Fiscal responsibility and reform

The “President’s National Committee on Fiscal Responsibility and Reform” has issued its “draft report,” actually just a series of powerpoint-like slides in pdf format, with a few complete sentences here and there.   Yves Smith [correction: These comments were guest-posted on Naked Capitalism but originate at The Daily Bail] has already posted comments, of which I fully endorse the last sentence, but I would like to expand a bit here on my own site.

Now, it would be too much to expect the President’s Commission to suggest anything that would seriously change the way the powers-that-be conduct their business.  So I’m unsurprised that they pretty much endorse the existing income tax system, calling for some “simplification” and removal of “loopholes.”  What they really should have said, on the revenue side, is something like:

Remove all taxes on earned income, including return for investment in capital goods.  Instead, tax things which are not products of labor, including the ownership of land and other natural resources, including exclusive access to portions of the electromagnetic spectrum.

This would have so aided the economy that nothing more might be needed, tho liquidation of many other rentier aids outside of the tax code would still be beneficial.

As for expenditures, it’s even worse than I expected.  Most of the savings seem to be versions of “reduce waste.”  Page 20 shows (sorry, for some reason WordPress doesn’t want me to put the page image here)  their “illustrative” cuts for “domestic” spending (which happens to include foreign aid):

The biggest item on the page is “Eliminate 250,000 non-defense service and staff augmentee contractors,” which apparently is expected to save $18.4 billion in 2015.  So, uh, what are these people doing? What programs will have to be eliminated, or cut to what extent, when they’re gone?  Perhaps they’re doing nothing useful, just writing memos to one another, so there’s no question they must be laid off. More likely they’re actually responsible for something, useful or useless, harmless or harmful, and until we know what it is we can only assume that, if they’re actually cut, it will be because they aren’t good enough at making themselves seem important.

Most of the rest on the page are equally inexplicable.  Pages 19 and 35 give similar pretend savings, for “defense” and “health” care, respectively. Who could object to “Cut Medicare Payments for Bad Debt,” whatever that really means?

“Pay doctors, other health providers, and drug companies less and improve efficiency and quality”  (page 32). Yeah, I’m sure the medical providers’ lobbyists will let that one go without comment. Even scarier, on the same page “Pay lawyers less and reduce the cost of defensive medicine. Enact comprehensive medical malpractice liability reform to cap non-economic and punitive damages and make other changes in tort law.”  Which means, basically, if an underpaid operating room staff accidentally cut off the wrong appendage, you the victim are entitled to an artificial leg, arm, or whatever, plus some portion of your expected earnings.  (If you’re unemployable, you’re uncompensable.)

Another part of the Committee’s draft solution is to transfer some of the burden to state and local governments.  “Reduce Taxes that States May Levy on Medicaid Providers” (page 35). “Include newly hired state and local workers in Social Security after 2020” (page 45).  Few states are in any shape to absorb these costs, of course.

The very few realistic good ideas in the draft are hardly new, but let’s give credit where due.  Regarding the social security payroll tax: “Gradually increase the taxable maximum to capture 90 percent of wages by 2050” (page 46) would certainly be better than the current system.

There is also some procedural stuff that might be significant; I don’t understand it, things like “60-vote point of order to enforce caps in Senate; separate non-amendable vote on point of order to enforce cap in House; sequester applied if caps are exceeded” (page 17).  Probably it will just lead to more innovative ways to play budget games.  I will discuss a serious proposal in my next post.

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