A plan to cut the deficit

It is said that Americans want the government to cut spending while also wanting the government to spend more for them.  We will now see how serious the demands to cut the deficit are.

The bipartisan commission appointed by the president to suggest how to trim government spending and get the budget into balance is working on the problem.  The two chairmen have released a report on their suggestions.  (This is not the final report of the commission.)  The two have come up with a plan to save $4 trillion through 2020.  It cuts the military, eliminates earmarks, drops federal subsidies for student loans, cuts Medicare, freezes federal salaries, cuts farm subsidies, and eliminates the option to draw social security until you are 68.  Supposedly, there is something in the proposal to anger everybody.

It will also raise some taxes.  It includes an intriguing reform of the income tax:

The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.

Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.

via Panel Weighs Deep Cuts in Tax Breaks and Spending – NYTimes.com.

Take a look at the proposed cuts listed in these articles andhere. Or read the entire 50-page report.

Would you be willing to bite this bullet?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • http://plauer.net Paul

    “Would you be willing to bite this bullet?” In a word, Yes.

  • http://plauer.net Paul

    “Would you be willing to bite this bullet?” In a word, Yes.

  • Joe

    I have no problem with the cuts, I would need to study the types of tax increases to try to determine what their actual effect would be. Depending on how you structure them some tax increases can actually lead to less revenue collected.

  • Joe

    I have no problem with the cuts, I would need to study the types of tax increases to try to determine what their actual effect would be. Depending on how you structure them some tax increases can actually lead to less revenue collected.

  • http://www.bikebubba.blogspot.com Bike Bubba

    No. The “cuts” in spending are simply cuts in the planned increases in spending, cuts that can be reversed at any time. If we really want to get fiscal sanity to government, what is needed is to take a good hard look at what we’re doing.

    Do we “need” to fund broadcasting? Do we “need” to fund the arts? Do we need to provide student loans to those who show by their SAT scores that they are extremely unlikely to graduate from college? Should we need to subsidize grain farmers who own some of the best soil on the planet? Should we be subsidizing alternative energy sources–none of which have become competitive with standard sources after 40 years?

    More or less, the deficit commission is playing an accounting game when the real money on the table lies in understanding the expenses caused by the spending we’re already doing.

    For example, corn subsidies increase the calories we consume while creating an incentive to put fertilizer, pesticides, and herbicides in groundwater. Result; heart disease, diabetes, and a dead zone in the Gulf of Mexico. Perhaps cancers as well. In the long term, cutting grain subsidies might save hundreds of billions of dollars in medical costs annually–and revive Gulf fisheries in the process.

    In other words, we need to take a look at ending entire programs, not modifying their funding levels.

  • http://www.bikebubba.blogspot.com Bike Bubba

    No. The “cuts” in spending are simply cuts in the planned increases in spending, cuts that can be reversed at any time. If we really want to get fiscal sanity to government, what is needed is to take a good hard look at what we’re doing.

    Do we “need” to fund broadcasting? Do we “need” to fund the arts? Do we need to provide student loans to those who show by their SAT scores that they are extremely unlikely to graduate from college? Should we need to subsidize grain farmers who own some of the best soil on the planet? Should we be subsidizing alternative energy sources–none of which have become competitive with standard sources after 40 years?

    More or less, the deficit commission is playing an accounting game when the real money on the table lies in understanding the expenses caused by the spending we’re already doing.

    For example, corn subsidies increase the calories we consume while creating an incentive to put fertilizer, pesticides, and herbicides in groundwater. Result; heart disease, diabetes, and a dead zone in the Gulf of Mexico. Perhaps cancers as well. In the long term, cutting grain subsidies might save hundreds of billions of dollars in medical costs annually–and revive Gulf fisheries in the process.

    In other words, we need to take a look at ending entire programs, not modifying their funding levels.

  • Dennis Voss

    I’m confused. Didn’t Congress commit to cutting ear marks once before?

  • Dennis Voss

    I’m confused. Didn’t Congress commit to cutting ear marks once before?

