COMMENTARY | To raise or not to raise? That is the question. Then there are the questions; if you "raise", by how much? And of how much, where will the revenue come from to pay it back? There is a lot of chatter about the new Gang of Six option in the ongoing effort to solve the debt ceiling question. While there are a few good aspects to the plan, there are also the bad and ugly.
The good of the plan is that, for a miraculous change, the evil rich will be relieved rather than targeted. The overall reduction in the higher-end personal income tax bracket will drop from 35 percent to a more reasonable 23 percent to 29 percent. This is brilliant in that it would encourage spending which would benefit the economy by generating income for local businesses as well as sales tax revenue for individual states. Another "good" in the plan is that the tax rates for businesses would drop in the same manner. This would of course encourage hiring and help get some of the millions of unemployed Americans back to work and off of the government dole. The Gang of Six proposal also moves to have corporate tax assessed on a territorial rather than a global scale, thereby eliminating the current double tax on foreign earnings of U.S. companies. Lastly, the plan would abolish the $1.7 trillion alternative minimum tax, a system designed to prevent higher income earners from avoiding taxes.
Obama loves the idea. "It would not match perfectly with some of the approaches that we've taken," USA Today reported the president saying of the plan. "But I think that we're in the same playing field." According to the Associated Press, House Minority Leader Nancy Pelosi, D-Calif., said, "It has some good principles in it." Even House Majority Leader Eric Cantor (R-Va.), one of the Democrats' staunchest and most vocal critics seemed unusually receptive. "While there are still portions that are unclear and need more detail," he admitted, "this bipartisan plan does seem to include some constructive ideas to deal with our debt."
In all, the Gang of Six budget plan would slash the deficit by almost $4 trillion over ten years, encourage the job creators to stand down from the tenacious guard of their capital reserves and inspire them to start spending and hiring again. So, where is the bad"?
First, according to House Armed Services Committee Chairman Howard "Buck" McKeon (R-Calif.), the plan would cut the Pentagon way too deeply and would unfairly curb military health and retirement benefits.
Secondly, the plan proposed between $85 billion and $202 billion cuts in Medicare and other health spending. Some seem to forget that, waiting in the wings are the $818 billion in cuts Obamacare will slash from Medicare from 2014-2023 and $3.2 trillion over the first 20 years. The plan also chops another $80 billion from defense. Then there is the $70 billion in cuts to education and labor programs and another $11 billion from agriculture programs reported by Businessweek.
As for "the ugly", the Gang of Six proposal will hit the middle class where it hurts.
What is surreptitiously described as a "simplification of the tax code," is actually cover-speak for raising taxes on the middle class. The plan proposes to raise their taxes by a hefty $1 trillion by effectively reducing tax breaks on mortgage interest, high-end health plans, charitable deductions, retirement savings and families with children. These are the very tax breaks that the middle class depend on the most to keep their boats afloat.
Complication and ambiguity is another set of ugly aspects of the Gang of Six budget plan. The vague five-page outline harkens back to Pelosi's statement of Obamacare, that "we have to pass the bill so that you can find out what is in it." By the admission of many, including the president, the plan is short on details and still-evolving. It falls under the heading of the old "fool me once" analogy. Of the president and congress, if nothing else, Americans should insist upon clarity before passage.
Lastly in the "ugly" category is the math; borrow $2 trillion today and cut only $3.5 trillion in debt over the next ten years. In ten years the interest on the additional $2 trillion in borrowed debt will cancel out and exceed the $3.5 trillion in cuts. Then there's the silly obvious, that success of this "short on details" plan is based on the foolish assumption that the president and the posturing members of congress from both sides will be able to set aside their egos long enough to agree on defining those currently "still-evolving" cut recommendations.
In its current state, the Gang of Six proposal defines Pelosi's "fog of controversy" and is therefore far too contentious to advance before Aug. 2. CNN just reported that, according to the Treasury Department, U.S. taxpayers likely lost $1.3 billion in the government bailout of Chrysler. With something as serious as our national debt we need pin-point clarity not ambiguity. Then there is this, which must be considered.
Whether through a sense of urgency or a simple weariness over the whole argument, the opinion of the majority in America has shifted. Where a Gallup poll in May showed the majority opposed to raising the debt limit, a recent poll by NBC reveals that the majority of Democrats, Republicans and Independents want congressional leaders to arrive at some kind of compromise in this budget debate. The freshmen senators who are threatening to oppose any compromise are, at this point, not listening to majority because it opposes their personal position.
They must understand that the majority has spoken and their voice, whatever it is and for whatever the outcome, must be heard.
Samuel Johnson once said, "Life cannot subsist in society but by reciprocal concessions." While it is a shame that the White House and congress feel it necessary to always wait until the eleventh hour to get serious about our economic problems, it appears that progress is being made. That, above all else, is a good sign.
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