The on-again, off-again “Gang of Six” has come back on the scene and is offering a “Bipartisan Plan to Reduce Our Nation’s Deficits.”
The proposal is quite similar to the one put forth by the President’s Simpson-Bowles Commission, which isn’t too surprising since some of the same people are involved.
At this stage, all I’ve seen is this summary (A BIPARTISAN PLAN TO REDUCE OUR NATIONS DEFICITS v7), so I reserve the right to modify my analysis as more details emerge (and since I fully expect the plan to look worse when additional information is available, the following is an optimistic assessment.
The Good
o Unlike President Obama, the Gang of Six is not consumed by class-warfare resentment. The plan envisions that the top personal income tax rate will fall to no higher than 29 percent.
o The corporate income tax rate will fall to no higher than 29 percent as well, something that is long overdue since the average corporate tax rate in Europe is now down to 23 percent.
o The alternative minimum tax (which should be called the mandatory maximum tax) will be repealed.
o The plan would repeal the CLASS Act, a provision of Obamacare for long-term-care insurance that will significantly expand the burden of federal spending once implemented.
o The plan targets some inefficient and distorting tax preference such as the health care exclusion.
The Bad
o The much-heralded spending caps do not apply to entitlement programs. This is like going to the doctor because you have cancer and getting treated for a sprained wrist.
o A net tax increase of more than $1 trillion (I expect that number to be much higher when further details are divulged).
o The plan targets some provisions of the tax code – such as IRAs and 401(k)s) – that are not preferences, but instead exist to mitigate against the double taxation of saving and investment.
o There is no Medicare reform, just tinkering and adjustments to the current system.
o There in no Medicaid reform, just tinkering and adjustments to the current system.
The Ugly
o The entire package is based on dishonest Washington budget math. Spending increases under the plan, but the politicians claim to be cutting spending because the budget didn’t grow even faster.
o Speaking of spending, why is there no information, anywhere in the summary document, showing how big government will be five years from now? Ten years from now? The perhaps-all-too-convenient absence of this critical information should set off alarm bells.
o There’s a back-door scheme to change the consumer price index in such a way as to reduce expenditures (i.e., smaller cost-of-living-adjustments) and increase tax revenue (i.e., smaller adjustments in tax brackets and personal exemptions). The current CPI may be flawed, but it would be far better to give the Bureau of Labor Statistics further authority, if necessary, to make changes. A politically imposed change seems like nothing more than a ruse to impose a hidden tax hike.
o A requirement that the internal revenue code maintain the existing bias against investors, entrepreneurs, small business owners, and other upper-income taxpayers. This “progressivity” mandate implies very bad things for the double taxation of dividends and capital gains.
This quick analysis leaves many questions unanswered. I particularly look forward to getting information on the following:
1. How fast will discretionary spending rise or fall under the caps? Will this be like the caps following the 1990 tax-hike deal, which were akin to 60-mph speed limits in a school zone? Or will the caps actually reduce spending, erasing the massive increase in discretionary spending of the Bush-Obama years?
2. What does it mean to promise Social Security reform “if and only if the comprehensive deficit reduction bill has already received 60 votes.” Who defines reform? And why does the reform have to focus on “75-year” solvency, apparently to the exclusion of giving younger workers access to a better and more stable system?
3. Will federal spending under the plan shrink back down to the historical average of 20 percent of GDP? And why aren’t those numbers in the summary? The document contains information of deficits and debt, but those figures are just the symptoms of excessive spending. Why aren’t we being shown the data that really matters?
Over the next few days, we’ll find out what’s really in this package, but my advice is to keep a tight hold on your wallet.
Thank you for the concise summary.
[...] Mitchell has more on the good, the bad, and the ugly of the proposal. Conn Carroll thinks that, by the gang's own [...]
The reed/mc connel plan is no good. It will include more taxes.I go with the House plan!!!!