  • http://clayjarspeaking.wordpress.com Steve Schueren

    I only wish to point out my agreement with “Bike Bubba’s” first point, namely, that we are not talking about real cuts in spending; these “cuts” are reductions in proposed future spending increases. The spending still increases as Dan Mitchell of the Cato Institute points out here: http://bit.ly/ag6AuK

  • http://clayjarspeaking.wordpress.com Steve Schueren

    I only wish to point out my agreement with “Bike Bubba’s” first point, namely, that we are not talking about real cuts in spending; these “cuts” are reductions in proposed future spending increases. The spending still increases as Dan Mitchell of the Cato Institute points out here: http://bit.ly/ag6AuK

  • Louis

    Bike, though I am ambivalent about your comments re the arts, I think that your agriculture comments are spot on – taking into account that the a vast amount of that subsidy money is given to agribusiness, who owns more and more of the land and means of production.

  • Louis

    Bike, though I am ambivalent about your comments re the arts, I think that your agriculture comments are spot on – taking into account that the a vast amount of that subsidy money is given to agribusiness, who owns more and more of the land and means of production.

  • Cincinnatus

    Right on, Bike. Though I wouldn’t limit my crusade to agricultural subsidies.

  • Cincinnatus

    Right on, Bike. Though I wouldn’t limit my crusade to agricultural subsidies.

  • Porcell

    This is an excellent set of proposals written by two wise men who understand both political and financial realities. I’d be delighted to see these proposals accepted, though it’s doubtful that Americans will develop the necessary political will to accept them.

    This plan cuts $4 trillion through 2020. Those including Mitchell of CATO who criticize it as less than ideal don’t understand political reality. The best part of this plan is the tax reform. If the spending and tax reforms were adopted, the American economy would take off like a rocket.

    The fifty-page report is worthwhile and designed for easy and fast reading.

  • Porcell

    This is an excellent set of proposals written by two wise men who understand both political and financial realities. I’d be delighted to see these proposals accepted, though it’s doubtful that Americans will develop the necessary political will to accept them.

    This plan cuts $4 trillion through 2020. Those including Mitchell of CATO who criticize it as less than ideal don’t understand political reality. The best part of this plan is the tax reform. If the spending and tax reforms were adopted, the American economy would take off like a rocket.

    The fifty-page report is worthwhile and designed for easy and fast reading.

  • utahrainbow

    Is asking the American people to sacrifice appropriate without addressing the fraud and corruption that has cost the taxpayer so much in the past few years? There have been zero serious prosecutions resulting from the crisis. Isn’t it important to have adequate rule of law before you can embark on such unpopular measures? When the politically connected are getting around the law, while those without access pay, people will be (justifiably) very angry. Simply taking some action to hold those who committed fraud responsible, and enacting some decent reform to address excessive risk taking, leveraging, and TBTF, would go a long way to establishing more trust.

    Also some of the staffers who worked on the commission were paid by outside groups. Even if these are balanced between liberal and conservative sponsors, at least the APPEARANCE of buying influence over policy really ought to bother us. It ought to have been completely government funded.

  • utahrainbow

    Is asking the American people to sacrifice appropriate without addressing the fraud and corruption that has cost the taxpayer so much in the past few years? There have been zero serious prosecutions resulting from the crisis. Isn’t it important to have adequate rule of law before you can embark on such unpopular measures? When the politically connected are getting around the law, while those without access pay, people will be (justifiably) very angry. Simply taking some action to hold those who committed fraud responsible, and enacting some decent reform to address excessive risk taking, leveraging, and TBTF, would go a long way to establishing more trust.

    Also some of the staffers who worked on the commission were paid by outside groups. Even if these are balanced between liberal and conservative sponsors, at least the APPEARANCE of buying influence over policy really ought to bother us. It ought to have been completely government funded.

  • Cincinnatus

    utahrainbow: To what fraud, exactly, are you referring? And exactly how much money has it cost the taxpayer?

    I’m not denying that fraud and waste consume rather vast portions of the budget, and such things need to be addressed, but they still don’t compare to an actual revision of the budget. Your comment is cryptic, to say the least.

  • Cincinnatus

    utahrainbow: To what fraud, exactly, are you referring? And exactly how much money has it cost the taxpayer?

    I’m not denying that fraud and waste consume rather vast portions of the budget, and such things need to be addressed, but they still don’t compare to an actual revision of the budget. Your comment is cryptic, to say the least.

