Firedoglake has obtained an advance copy of the final report from the Simpson-Bowles Catfood Commission, which presents the plan from the co-chairs since the committee has failed to meet its mandate of producing a super-majority endorsed plan. They had been required to produce such a plan by today when Obama created the commission. In trying to convey the “wisdom” of their “sober” analysis of the national debt situation, the commission unintentionally demonstrates that the best current alternative is gridlock in Washington preventing any “fixes” in the near term, allowing laws already in place to improve the debt outlook, primarily through expiration of the Bush tax cuts and ending adjustments to the Alternative Minimum Tax and Medicare.
Here is Figure 1 from the report, along with its caption:
The commission is comparing the anticipated impact on the national debt from its plan with a plan based on what they see as current policy in Washington, which they interpret to mean that Bush tax cuts for incomes below $250,000 are extended, the Alternative Minimum Tax continues to be patched and Medicare “Doc Fixes” continue; this is the line labeled “Current Policy” on the graph. Also on the graph is a line labeled “Current Law”, which shows what would happen if gridlock in Washington prevents any further changes, meaning that the Bush tax cuts are allowed to expire and no other patches or fixes are enacted.
Remarkably, the commission indicates that their plan actually makes the national debt worse than either of the two alternative scenarios through 2014. Furthermore, the commission’s plan does not improve the debt situation over the gridlock scenario until 2020. But by the time we get that far out, other “assumptions” in the commission’s analysis kick in, with the “Current Policy” line on graph heading for the stratosphere because they assume that after 2020, revenue does not increase as a percentage of GDP and that the health reform law suddenly will become ineffective in slowing growth of health care expenses.
For an alternative perspective on where real changes on the debt situation could be achieved, I find it useful to consider this figure prepared by the Washington Post addressing the 2011 budget. Note that individual income tax revenue is projected at $1.1 trillion and corporate tax revenue is projected at $297 billion, with a projected deficit of $1.27 trillion. The Bush tax cuts account for nearly $4 trillion over the next ten years in lost revenue if they are extended for all tax brackets, or about $400 billion a year on top of the projected $1.27 trillion deficit. Also, it should be noted that the projected corporate tax revenue of $297 billion could be increased significantly, since corporate profits are now at a record level, with profits for the third quarter coming in at an annualized rate of over $1.6 trillion with the current tax rate built in. Doubling that rate would still leave a very healthy profit of over $1.3 trillion a year and take another $300 billion or so off the deficit.
Note also that we are now spending $3 billion per week, or over $150 billion a year on the wars in Afghanistan and Iraq alone, on top of the massive nearly $900 billion a year on defense. And yet, despite these huge outlays that could be cut back to levels that would make the deficit disappear when coupled with allowing the Bush tax cuts to expire and doubling the corporate tax rate, Simpson and Bowles find it necessary to attack Social Security and Medicare spending as a higher priority than addressing an unsustainably low tax rate and out of control defense spending. As if Simpson and Bowles are not a big enough problem on their own, we also have Republicans like Scott Brown grandstanding on how to pay for extending unemployment benefits of roughly $60 billion a year while at the same time wanting to extend, without paying for them, the Bush tax cuts and the wars.
I never knew gridlock could be so beneficial, but at least for now, it is our best alternative, and we have Alan Simpson and Erskine Bowles to thank for pointing that out to us.