Today's Wall Street Journal is reporting that a deficit-reduction plan put together by a panel of Democrats, Republicans, economists and other experts is expected to be introduced today. The plan is co-authored by Democratic budget veteran Alice Rivlin and former Sen. Pete Domenici (R., N.M.),
According to the article:
"The most recent report, put together by a group called the Bipartisan Policy Center, will call for a one-year payroll-tax holiday in 2011 that it says will create between 2.5 million and 7 million jobs.
"The plan would lower income and corporate tax rates and offset them with a 6.5% national sales or "consumption" tax as well as an excise tax on sugar drinks like soda."
The national sales tax is essentially a vat (value added tax) tax, something very common in Europe.
According to the article, the plan also includes:
• Changing the formula for social-security taxes so that they are levied against 90% of all wages, compared with the current system, which caps the tax at a certain income level.
• Major cuts in discretionary spending. Both singled out a government policy that allows military retirees to collect full benefits after 20 years.
• Cuts to farm subsidies and either eliminating or limiting certain politically popular tax breaks, such as the mortgage-interest tax deduction.
There are some problems with this. To single out military retirees retirement is just ridiculous. The people who serve in our military do not live the same sort of life as the rest of us--they are forced to move their families every two to four years, they deal with long periods of being separated from their spouses, their salaries are not comparable to the civilian world, and they put their lives on the line on a regular basis. If you would like to cut someone's retirement benefits, try federal workers and government officials (including the House and Senate).
This is not a workable long-term proposal. It is a bunch of gimmicks that hopefully will help with unemployment, but only termporarily, and will not do anything about baseline budgeting or the true causes of our budget deficit.
Baseline budgeting is explained as follows at the Citizens Against Government Waste website:
"Baseline budgeting tilts the budget process in favor of increased spending and taxes. For example, if an agency's budget is projected to grow by $100 million, but only grows by $75 million, according to baseline budgeting, that agency sustained a $25 million cut. That is analogous to a person who expects to gain 100 pounds only gaining 75 pounds, and taking credit for losing 25 pounds. The federal government is the only place this absurd logic is employed."
We will never solve the deficit problem unless we are willing to acknowledge the root of the problem.
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