  • SKPeterson

    The best way to prevent excessive risk taking and over leveraging is to let firms that engage in these investment vehicles and the people who invest in them to go out of business and to lose their money. This eliminates two things: companies that engage in foolish financial strategies that they don’t understand, and the people who provide these firms with scarce capital resources without sufficiently appreciating or understanding the investments and the firms doing the investing. Our problem is that we have been subsidizing this behavior, which has only encouraged more of it.

  • SKPeterson

    The best way to prevent excessive risk taking and over leveraging is to let firms that engage in these investment vehicles and the people who invest in them to go out of business and to lose their money. This eliminates two things: companies that engage in foolish financial strategies that they don’t understand, and the people who provide these firms with scarce capital resources without sufficiently appreciating or understanding the investments and the firms doing the investing. Our problem is that we have been subsidizing this behavior, which has only encouraged more of it.

  • utahrainbow

    Reading back over my post, yes, maybe I could have been a bit more clear, Cincinnatus. Let me try to explain better and make the connection I’m trying to make.

    I wasn’t referring to fraud and waste within government spending. I was referring to the financial crisis and the taxpayer funded bailouts and guarantees of the largest financial entities who brought our economy to the brink. The “costs”, implicit and otherwise, of this are in the trillions. In these same institutions is a real problem of fraud: see the latest foreclosure scandal as an example. However, not one serious prosecution has been made, so we’ve created extreme moral hazard. On the contrary, each year they’ve been paying out record bonuses.

    The American people need to know that this “will not happen again”. And they need to know that this type of behavior will be punished, even if you’re big money.

    Then I think it is fair to try to honestly present the future deficit and budget problems, and ask for sacrifice.

    Hopefully that makes more sense.

  • utahrainbow

    Reading back over my post, yes, maybe I could have been a bit more clear, Cincinnatus. Let me try to explain better and make the connection I’m trying to make.

    I wasn’t referring to fraud and waste within government spending. I was referring to the financial crisis and the taxpayer funded bailouts and guarantees of the largest financial entities who brought our economy to the brink. The “costs”, implicit and otherwise, of this are in the trillions. In these same institutions is a real problem of fraud: see the latest foreclosure scandal as an example. However, not one serious prosecution has been made, so we’ve created extreme moral hazard. On the contrary, each year they’ve been paying out record bonuses.

    The American people need to know that this “will not happen again”. And they need to know that this type of behavior will be punished, even if you’re big money.

    Then I think it is fair to try to honestly present the future deficit and budget problems, and ask for sacrifice.

    Hopefully that makes more sense.

  • DonS

    This proposal is a firm step in the right direction. However, it is only a fraction of what really needs to be done.

    We are far better at raising taxes than we are at cutting spending. Many times in the past we have been offered a mix of spending cuts and tax hikes, which seems reasonable, but then we find out the tax hikes are real and immediate, while the spending “cuts” are really just decreases in the rate of increase (we project what we would like to spend, and then “cut” from that), and often don’t pan out at all. So the spending cuts need to come first, and they need to be demonstrably real and swift.

    Raising the retirement age for Social Security is an excellent idea. But why so gradual? 2075? The folks affected by that change, to age 68, are only 4 years old today and have nothing invested in the current system. Good grief — the situation is dire and we need to start raising the age almost immediately. I’m 51, I understand the problem, and I would be willing to wait until 68, rather than the current 66 years and 10 months, for goodness sake.

    As I think Bike said above, we need to cut entire programs and we need to budget based on revenues and not perceived needs. We cannot establish “entitlements” and then desperately try to find money to fund them. Rather, we need to see how much money we have, and then dole it out accordingly. If you get less than last year because there isn’t as much money, well, that’s real life. Live with it. Historically, the federal government has consumed between 15 and 20% of GDP. Currently, it is consuming 26%. We need to get it back down to 20. Now.

    Once we have taken those hard measures, and put them into law, then by all means, if we need to raise taxes to make things work and to bring down the national debt over time, then so be it. But not before.

  • DonS

    This proposal is a firm step in the right direction. However, it is only a fraction of what really needs to be done.

