Free Markets, Free People

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  • The CLASS Act provision of Obamacare would be repealed.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.

~

Dale
Twitter: @DaleFranks

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22 Responses to The Gang of Six is back

  • Grover Norquist: http://www.atr.org/taxpayers-gang-six-announcement-today-a6351
    “The ‘Gang of Six plan’ is not written in legislative language. It is an outline. It punts many decisions to the Senate Finance Committee.  It deals in ranges rather than specifics. When it is eventually written down in legislative language and every American can read it, taxpayers will then learn whether the ‘plan’ raises taxes or cuts taxes and seriously reduces spending or fails to mandate spending reductions.”

  • This is not calling his bluff.
    A serious balanced budget amendment needs to be passed.  If not from the heights, from the roots.

  • Is there anybody with half a brain outside of MiniTru* who DOESN’T see where this is going?

    —- The deal cooked up by Our Gang will give both sides cover to vote for a “historic” Grand Bargain (I love how MiniTru coined this term; neat bit of propoganda);

    —- MiniTru will go into overdrive praising this monstrosity and tarring anybody who dares to oppose it.  Look for lots of polls showing HUGE support among the American people;

    —- Captain Bullsh*t, just before he signs it, will make a self-congratulatory speech so full of “I”, “me” and “my” that it will leave one to wonder if anybody else had anything to do with it;

    —- It’ll become a law.  Taxes will go up.  So will spending.  Default MIGHT be pushed back by a year or two.

    —- Our economy will collapse.

    __________

    (*) Yeah, I know: is there anybody in MiniTru with even half a brain?

  • On the other side of despair….the House DID pass CC & B, which does call Obama’s bluff.  There are people holding our ground.

  • A BBA, without the proper (and likely NEGLECTED provisions [1]) could be a budget of $4.5 trillion and a corresponding (attempt) at tax revenue.
    [1] A budget can only be equivalent to LAST YEAR’S tax revenue.

  • Nice to see the GOP is up to its usual cave-in on fiscal responsibility.  Spend now and promise to cut later.  I won’t be holding my breath waiting for the cuts to materialize.
     

  • If the GOP were the guy in the parable about teaching the horse to sing, of the alternatives they expected might save them, the GOP thinks the horse will sing.

  • The gang of Sucks plan has no real ability to reduce the deficit, there are a few cuts right away, and that is good, another good part is the change to how COLA’s are figured. But that is not enough, Maybe if this was reconciled to the House bill then you could get something with a real ability to reduce the deficit.

  • “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.”

    So, to hammer down a well worn phrase, “The more things change, the more they stay the same”.

    Shame on us.

  •  

    If you take the Gang’s figure of half-a-trillion dollars in immediate “aggressive deficit reduction” seriously, that represents about what the U.S. government borrows every four months. What’s “aggressive” about that? And what’s immediate about it? It’s all unspecified “discretionary spending caps” and “process reforms” that will collapse like soufflés ten minutes after the signing ceremony. Obviously it’s appealing to Democrats: It accepts their view that 25 percent of GDP should be the new baseline for national (“federal” no longer seems quite the word) government spending. But what’s in it for Republicans?

    We are sending a consistent message to the world that the political structures of the United States do not allow for meaningful course correction. That does far more damage to the “full faith and credit” of America than failing to hike the debt ceiling.
     
    Mark Steyn

    • Well brother Rapspierreavros, I am brother Lookerilokis, so glad to meet you.  Welcome to New Athens.

      • I will not go gently into that Greek night.
        There just may need to be a revolution here.

        • We’re headed for an American version of a modern Greek tragedy.
           
          I’d be willing to take the risk to see what happens if nothing is done by August 2nd, because it looks to me like what they’re proposing will only make it even worse later.
           
           
           
           

          • The trick to not becoming Greece is to cease from voluntarily grabbing ones ankles. Seems there are several Republican ankle grabbers readily available for the senate gang bang.

  • They are talking about cutting $4 trillion over 10 years when the past 3 years under Obama we have deeper into the hole by more than $1 trillion each year.

  • Here’s a little dose of reality…
    We no longer have a AAA bond rating in reality.  The Chinese are not giving us anything higher than a AA rating, and so is the market.
    Why do we buy 70%+ of our own bonds….???

  • The whole problem is the Senate. Its still stuck in 2008.
    The system is not broken because in 2012, the Senate will be very, very different.
    And the President and Harry Reid can be so aggressive in demanding a deal that protects Obama only because of the press being 100% supine.