I have written in the past few years (and weeks) about the US deficit and building debt as it is a ticking time bomb. We failed to reach a grand bargain early in the Obama presidency after the marvelous efforts of the Simpson-Bowles Deficit Reduction Committee. And, that is unfortunate as it was a terrific model to start legislative conversations. While I think the President has done a pretty good job, I see shelving the Simpson-Bowles work as his biggest failure.
Recently, I cited the sixteen myths about our deficit and debt problem in the US, that I gleaned from a bipartisan organization called Fix the Debt which can be found at http://www.fixthedebt.org. As with the efforts of Simpson-Bowles, reducing the debt cannot be done by panacea and will require bipartisan trade-offs that include a mix of revenue increases and spending cuts. The Simpson-Bowles recommendations blended about 1/3 tax increases with 2/3 spending cuts to make huge strides in reducing the debt.
It will definitely not be accomplished by tax cuts as proposed by the two leading GOP candidates for president, who former GOP Senator Alan Simpson said would so significantly increase the deficit, that there are not enough spending cuts to bring the deficit down. Both leading candidates tax proposals have been scored unfavorably by The Concord Coalition, another bipartisan deficit and debt reduction group in this regard, which is a concern, especially with one of the candidates touting how much of a deficit hawk he is.
Solving this problem will require trade-offs and both political parties will need to check their baggage at the door. From an exercise called “Debt Busters, An Interactive Budget Education Exercise by The Concord Coalition” which can be found at http://www.concordcoalition.org, here are few examples of what can be done. This is not a complete list, but is indicative of the kinds of options that could be considered. Note, the numbers reflect the impact on the deficit over the next ten years as measured by the Congressional Budget Office.
- Reduce healthcare spending by adding a public option to the Affordable Care Act (ACA), limiting the subsidies to people making 3 x the poverty limit or less (it is currently 4 x) and limiting malpractice suits = $327 Billion deficit decrease
- Reform Medicare Part B premiums to be 35% of the cost (closer to the initial intent of 50%) and convert federal share of Medicaid payments to a fixed annual block grant = $749 Billion deficit decrease
- Reduce specified defense spending deferring development of a long-range bomber and number of ballistic submarines = $41 Billion deficit decrease
- Reduce domestic spending by reducing the size of the federal workforce through attrition = $49 Billion deficit decrease
- Increase Social Security retirement age gradually to age 70 and calculate cost of living adjustments based on consumer good price changes = $217 Billion deficit decrease
Increasing revenue is something that has to be considered. Strong opinions flavor this discussion, but this is where the exercise earns its keep, as it let’s folks consider the trade-offs and priorities.
- Increase the Social Security Taxable Wage Base to $177,500 from its current limit of $118,500 which would draw in more FICA taxes = $672 Billion deficit decrease
- Increase gas tax to 35 cents per gallon (or something equivalent in mileage tax) earmarked for Highway Trust Funding = $469 Billion deficit decrease
I purposefully stayed away from more tax increases, but reconfiguring our tax code to get more corporations to keep revenue taxed here and simplifying our individual tax code should be considered. Those ideas could be deficit neutral or deficit reducing, but we should think very hard about lowering tax revenue as we cannot afford it in my view and the view of the above bipartisan sources.
Please check out these websites and speak with your congressional representatives and senators. And, ask candidates pointed questions about their plans. Their failure to do something about an obvious problem, telling us what we want to hear via promised tax reductions, does not help us and is a reason our younger adults are frustrated. They will be the ones who have to bear the burden of our poor stewardship.