Shouldn’t we be more concerned with the effective corporate tax rate, which recent reports state are quite low in the United States compared to other countries?
[...] So what’s my gripe? $500 billion in immediate cuts is chump change. Future cuts are to be identified – right. The plan is vague and all the pain happens in the future, when it’s someone else’s problem. And of course, it does not deal with entitlement programs. For a more thorough analysis by someone smarter than me, read Dan Mitchell’s analysis, here. [...]
“my advice is to keep a tight hold on your wallet”—but isn’t this always CATO’s advice? When in doubt, go into bunker mentality. “Only I matter” would be a great slogan for you guys.
[...] Tax increases, a ridiculously modest cut to spending (below what the “one-time” stimulus payment now factored into every budget has already added), no real reform of any kind, and promises to cut more in exchange for permission to grant yourself $2.5 trillion in new spending. Yeah, that’ll fix shit! [...]
I know this might seem like an unimportant issue to most. . but I don’t have a problem with the “cap” of 29% on the upper income, but as a rule, most in the highest income “bracket” pay a far smaller percentage than I do. I’d like to see you get them to pay their “fair share”, as well as eliminating these incredible “loopholes” that allow the likes of GE, Boeing, and other multi-billion dollar corporations, to pay virtually no taxes, and to even get “refunds” on taxes they never paid. . This is corporate “welfare” and needs to be eliminated as well. . I just don’t see any of the people getting it done. . They are “owned” by their corporate “sponsors” and do not represent the people who vote for them. . Check the voting records and you’ll see this is indeed a correct statement. .
I am always entertained by people who want to tax “evil” businesses. People who can’t seem to pull together the concepts that businesses charge customers a price that covers the cost of making or supplying goods or services INCLUDING TAXES.
We could in theory, tax business at a sufficiently high rate so that personal income tax would not be needed. In this case we would effectively have a sales tax.
Perhaps if we did do that people would realize that businesses dont pay taxes, only people pay taxes.
with terms like decreased tax expenditures and vitiate used throughout the document I read, my eyes just glaze over with the realization they are working against me…
Um…there isn’t any cut in spending anywhere in this pathetic lib-RINO mess. All of Dan’s “good” bullets are tax-related, including a trillion+ tax increase and a higher debt ceiling.
Good? Bwaaaa! Try selling this mess to Tea Party House members…
Two words: this sucks
Anyone who dreams that a plan devised by kook-fringe Dickless Dick Durbin could make fiscal sense must be drinking hard.
[...] Mitchell reviews the “Gang of Six” debt ceiling [...]
I’m throwing all the GOP politicians under the ‘literal’ bus. I will not be voting for any politician that accepts this smoke-and-mirrors plan.
I’m sick and tired of the RINOs in the GOP.
If a politician is not for the Tea Party, then they are against me and American.
Thus, my vote will now only go to a Tea Party statesman in 2012.
Don’t Tread On Me!
Geee, it would have been nice for the author to TELL US WHO THE HELL THE ‘GANG OF SIX’ ARE.
Who, what, when, where, why and how. Basic Journalism 101. Journalism is dead.
This farce should be nicknamed the “I’ll cut spending Tuesday, if you raise the debt limit today” plan. Nothing in this plan is enforceable and everything is yet to be determined in committee later.
Same old shit, we need to get rid of any rinos who vote for anything other than NO DEBT CEILING INCREASE!!!! When I run out of money I don’t spend, these jackals in washington need to get their heads out of their asses and LISTEN to the American citizens who have to pay the damn bill!!!
