What is the Deficit Commission Co-Chairs’ Plan About?

Although Obama's Deficit Commission was heavily stacked against Social Security, Medicare, and Medicaid, the Commission was unable to reach a consensus on recommendations, so Commission Co-Chairs Alan Simpson and Erskine Bowles released their own recommendations.  The Co-Chairs' recommendations failed to get the number of Commissioners' approvals which the Commission's own ground rules required to pass the recommendations to Congress, but Senators Mark Warner (D, VA) and Saxby Chamblis (R, GA) are determined to pass a bill containing the Simpson-Bowles recommendations. They are also trying to get the recommendations be a precondition for raising the national Debt Limit, which must be increased if national government is not to shut down.  It is important to understand the devastating effect these recommendations would have on Social Security, Medicare, Medicaid, the economy, and jobs, so they are outlined here.

Starting in less than a year (Oct. 1, 2011) when unemployment is supposedly back to normal, the Simpson-Bowles plans reduces projected deficits through 2020 by nearly $4 Trillion.  Spending cuts are twice revenue increases. (Terminating all Bush tax cuts over same period would do the same deficit reduction.)    Not bailing out banks would have reduced deficit $1.5 trillion.   Discretionary spending under Congress’ control accounts for only 10% of deficit.  This will throttle any chances of lowering unemployment.  Most of deficit is caused by the recession, which the Co-Chairs’ plan will make worse, causing worse deficits. 

Here are some of the pieces of the Co-Chairs’ plan:

Throttles Government Services and Job Expansion

It permanently Shrinks All Government Services by capping federal revenues at 21 pct of the GDP.  The sum of Health, Education, Housing, Jobs Programs, Infrastructure Rebuilding, Social Security, and even military spending could never exceed 21% of GDP. This is less than spending from 1980-2008, when no baby boomers were starting Social Security and Medicare.   See more.

Lower Taxes for Corporations and the Richest

No repeal of the Bush tax cuts for the rich, no tax proposed on stock or bond transactions, no proposal that high-earners pay Social Security payroll taxes, no end of wars.  Instead, the plan proposes:

Tax cuts for corporations and the rich; Tax increases for the middle class and the poor. 
Corporate tax rate is reduced from 35% to 26%.   The Individual rate for the richest is reduced from 10% to 8%.  There is a permanent extension of corporate tax credits for research.   There is a reduction or elimination of Mortgage Interest Deduction (while the housing market is still in disaster), and elimination of deductions for State and Local Taxes paid, contributions to your private retirement account, for charitable contributions,  and elimination of the Child Tax Credit.   Students must pay loans while still in school,   There’s a 15 cent/gallon gas tax, As Krugman says, “"(it) clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans."

Cuts to Social Security Benefits, Cost of Living Increases
Even as They Admit that Social Security Doesn't Increase the Debt.

Social Security: Raises Retirement Age, Reduce benefits for middle-income recipients, Reduce Cost-of-Living Raises,  Moves Social Security from a universal plan toward a welfare plan:

Payroll tax cap raised to increase covered workers from 86% to 90% of workers by 2050!  Even then, the rich don’t pay!

Cut benefits of middle-income earners: Half of Social Security recipients, who had earned above ($34,500), would be considered “high-income earners” and would be have their benefits cut from 17-36% depending on income, for example a 25% cut for people who had earned $43,000.

Raise Retirement Age: For full benefits, retirement age is raised from 67 to 69, an average 13% benefit cut; that discriminates against poor, who start working earlier and die earlier.  To get partial benefits, retirement age is raised from 62 to 64, meaning two more years of poverty for seniors whose bodies are worn out or who can’t find jobs.

Reduce Cost-of-Living Raises: Raises would be based on new “chained CPI” inflation formula, .3% lower than now,  based on our alleged ability to switch to cheaper alternatives for goods and services that get priced beyond our means. What about, healthcare, which rose 4.2% last year while the regular CPI rose 1% .  By 2030, the COLA cuts would be a benefit cuts between 5-20% depending on income.

Means Testing, moving toward a welfare model of Social Security:  Instead of raising the payroll tax cap so the rich pay the same as us on all their income, the Co-Chairs’ plan raises the payroll tax rate on the small portion of their income that’s taxed.  This undermines widespread support for the current, universal insurance model that has withstood 75 years of attacks.

Deficit Commission admits Social Security doesn’t increase deficit, so “savings” aren’t counted toward deficit reduction.  “Cuts are being made for Social Security’s own good.”

Cuts to Healthcare

Medicare: Accelerate and intensify the cuts to Medicare that are in Obama Health Plan. (Increases in Medicare and Medicaid costs, are of course, the real drivers of increased future government expenses, and  single-payer, improved, expanded Medicare for All, is the only solution.  The Obama Plan greatly increases healthcare costs, and shifts the cost onto working families, particularly on Medicare.)

Federal health spending is supposed to be cut one-third by 2040, but no plan given.

The “Cadillac Insurance Tax” (a tax on insurance plans without ruinous deductibles or co-pays) would apply to less adequate insurance plans also.

Cuts in healthcare for veterans: “Modernize the Tricare health system” to increase premiums and co-pays for healthcare for vets.

It speeds up Obama Plan’s cuts to Medicare Advantage plans and charity hospitals that will serve the 23 million remaining uninsured, including all undocumented immigrants.

It strengthens the Independent Payment Advisory Board beyond its already-sweeping powers to cut Medicare payments to hospitals, doctors, equipment suppliers etc.

It pushes Malpractice Reform, “tort reform,” to limit the ability of people to sue for damages in cases of medical malpractice. 

Federal payments for Medicaid (Medi-Cal in Calif.) would be a fixed amount per year, no matter how much care was needed by poor patients in that state, making states cut their programs.  Old or sick Medicaid patients needing long-term care would have to pay more of costs.

Attacks on Public Workers

Federal workers: layoffs and pay freezes
A 10 percent reduction in the total federal workforce, over 200,000 jobs.
Three-year pay freeze for all non-military federal employees.

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