Economists respond to deficit commission report

From the Economic Policy Insittute:

Today the National Commission on Fiscal Responsibility and Reform released a preliminary proposal as devised by co-chairs Alan Simpson and Erskine Bowles. While the specifics of the proposal are not yet set in stone, the report shows that the commission is running severely off track.
In particular, nearly half of the adjustments come from cuts to discretionary spending – a portion of the budget that is not responsible for long-term deficits. The suggested reductions include a wide range of cuts that would cost jobs and increase financial burdens on working families. For example, the report suggests cutting the federal workforce by 10%, or 200,000 jobs, by 2020. The proposal suggests increasing health care fees on low-income veterans. It proposes budget cuts to national parks, the Smithsonian, water programs and airports. It even suggests eliminating funding for the Corporation for Public Broadcasting (sorry, Elmo). In total, the reductions in discretionary spending would be 16% below the president’s request in his 2011 budget, and 18.5% below the 2020 levels.
The report also does little to increase tax revenue, with only about 5% of the savings coming from increased general revenue (4.8% in 2015 and 6.4% over 10 years). On health care costs—the prime driver of longer-term deficits—the report suggests “establishing a process” to control cost growth. The commission makes several changes to Social Security, mainly in the form of benefit cuts for all but the bottom fifth of the income distribution, but also states that the program changes would not be used for deficit reduction—thus placing their work on Social Security outside the mandate of the commission.
More importantly, there is little acknowledgement that unemployment remains high and it is expected to remain high for years. By beginning austerity in 2012, the report does not allow enough time for the economy to recover, nor does it call for the policies necessary to get the economy back on track. The spending reduction of over $68 billion in 2012 ramping up to $140 billion in 2015 would mean a slower economy and higher unemployment for an already weakened labor market.  (See also John Irons and Andrew Fieldhouse on the Pew-Peterson Commission on Budget Reform’s report, also released today.)
This preliminary set of policies strongly suggests that the commission leaders are not addressing the root causes of the long-term deficit. It’s time for the Obama administration to become more engaged in the bipartisan commission it established, or to make it clear that the commission does not represent their viewpoint on these issues.

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  • @lubindave Let's remember some facts. When Republicans controlled the White House and Congress they turned a Democrat-created budget surplus into a massive annual deficit doubling what was a shrinking debt in eight years. They created and did nothing about two recessions, the latter of which left a trillion dollar hole in the economy that capitalists were unable to fill. That is what the recovery act was for. If it had shortcoming, it was that it was too small and focused on tax cuts more than it should've been. We're seeing job creation now because of it.

    Simple fact, however, is that Social Security has nothing to do with the budget deficit or debt! It pays for itself. So why are they going after that? I don't think there is a legit answer to that question.

    Posted by Tim, 11/11/2010 7:01am (7 years ago)

  • Obama is spending $$$$ like a kid with his father's credit card. The only difference is he has the power to print more money to pay down the debt. Of course this little trick does not go without grievius consequences. If the U.S. were a municipality like, for example, Orange County, Ca., it would be bankrupt. Can you imagine what a pickle Communist China would be in if this ensued? Anyway, since bk is not in the cards, the thing that American citizens must do is "cut up" the credit card. This is what the people have figuratively done by voting the Democrats out of power in the House of Representatives-the House that originates spending. The question now is will Congress get the message? Some members are deep in denial ie Nancy Palosi. Others are firm believers in American's notoriously short attention span. However, the internet and talk radio are not going to forget and will not let the people forget.

    Posted by lubindave@live.com, 11/10/2010 11:23pm (7 years ago)

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