wow you people are morons
seriosuly calling gops rino cause they are not tea baggers
u realize that people dont trust tea bagggers more than gops and dems and way less than obama
remember the debt is 93% reagan bush1 bush2
wars irrisponsible taxcuts for “job creators”
yeah bushes tax cuts worked in 2007-2009 when they cut jobs or now when they are just hold the money
yall went on a spending spreee and it FAILED and when dems once again have to clean up your mess u claim
ohh the debt the debt
the ceiling was raised 12 times for ronny and 7 times for el busho
you ever wont why obama kicks your asses in debates
cause all you have are weak talking point
cut defense budget to 1999 levels
all tax loopholes gone
ss cap above 200 thou
subsidies gone for billionaires
high end taxes back up to clinton era( when we had a surplus)
your cutting in states have gained you
the most unpopular govs
ohio fla wisc penn mich
oh and to the bagger who thinks anyone who is agaiinst you is not american?
thats is exactally why you will never be in the majority
Colin – if only it was just “I” that mattered. Unfortunately, the taxes that I pay are paying for 10 or 12 “theys” – and their kids. Now it looks like it’s going to be 12 or 14.
When to “they” get the communal blessings of getting to pay for the benefits they use? I would LOVE to share the love with the “theys” of the world. Somehow I think “they” would take a pass…
What’s this utter crap about Obama being “consumed by class-war resentment?” It’s the ultra-rich far-right, such as the oil-fueled Koch brothers and their wholly owned Tea Party, who declared class war on all of us.
Dan,
Remember that Democrats already passed tax increases that take effect over the next few years. I think it was part of Obamacare.
Dan Mitchell spoke on the Mark Levin show tonight . It was good. Here it is.
http://mrctv.org/videos/catos-dan-mitchell-mark-levin-show
Obama could be re-elected. Republicans and Independents may not show up to vote..
This plan is touted to increase a trillion of revenue. All;that is revealed is that rates will be reduced for indioviduals and coprations. The only counterbalancing factors are to reduce deductions for mortgage interest and they like–which will hit the middle class–while the fat cats will have a net saving on their new 29–or–25 rates. Does anyone have any idea where this 1 trillion comes from–and from whom?
i hope both sides come to an agreement because this is our about our childrens future
we have to take an ethical approach and stop bickering
http://ethicalfutures.wordpress.com
[...] Good reading on the Gang of Six plan. [...]
[...] A good analysis from Dan Mitchell of the libertarian Cato Institute. (With links removed – you have to click through for the links he included) [...]
another piece of crap that will screw the little guy………fix the borders, don’t allow non americans to grab benefits, get rid of corruption in current entitlements,,,,,,,go to a straight percentage tax with no loopholes for anyone. vote everyone out of congress, start over with term limits…impeach obama, get rid of the fed. that should cover it….
Read Beldar’s message to the six
http://beldar.blogs.com/beldarblog/
[...] a nice overview of the plan, Cato’s Dan Mitchell points out that, as usual, the headline deficit reduction figures don’t represent real reductions from [...]
[...] worst of the Gang of Six proposal, as fed-spending watchdog Dan Mitchell noticed, is that the alleged spending cuts don’t actually cut spending overall, just (get ready [...]
[...] going after Senator Conrad. Is it because I’m upset that he has played a key role in tricking some gullible Republicans into supporting tax increases, based on a laughably vague set of talking [...]
[...] why I’m going after Senator Conrad. Is it because I’m upset that he has played a key role in tricking some gullible Republicans into supporting tax increases, based on a laughably vague set of talking [...]
[...] worse, Obama’s negotiating position was just strengthened by the so-called Gang of Six, which undercut GOP negotiators and enabled Obama to move even farther to the [...]
[...] 1. The joint committee proposes a terrible package of fake spending cuts and real tax increases (just like the Gang of Six). [...]
[...] I’ve been somewhat critical of Senator Coburn’s willingness to raise taxes, I’ve never doubted that he is a sincere [...]
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[...] of means-testing and price controls. Now, take a wild guess at which approach was adopted by the Gang of Six and the Simpson-Bowles fiscal commission, plans that often are cited as providing a framework for a [...]
[...] a nice overview of the plan, Cato's Dan Mitchell points out that, as usual, the headline deficit reduction figures don't represent real reductions from current [...]