    We are far better at raising taxes than we are at cutting spending. Many times in the past we have been offered a mix of spending cuts and tax hikes, which seems reasonable, but then we find out the tax hikes are real and immediate, while the spending “cuts” are really just decreases in the rate of increase (we project what we would like to spend, and then “cut” from that), and often don’t pan out at all. So the spending cuts need to come first, and they need to be demonstrably real and swift.

    Raising the retirement age for Social Security is an excellent idea. But why so gradual? 2075? The folks affected by that change, to age 68, are only 4 years old today and have nothing invested in the current system. Good grief — the situation is dire and we need to start raising the age almost immediately. I’m 51, I understand the problem, and I would be willing to wait until 68, rather than the current 66 years and 10 months, for goodness sake.

    As I think Bike said above, we need to cut entire programs and we need to budget based on revenues and not perceived needs. We cannot establish “entitlements” and then desperately try to find money to fund them. Rather, we need to see how much money we have, and then dole it out accordingly. If you get less than last year because there isn’t as much money, well, that’s real life. Live with it. Historically, the federal government has consumed between 15 and 20% of GDP. Currently, it is consuming 26%. We need to get it back down to 20. Now.

    Once we have taken those hard measures, and put them into law, then by all means, if we need to raise taxes to make things work and to bring down the national debt over time, then so be it. But not before.

  • Cincinnatus

    SKPeterson: Fair enough, but we’re not going to balance the federal budget by ceasing our (temporary and _comparatively_ small) subsidies to “Wall Street.” I oppose such subsidies as well, but they are not the root of the problem.

  • Cincinnatus

    SKPeterson: Fair enough, but we’re not going to balance the federal budget by ceasing our (temporary and _comparatively_ small) subsidies to “Wall Street.” I oppose such subsidies as well, but they are not the root of the problem.

  • utahrainbow

    Cincinnatus @ 14

    Perhaps they are not at the root of the budget problem. They are at the root of the trust problem. You have no chance to make a budget work if people believe that it won’t apply to the politically connected.

    I am trying to say that to help establish that trust, some visible actions need to be taken. Otherwise you’ll have people very angry.

  • utahrainbow

    Cincinnatus @ 14

    Perhaps they are not at the root of the budget problem. They are at the root of the trust problem. You have no chance to make a budget work if people believe that it won’t apply to the politically connected.

    I am trying to say that to help establish that trust, some visible actions need to be taken. Otherwise you’ll have people very angry.

  • Dan Kempin

    Rush Limbaugh gets this exactly right. It is a trap. It sounds like a cut, but it is actually an expansion of government.

    http://www.rushlimbaugh.com/home/daily/site_111110/content/01125106.guest.html

    Spending would be locked in at 22% of GDP. That is too much. It doesn’t even mention the health care legislation.*

    *I am relying on the reports I have heard, without having read and verified.

  • Dan Kempin

    Rush Limbaugh gets this exactly right. It is a trap. It sounds like a cut, but it is actually an expansion of government.

    http://www.rushlimbaugh.com/home/daily/site_111110/content/01125106.guest.html

    Spending would be locked in at 22% of GDP. That is too much. It doesn’t even mention the health care legislation.*

    *I am relying on the reports I have heard, without having read and verified.

  • helen

    Dennis Voss November 12, 2010 at 11:05 am
    I’m confused. Didn’t Congress commit to cutting ear marks once before?

    Someone does before every election, don’t they?
    And then promises enough “if I get elected” to ensure a new batch of “earmarks”.

  • helen

    Dennis Voss November 12, 2010 at 11:05 am
    I’m confused. Didn’t Congress commit to cutting ear marks once before?

    Someone does before every election, don’t they?
    And then promises enough “if I get elected” to ensure a new batch of “earmarks”.

  • Cincinnatus

    And it’s a red herring anyway, as eliminating earmarks would reduce the federal budget by only the tiniest of tiny fractions.

    (Not that we shouldn’t do it, but like many of the proposals I’ve seen on this thread, including the original plan offered by the deficit commission, it is entirely inadequate to the task at hand.)

  • Cincinnatus

    And it’s a red herring anyway, as eliminating earmarks would reduce the federal budget by only the tiniest of tiny fractions.

    (Not that we shouldn’t do it, but like many of the proposals I’ve seen on this thread, including the original plan offered by the deficit commission, it is entirely inadequate to the task at hand.)


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