Another Useless Debt Reduction Plan

The Bipartisan Policy Center set up by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell will offer a new plan to address the national deficit. It will be called “Restoring America’s Future.” The group says its project will offer a “comprehensive plan to dramatically reduce America’s deficits and debt and strengthen our economy, enabling the nation to reclaim its future. We urge the nation’s leaders to seriously consider it.”

At the core of the plan are these items, nearly all of them already mentioned in part or whole are foundations of other programs to save the federal government from its profligacy:

• a one-year “payroll tax holiday” for 2011, suspending Social Security payroll taxes for employers and employees;
• stabilize the debt held by the public at less than 60 percent of gross domestic product, an internationally recognized standard;
• simplify the tax system, establishing individual tax rates of 15 and 27 percent (from the current high of 35), cutting the corporate tax rate to 27 percent (from 35 today);
• strengthen Social Security so it can pay benefits for the next 75 years by gradually raising the amount of wages subject to payroll taxes; slightly reducing the growth in benefits for the top 25 percent of beneficiaries;
• freeze domestic discretionary spending for four years and defense spending for five control health-care costs – the biggest driver of long-term deficits – by reforming Medicare and Medicaid;
• cap domestic and defense discretionary spending

This plan, ambitious as it is, has many of the same ideas as the Presidential commission on deficit reduction. It has the disadvantages of lacking support from the White House and poor timing because it was released a week after the Presidential commission’s proposal.  The Bipartisan Policy Center would have been better off if it had issued its report at the start of November, which would have stolen the spotlight from the presidential commission. It did not, so its suggestions will almost certainly be ignored even if a few press people and policy experts show up for its unveiling.

Washington is already full of reactions to the Presidential commission’s proposal. Members of Congress and think tanks have drawn up responses to the “official” report which will come from the White House early next month. The problem with all of these is that some lawmakers have already rejected part of the Presidential commission’s proposal and there is debate among commission members over whether their initial plans will be approved before they are issued in final form.

The most severe problem which faces all of these complex and well thought-out plans is that there is no political will to implement them. Members of Congress who want to be re-elected cannot now go to voters with plans to cut entitlements. And, there still are economists who believe that the problem of deficits will be solved by high tax receipts brought in by the upcoming rapid rise in GDP growth.

It is a conceit – and nothing more – to the belief that a former politicians and economy experts will bring a plan to “save” the  economy. The one already on the table from the Presidential commission is considered deeply flawed by many. The Bipartisan Policy Center plan comes at a time when it will be ignored because it was not commissioned by the President or Congress. and it will be released in the shadow of the only real proposal which matters–if it matters at all.

Douglas A. McIntyre