The Hijacked Commission

By Paul Krugman
November 11, 2010
http://www.nytimes.com/2010/11/12/opinion/12krugman.html

Count me among those who always believed that President
Obama made a big mistake when he created the National
Commission on Fiscal Responsibility and Reform -- a
supposedly bipartisan panel charged with coming up with
solutions to the nation’s long-run fiscal problems. It
seemed obvious, as soon as the commission’s membership
was announced, that "bipartisanship" would mean what it
so often does in Washington: a compromise between the
center-right and the hard-right.

My misgivings increased as we got a better feel for the
views of the commission’s co-chairmen. It soon became
clear that Erskine Bowles, the Democratic co-chairman,
had a very Republican-sounding small-government agenda.
Meanwhile, Alan Simpson, the Republican co-chairman,
revealed the kind of honest broker he is by sending an
abusive e-mail to the executive director of the
National Older Women’s League in which he described
Social Security as being "like a milk cow with 310
million tits."

We’ve known for a long time, then, that nothing good
would come from the commission. But on Wednesday, when
the co-chairmen released a PowerPoint outlining their
proposal, it was even worse than the cynics expected.

Start with the declaration of "Our Guiding Principles
and Values." Among them is, "Cap revenue at or below
21% of G.D.P." This is a guiding principle? And why is
a commission charged with finding every possible route
to a balanced budget setting an upper (but not lower)
limit on revenue?

Matters become clearer once you reach the section on
tax reform. The goals of reform, as Mr. Bowles and Mr.
Simpson see them, are presented in the form of seven
bullet points. "Lower Rates" is the first point;
"Reduce the Deficit" is the seventh.

So how, exactly, did a deficit-cutting commission
become a commission whose first priority is cutting tax
rates, with deficit reduction literally at the bottom
of the list?

Actually, though, what the co-chairmen are proposing is
a mixture of tax cuts and tax increases -- tax cuts for
the wealthy, tax increases for the middle class. They
suggest eliminating tax breaks that, whatever you think
of them, matter a lot to middle-class Americans -- the
deductibility of health benefits and mortgage interest
-- and using much of the revenue gained thereby, not to
reduce the deficit, but to allow sharp reductions in
both the top marginal tax rate and in the corporate tax
rate.

It will take time to crunch the numbers here, but this
proposal clearly represents a major transfer of income
upward, from the middle class to a small minority of
wealthy Americans. And what does any of this have to do
with deficit reduction?

Let’s turn next to Social Security. There were rumors
beforehand that the commission would recommend a rise
in the retirement age, and sure enough, that’s what Mr.
Bowles and Mr. Simpson do. They want the age at which
Social Security becomes available to rise along with
average life expectancy. Is that reasonable?

The answer is no, for a number of reasons -- including
the point that working until you’re 69, which may sound
doable for people with desk jobs, is a lot harder for
the many Americans who still do physical labor.

But beyond that, the proposal seemingly ignores a
crucial point: while average life expectancy is indeed
rising, it’s doing so mainly for high earners,
precisely the people who need Social Security least.
Life expectancy in the bottom half of the income
distribution has barely inched up over the past three
decades. So the Bowles-Simpson proposal is basically
saying that janitors should be forced to work longer
because these days corporate lawyers live to a ripe old
age.

Still, can’t we say that for all its flaws, the Bowles-
Simpson proposal is a serious effort to tackle the
nation’s long-run fiscal problem? No, we can’t.

It’s true that the PowerPoint contains nice-looking
charts showing deficits falling and debt levels
stabilizing. But it becomes clear, once you spend a
little time trying to figure out what’s going on, that
the main driver of those pretty charts is the
assumption that the rate of growth in health-care costs
will slow dramatically. And how is this to be achieved?
By "establishing a process to regularly evaluate cost
growth" and taking "additional steps as needed." What
does that mean? I have no idea.

It’s no mystery what has happened on the deficit
commission: as so often happens in modern Washington, a
process meant to deal with real problems has been
hijacked on behalf of an ideological agenda. Under the
guise of facing our fiscal problems, Mr. Bowles and Mr.
Simpson are trying to smuggle in the same old, same old
-- tax cuts for the rich and erosion of the social
safety net.

Can anything be salvaged from this wreck? I doubt it.
The deficit commission should be told to fold its tents
and go away.

___________________________________________

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