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Thursday, November 11, 2010

How Serious are We about the Debt?

So a draft of the Debt Commision's report has been leaked. Erick Erickson breaks it down:
Yes, the plan ends the deficit. It does so with lots and lots of spending cuts across the board. There are actually some good suggestions in the plan, but there is one inescapable fact — the proposal has buried in it one trillion dollars in tax increases.

Some of what are defined as tax increases are, in fact, closing loopholes in the tax code that lobbyists have inserted on behalf of clients. But also included is getting rid of the home mortgage deduction. That would amount to a massive, massive tax increase on the middle class.

The reforms suggested for social security are out and out garbage. It is not means tested. It is not “lock boxed”. Payments are cut. Retirement is increased.
It's a comprehensive solution, so there's something for everyone to hate, which means it chance of being passed in toto are about zero.

This could be a tough nut to crack politically because the economic and national security risk that comes with a debt-inducing death of King Dollar, to use a phrase, is real. However, aggressive tax increases to arrest a growing national debt bring their own risks. (The proposal ends the deficit, but necessarily would leave the debt at an uncomfortably high percentage of GDP, i.e., until GDP grows appreciably, which is further at risk by a massive tax hike aimed at the heart of the middle and employer classes).

If only there were another way to erase the deficit...

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