Austerity Measurement: Deficit Reduction, You Asked For It

—by , November 17, 2010

Interestingly, the bitter pill of smaller government that Tea Party-leaning Americans shoved down the ballot box not two weeks ago came into the public discourse this week not from the newly elected House Of Representatives but the Democrat-led executive branch, with a laundry list of recommendations by the White House Commission on Financial Responsibility and Reform.

And if anything, the recommendations look like the product of small government advocates, leaving both entitlement programs and military budgets on the table. In fact, early on the project was dubbed the “Cat Food Commission” by its detractors, implying that’s what those on entitlement programs will be eating after it is implemented.

Eliminating child tax credits, reducing mortgage tax credits, implementing caps on malpractice suits, raising the eligibility age for Social Security and possible reductions in Medicare/Medicaid are generating a lot of bile in the gullet of the Democrat base, and troop cuts of 33 percent in Europe and Asia, an overall military budget cut by $100 billion in four years, a raise in social security taxes, reductions in farm subsidies, and a public option in health care are putting Republicans in a tough spot.

After all, they asked for it.

Other thoughts? No more funding for public broadcasting, cut federal workforce employment by 10 percent and reduce the budgets of Congress and the White House a staggering 15 percent, and almost double the gasoline tax. How about implementing co-pays for Veterans’ Administration?

Talk about brutal.

The plan’s overall goal is to raise revenues (i.e. taxes) by $1 for every $2 cut in spending, bringing the budget deficit below 3 percent with a target of both public revenues and spending as 21 percent of GDP.

Currently, spending is about 26 percent of GDP and tax revenues have been around 18 percent.

How about that for change? Or the audacity of hope? Or the statistical improbability that all of these recommendations actually go into effect?

Truth is, some of them will, but most won’t. Farm subsidies may go down short term but will be raised again in the future. Troop cuts are inevitable, as the military has been burning up their reserves and the National Guard in lieu of more multiple redeploys. As far as a 10 percent reduction in the federal workforce, that may not pan out to a 10 percent reduction in payroll costs, as whoever’s left over will actually have to be competent. The raise in the Social Security age won’t be complete until 2075, by which time we’ll all be bionic anyway.

Tax credits for home mortgages will be a huge stumbling block to bipartisan support, and it’ll fare even worse in the business community who see the real estate market as being shaky at best after weathering wave after wave of foreclosures. Raising gas prices a minimum $1.80 per fill-up won’t make anybody happy either (mostly because keeping our aging bridges from falling down is way more expensive than anyone would like to admit), and that’ll be a tough one to get past the Republican base. So will raising the threshold for Social Security payroll tax.

The “cat food” feeling that the commission’s recommendations will be borne on the backs of the middle class isn’t helped by the recommendation to lower the corporate tax almost ten percent, and depending on the tax rates, lower the tax rates most significantly for the highest earners. Alternative Minimum Tax? Abolished.

Discretionary caps recommended won’t fly well with the big shot lobbyist community, and should these caps go into effect, the men on the hill will have a newfound impotence in bringing home the pork to their constituencies. Better governance, it can be argued, but most legislators are smart enough to vote with their own interests in mind (unlike the larger voting populace).

A few other proposed line items?

A 15 percent reduction in procurement by the military (meaning new toys to kill people with) is expected to make up $20 billion in savings, which along with reductions in defense contractors is $25 billion less going to the military industrial complex, who historically lobby hard to maintain their bottom lines.

On the domestic front? Using both sides of paper when they print, for an estimated $400 million in savings and creating a committee to trim waste to the tune of $11 billion.

Another line item is finding over $18 billion by cutting 250,000 non-defense service and staff augmentee contractors. That’s an average of over $72 million in savings per contractor. So between the cuts in the military industrial complex and non-defense government contracts, over $40 billion is coming out of the private sector every year from 2015 onward in this plan.

Democrat or Republican, the entirety of this recommendation is political suicide. Expect something watered down to leak out of Congress by this time next year.


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