The deadline to raise the federal debt ceiling came and went without anything happening. Some say that this is proof that it was never a real issue to start with. Is it possible that they are right?
Not a chance. We got an extension until August by raiding the pension fund.
You may or may not be willing to take the risk, as some are, but it is unreasonable to think government default has anything other than horrible consequences – starting with a complete government shutdown, likely involving higher costs to service the massive debt we have, and probably threatening the fragile recovery we have in the economy.
Yet there are many who want a long-term budget balancing plan before they agree to increasing the debt limit. It may surprise you to know that just such a plan has already been crafted by a bi-partisan commission, and it is a damned good one.
There wasn’t a lot of attention on this issue when President Obama created the commission in February 2010 or when it reported last November. The chairs are Erskine Bowles, former Pres. Clinton Chief of Staff and Alan Simpson, former Republican Senator from Wyoming. The report that they created is comprehensive, detailed, and difficult to summarize. But it does work.
Read the entire report for yourself here (pdf form).
The main feature is that there are not any actual tax increases – but there is the elimination of all special tax breaks, called “Tax Expenditures” for the purpose of this plan. It starts with dramatic tax simplification and an actual lowering of corporate tax rates once the loopholes and credits are shut down. It also trims $100B from military spending along with $100B from domestic spending.
More importantly, it advises kicking this in with the 2012 budget, something that does not have to be approved until October of this year. They did not want to threaten the recovery.
Why hasn’t this plan surfaced as the compromise necessary to promote long-term reform ahead of a debt ceiling increase, a plan many Representatives have insisted is necessary to win their vote? Like any good compromise it has something in it to displease everyone. Closing down special tax breaks is considered a “tax increase” by those who … well, I guess that they want to see it that way and that’s about that. Democrats are wary of the domestic cuts offered and the long-term plans to control medical expenses.
But there is a plan out there which should serve as a blueprint for moving ahead – and the details do not have to be finalized for another 5 months. It simply has not been accepted by entrenched interests and a need for grandstanding.
Is the debt ceiling a very real problem? Oh yes, it is. But, as always, there is a way out that is very real and workable. The problem is that those in power have a very limited interest in reality, preferring instead to score cheap political points while the nation slowly slides to the brink of disaster.
It’s up to us to reform our political process by insisting that real solutions be found to real problems. The biggest one of all is actually out there right now, ready for implementation if Congress is ready to get real and get to work. It’s up to us to start putting pressure on them to make it happen.
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Looks like a good plan overall, but I see it’s marked “Draft” all over it. Does that mean that they never agreed to a final plan? Looks like Obama gave them a December deadline to have a final plan but there isn’t one listed.
Jim, I did forget to include a link. Simpson and Bowles did not get the 14/18 votes necessary to pass their plan on to Congress, hitting only 11. So, technically, it’s dead – but can be brought back at any time if Congress wants to. The two are still shopping their plan around:
http://tinyurl.com/3npjk84
Because it didn’t pass the bipartisan commission the plan received little attention after an initial flurry, but among policy geeks like me it’s still seen as the best hope for a compromise.
I’ve heard of Simpson-Bowles and it is being discussed on a lot of political blogs. But I never had a link to the details of the plan – thank you. It is at least close to what I would think a compromise would look like. However, I think you understated the concerns about Social Security reform which some people say would privatize or even end SS as we know it. I’d like to hear more about that part of it.
Dale, I do not know why there is such hostility towards this plan from the left from the Social Security angle. An example from Daily Kos is here http://tinyurl.com/6fg7k24 and I and have to say that it’s not particularly coherent as a policy discussion.
For the record, I completely disagree with Simpson that the retirement age has to be lifted, and even proposed a system where we can have people as young as 55 voluntarily retire to make room in the economy for the next generation. Raising the retirement age only increases the size of the labor force at a time when there’s an excess. However, the discussion Simpson is leading is long overdue and has to happen. And this says nothing about the rest of the plan, either.
So what are the objections to this plan? I haven’t found anything that tells me that my initial read – this the start of the way out of the darkness – is in any way wrong.
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I’ve read the Simpson-Bowles plan very carefully and I have to say that I can’t understand why they don’t at least use it as a starting point. They must be truly dysfunctional.
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I missed this one when it was first posted (but it is still valid sadly!) What an unbelievable crock it is that they still don’t have a deal on this. It’s just unbelievable. Given that there is something on the table that works they can’t say that they don’t even have a start (unless they just reject this plan which is stupid!)
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