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The Deficit Commission Scam

Lying about "cuts."

By Petrarch  |  November 18, 2010

Obama's Fiscal Commission recently leaked a summary report of their ideas on how to right America's financial ship - and what a firestorm erupted!

The Left is struck dumb with horror at the concept of cutting spending more than raising taxes - they'd hoped the Commission would simply recommend a European-style VAT tax-on-everything to scoop even more dollars into the Federal maw.

The Right is pleased with the idea of cuts, naturally, but views a monster increase of the gas tax as anathema.

Unfortunately, it's all irrelevant.  Even if the Fiscal Commission's plan was passed and approved exactly as written, with no political meddling, America's economy would still be doomed - because it doesn't actually do anything about either our deficit or our debt.

Good Ideas...

To our surprise, the plan includes a number of improvements that we've long advocated, particularly regarding Social Security, as the New York Times reports:

The plan would reduce cost-of-living increases for all federal programs, including Social Security. It would reduce projected Social Security benefits to most retirees in later decades, though low-income people would get higher benefits. The retirement age for full benefits would be slowly raised to 69 from 67 by 2075, with a “hardship exemption” for people who physically cannot work past 62.

Raising the retirement age is not really optional; there simply is not enough money to allow people to spend decades in publicly-funded retirement.  The retirement age will be raised one way or another; we would prefer it to be done in an orderly, transparent fashion well in advance so people can be warned and prepare, rather than abruptly when the checks start bouncing.  The Commission merely recognizes this reality.

Likewise, if as a society we believe that government should support the decrepit aged poor, surely it makes no sense to also pay the wealthy.  Logically there's no reason age should matter directly at all: if you cannot work due to health reasons (including extreme old age) and have no money, there's an argument to be made for having some kind of safety net.  If you can work but choose not to, or if you have plenty of money of your own, you don't deserve and don't need taxpayer dollars regardless of age.

One of the more controversial proposals that's being attacked as a tax raise is actually an essential improvement of principle.  The Commission wants to eliminate the beloved mortgage-interest tax deduction.

This would increase taxes (by reducing deductions) so normally we'd oppose it.  However, the principle is the right one: government should not be using taxpayer dollars to encourage particular financial investments over others.

Why should government use tax policy to encourage homeownership instead of, say, starting a small business?  The only effect of this mistake was to inflate the housing price bubble even more than it otherwise would have, and we all know how that ended up.

There are certainly some specific ideas that are unappealing for various reasons: eliminating the child tax credit, for example, would simply reduce American reproduction rates even further and add even more pressure to permit non-American illegal immigration which is fast changing America into something else completely different.  As a whole, though, the Commission's suggestions seem rational and well-thought-out.

Except for one thing: They would accomplish nothing at all worth doing, because they don't do what they're being advertised as.

...But Bad Math

What is the purpose of the Fiscal Commission?  The Times started their article with this description:

The chairmen of President Obama’s bipartisan commission on reducing the national debt... [emphasis added]

Wrong!  Totally, completely, utterly, and profoundly wrong - as even the Times realized two paragraphs further:

Those changes and others... would erase nearly $4 trillion from projected deficits through 2020, the proposal says, and stabilize the accumulated debt.

The proposals won't reduce the debt one iota - at best, they claim to merely stabilize it.

If you're wondering what we're driving at, did you notice the politicians' favorite financial weasel word?


That's right - the Commission's proposals do not reduce $4 trillion from our debt, nor even from our actual deficit.  They merely reduce it from our projected deficits - which is to say, from money we have not yet even spent!  Our politicians want to spend that money; these "cuts" are just reductions in the size of their pork-barrel dreams.

If your wife wants to spend $1000 you have not got on a new dress, and you negotiate her down to $500, are you in good financial shape?  Of course not - you have still spent $500 you don't have.  Yes, spending $1000 would have been worse, but you hardly have grounds for celebration and congratulations.

Cato Institute writer Dan Mitchell puts it bluntly:

The Fiscal Commission is asking us to pay higher taxes so that government spending can grow at twice the rate of inflation.

Growth in government spending is exactly what's gotten America in the fix we are in!  What about this does the Commission not understand?  They are playing the same old Washington game - claim "cuts" against spending that hasn't happened while letting actual spending continue to grow past all reasonable bounds.

The bottom line?  The Fiscal Commission proposes to "reduce" the Federal government's baseline, non-emergency, non-recession spending to 22% of GDP... which is more than it has ever been in 50 years except briefly during the early-80s recession.

With "reductions" like that, who needs increases?  Unionized government employees, that's who!