in the private sector, should be cut. Let us know when that happens, then we'll talk about the tax hikes.

Those who have supported the concept of the "flat tax" should have no problem, conceptually, with getting rid of various tax breaks that once compensated for once low pay, like the tax-free benefits; or were meant as "beginner" incentives for economic behavior, like the mortgage interest deduction designed to promote home ownership. Now they just drive up the cost of health care and housing for everyone.

Using the mortgage interest deduction not only for basic starter homes, but for second homes and McMansions, is ridiculous.

In return for giving up these benefits, we'll be promised lower tax rates. No reason to trust this: Benefits will be gone, tax rates may be temporarily lowered, but then they will increase again.

I don't see any repudiation of the recent bailouts and "stimulus" plans. According to Americans for Tax Reform, the proposal sets spending at the present 2010 levels.

The "spending cuts" are cuts in the rate of increase. The tax hikes of course would be real.

Another name for "reasonable people" in Washington, D.C., is "fools."


The comments made and opinions expressed in her columns are those of Barbara Anderson
and do not necessarily reflect those of Citizens for Limited Taxation.


Barbara Anderson is executive director of Citizens for Limited Taxation. Her column appears weekly in the Salem News and other Eagle Tribune newspapers; bi-weekly in the Tinytown Gazette; and occasionally in the Lowell Sun, Providence (RI) Journal and other newspapers.


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