The Gang of Six is back
Gangs of anything are rarely good things. And when it comes to the Senate’s Gang of Six, that caution is doubly true. Today the Gang proposed a bipartisan deficit plan to which the president–eager to kick the deficit can down the road past the 2012 election–gave his qualified approval. There is only this summary (PDF) available at the moment, and there is much to digest.
The good news is that there is at least some sanity in it.
- Personal and corporate income taxes would be reduced to a top rate of 29%.
- The Alternative Minimum Tax–which has turned into a horrific taxation burden–will be eliminated.
- The CLASS Act provision of Obamacare would be repealed.
The bad news–and there’s always bad news with these guys–is that the budget reduction portion of it is notional. As usual in Washington, it calls “cuts” what the rest of us would call “reductions in the rate of spending increases”. In other words, spending isn’t actually reduced at any point, they just promise not to spend as much as they previously said they would. The main problem points include:
- None of the plan’s “spending caps” apply to entitlement programs, only discretionary spending. So the 800-pound gorilla of the budget remains untouched.
- Reform tax expenditures for health, charitable giving, homeownership, and retirement. These aren’t expenditures! They are allowing you to keep your money for IRAs, 401(k)s, Mortgage interest, etc. So, that sounds…ominous. Especially since the plan assumes that these, and similar reforms will net an additional $1 trillion in revenue.
- No reform at all of Medicare of Medicaid.
- A politically-imposed requirement to use the Chained-CPI as an inflation measure, presumably to cut down on cost-of-living increases, as the Chained-CPI understates inflation even more than the current CPI does.
- Requires the tax code to become more “progressive”, so you can expect serious increases in Capital Gains taxes.
- No Social Security reform at all, unless there’s 60 votes for it in the Senate, i.e., sponsors for such reform prior to its submittal to the Senate for consideration. So, essentially, never.
There’s no information at all on how big or expensive government will be, say 10 years down the road. No information on how strict the spending caps will be, making me expect another Gramm-Rudmann deal: Good on paper, ineffective in practice.
Basically, this plan, so far as I can tell, contains some eye-candy on income taxes to draw in the supply-siders, with the actual deficit reduction portion sounding…sketchy. Or in the case of entitlements, by far the source of most federal spending, non-existent.