Nancy Pelosi: "simply unacceptable" (deficit reduction commission)

Topics: Taxes
11 Nov 2010

From: Ervan Darnell

Yes, she is, even though she was referring to the "bipartisan
commission on reducing the national debt " chairmen's report,
apparently the part about Social Security[1].

With the U.S. about $250K/taxpayer in debt for Social Security[3],
it's clearly not sustainable. While the Democrats appear to remain
in denial of reality, I am pleased to see the two chairmen offer a
reasonable compromise given the political reality.

It's obviously not the proposal I would make, but it's better than the
current course, and actually manages to make some hard choices. On
the news this morning, House members were suggesting taking
recommendations from it but not the whole report. That's a
prescription for failure. Each idea on it's own has a constituency
that will block it. Congresspersons know that and it's much to their
shame they are looking for a way to sabotage it instead of tie their
own hands sufficiently that a meaningful compromise vote can be made.

As much as we like democratic oversight, it's largely a failure. The
most effective organizations in the federal government are the Supreme
Court and the Federal Reserve. That's not to be confused with
"effective" in an absolute sense, but in comparison to HHS they are
shining stars. They are also the most insulated from politics and
congressional oversight. That's not a coincidence. We need something
similar here. The real challenge is making any bargain stick into the
future. We have Gramm-Rudman after all and Congress simply voted to
ignore it.

Unfortunately, the report still doesn't go far enough. It does little
to restrain Medicare (a bigger problem than SS), and it only targets a
deficit of 2.2% of the GDP[2].

Getting rid of tax deductions in favor of lower rates (but higher
collections) is a good move on the first part, and understandable on
the second. Binding together the removal of all deductions is the
only way to swallow the pill against concentrated interests. It moves
some cost of Medicare back to patients, which is good on both fiscal
and efficiency fronts. I really dislike removing the cap on SS, which
means a whopping 13% tax increase on people with good jobs, a very
substantial increase (and those same people get fewer benefits). I
even sort of like this because it might weaken political support for
SS and bring privatization back as a serious idea. But I'd swallow
that to get the rest of it since real sanity is nowhere on the radar.


[3], which has further (credible) references for its sources