We definitely needed another greybeard panel to tell us all to sacrifice to “get our fiscal house in order.” And that’s what we got today, with the Domenici-Rivlin Bipartisan Policy Center report on debt reduction. Pete Domenici is the former Republican Senator from New Mexico who at the end liked to walk around Congress in his pajamas; Alice Rivlin is the deficit scold Democrat who’s a member of the Catfood Commission.
Their report is basically similar to the Bowles-Simpson report. It includes tax reform of the “lower the rate, broaden the base” variety, with the innovation being the addition of a 6.5% “debt-reduction sales tax” (probably a nice way of saying VAT, a regressive sales tax). They “strengthen” Social Security with three of the four recommendations from Bowles-Simpson, jettisoning the increase in the retirement age while using progressive price indexing, changing the calculation of COLA and increasing the payroll tax cap to 90% of compensation. They “reform Medicare and Medicaid” with a lot of hand waving, a tax on soda, eliminating the employer deduction for health care (which would lead millions of companies to ditch their health care, no?) and not much else. They would freeze discretionary and defense spending and limit future growth. And they would basically keep the cost of government racheted down, regardless of demand for services, through a variety of means.
There’s really only one thing that sets Domenici-Rivlin apart from Simpson-Bowles, and that’s the acknowledgement that the economy needs spending right now to increase demand. Yes, spending in a deficit reduction report. Because they understand that economic growth will wipe away deficits (and I’m glad David Leonhardt gets this too). Domenici-Rivlin gets at this with a one-year payroll tax holiday that would cost $650 billion dollars. I would hope it could be structured so that not one dime gets lost from the Social Security and Medicare trust fund, but if so, that’s a big stimulus number, if a clunky one, since it only goes to people who are working.
All these deficit commissions and deficit reports, positioned to drop at the same time, are meant to give the indication that America needs to cut its deficit right now, despite 15 million people out of work. Never mind if the plan constitutes a transfer of wealth upward to the rich, or if it tilts in favor of cuts to services people need instead of tax fairness that the most fortunate of us can afford. Even Jan Schakowsky’s progressive plan concerns me, because it plays on this turf where the only responsible measure is to cut the deficit, which is the exact opposite of what we should be doing right now.
The expectation right now is that the Catfood Commission, the only game in town with any actual authority, won’t come to a consensus. But you have its leaders maneuvering to try and get a confirmed vote from a more Republican Congress after January.
Several members of the US fiscal commission are asking for a commitment from Harry Reid, the Democratic Senate majority leader, and John Boehner, the future Republican speaker of the House, to hold a vote on a final package to shrink the US budget deficit in the new Congress.
According to people familiar with the matter, both Republicans and Democrats on the panel have suggested that Erskine Bowles and Alan Simpson, co-chairs of the commission, receive additional assurances from congressional leaders that they would be prepared to vote next year on a proposal that garners a majority of 14 votes out of 18 on the commission.
At the moment, Mr Reid and Nancy Pelosi, the Democratic speaker of the House, have pledged to hold a vote on a commission package in the “lame-duck” session of Congress, which began on Monday and ends next month.
A promise from Mr Reid and Mr Boehner to hold a vote on a package next year could strengthen the political momentum in favour of a deal on the commission in time for the December 1 deadline, following attacks from both the left and the right on initial recommendations by Mr Bowles and Mr Simpson.
You can see what Bowles and Simpson are trying to pull off. Their report was attacked badly. But if they can get a vote on it or something like it with a Republican House and a more Republican Senate, they can convert it into something that John Boehner can love, at that point garnering enough support from Republicans to pass at least one house. Then Democrats in the Senate can be browbeaten into acceptance on the grounds of having to be “serious” about the deficit. And you can bet that nothing like Domenici-Rivlin’s payroll tax holiday will factor into this scenario.
That’s why the best move is not to play, and to hope the commission collapses under its own weight.