Thursday, November 24, 2011

Deficit Reduction Panel Fails to Reduce the Deficit

This is Not News; It Would Be News if They Did Reduce the Deficit

As a face saving gesture last summer the Congress and the Obama Administration agreed to form a “super” committee composed equally of Republican and Democratic legislators.  That committee would come up with a deficit reduction package that would be voted up or down by the Congress.  If they did not develop a plan or the plan was defeated automatic cuts in defense and social programs would take place beginning in 2013.

That this plan failed is no surprise.  The Republican position was that any deficit reduction plan had to gain savings from spending cuts on social programs and entitlements only, with no tax increases although they were willing to count minor changes in tax revenues as tax increases.  Democrats were willing to engage in massive cuts to social programs, but only if there were tax increases on the wealthiest of Americans.  Here are the two positions.

 Democrats offered a proposal to reduce deficits by $3 trillion over 10 years through a combination of spending cuts and $1.3 trillion of revenue, largely from tax increases.

The Democratic proposal included as much as $500 billion of savings in health care programs, higher Medicare premiums for high-income beneficiaries and use of a less generous measure of inflation that would reduce annual cost-of-living adjustments in Social Security benefits. . . .

Republicans on the committee rejected the Democratic offer and came back with a proposal that would reduce deficits by $2.2 trillion and that included $640 billion of nontax revenue that Democrats said was too modest.

Note that the above contradicts the lie that Democrats were not willing to compromise on key Democratic programs like Social Security and Medicare, but also note that this will not stop Conservatives from continuing to spread that lie.

The sticking point was always going to be taxes.  Republicans are simply not willing to have meaningful increases in taxes for high income individuals to accompany cuts in social programs and entitlements. The supposed reduction in defense spending and social programs that are scheduled to take place in 2013 of course will not happen. 

The fate of deficit reduction and tax rates will now go to the 2012 elections, which is probably where it should go.  The American public has unrealistic expectations, it wants low taxes, government support for social programs, education, Medicare and Social Security, increases in Defense spending and a balanced budget.  This cannot happen, but politicians continue to promise that it can. 

If a Republican (Mr. Romney, New Gingrich?  C'mon Man)  is elected President in 2012 then the American people will have decided on low taxes, huge cuts in federal spending and a society that is increasingly divided into a small group of rich people and a large and growing group of poor and near poor.  If this happens the large group of poor and near poor and the shrinking middle class will have only themselves to blame.  They don’t have more money than the rich, but they do have more votes.

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