Simpson-Bowles: Of bitter pills and strong medicine

posted at 2:00 pm on November 13, 2010 by Jazz Shaw

By now most of you should have had an opportunity to look over the proposals from the co-chairs of President Obama’s Fiscal Responsibility Commission which aim to cut the deficit, reduce spending and plaster up some cracks in the entitlement system. While the soon-to-be-exiting-stage-left Speaker of the House pronounced it “unacceptable” (as Allahpundit noted) before she could have possibly found time to read it, I was more in the Shocked and Awed camp, with Fred Thompson. (For a thoughtful, well-written analysis of the proposal, check out Charles Blahous’ study on the subject.)

The proposal is hardly perfect, and no sane person would have expected it to be. But it has the promising attribute of ticking off pretty much everyone, as I have long predicted any real solution would do.

Some of the more strident voices on the left broke out in initial howls of “hot rage” and rending of clothing before settling down to seethe with simmering hatred. After all, the proposed plan not only reduced taxes for those evil corporations who are trying to destroy the world, but it had the temerity to mess with Social Security. And after all, as we all know, any attempt to add some sustainability to the bloated, groaning entitlement system is clearly the exact same thing as telling America’s workers to drop dead and yet another example of nefarious Republicans’ communal desire to club senior citizens like baby harp seals.

But the pain wasn’t restricted to the Left. There are some bitter pills for doctrinaire fiscal conservatives to swallow as well. While the corporate tax rate may go down, the effective capital gains rate would go up – at least for a while. Many tax deductions which affect earners across the board would disappear as the tax code – desperately in need of reform – gets stripped down a bit. And higher earners would find themselves paying into the Social Security system on a larger percentage of their incomes.

But that’s really the type of formula we should have expected. To right a ship which is floundering this badly, some pain and sacrifice will be required all across the board. I still recall a debate I had with our host, Ed Morrissey, during the run up to the 2008 elections. We were discussing some of the more “radical” proposals of Libertarian candidate Bob Barr, and Ed told me that, “nobody ever got elected arguing for an austerity platform.”

But that’s pretty much what this is, albeit a rather mild one. The question is, what will become of it? We just finished electing roughly five dozen new members of Congress, each of which ran on a promise to cut spending and enact tough fiscal reform. Now Masseurs Simpson and Bowles have served up low, hanging strike to the outside corner.

It seems to me that this is the opportunity for those claiming to care about our fiscal future to wo/man up. It’s time, as others have less artfully phrased it, to put on the man pants. (Or woman’s pant suits? This analogy is going down faster than Obama’s approval ratings.) The point is, we don’t have to accept every line item of this proposal without proper debate and adjustment, but the rudimentary formula seems to be in place. Somebody is going to have to take the political risk of fixing the entitlement system and refreshing the tax code.

Sacrifices are going to have to be made, and they’re going to hit all of us to some degree or another. If you envision an America of a more socialist nature, you’re going to have to admit that somebody has to pay for the required corrections. The most die hard capitalists will need to acknowledge that everyone, at every level of wealth, will have to pitch in to fix this. And in the end, the fault lies with all of us. You voted for the people who got us into this mess. (And if you didn’t vote, then you chose to let the rest of us choose for you, so sit down and shut up.) We’re all going to have to pay to fix this, but it’s better to swallow some strong medicine today then allow it to turn into a fatal overdose for the next generation.

Election 2010 was focused on jobs, but also on fixing the economy. The voting is over and the new members are on their way to DC to be sworn in. It’s time to get to work, and we never promised you it would be easy.

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Just tell Pelosi she will have to pass it to find out what is in it!

The Expert Knows

HAExpert on November 13, 2010 at 2:16 PM

Tax credits and deductions don’t affect incentives to produce the way that tar rates do — they work more like government spending. Frankly we should scrap them all and go with an ungraduated, flat tax, zero corporate profit tax, and just make capital gains fall under income (though I would like to see a way for that not to be taxed until money is pulled out of your investment portfolio entirely).
To bad it would probably take a constitutional amendment to make that stick.

Count to 10 on November 13, 2010 at 2:17 PM

If they change the budget baseline from 2010 to 2008, I’m willing accept some of the more painful tax readjustments.

JeffWeimer on November 13, 2010 at 2:18 PM

Sacrifices are going to have to be made, and they’re going to hit all of us to some degree or another.

I will but “they” need to show us how. One of those you first moments.

marinetbryant on November 13, 2010 at 2:30 PM

The Democrats used Hope & Change “A spoonful of sugar helps the medicine go down” because that’s how Big Government Nannies Roll.

The Republicans on the other hand are simply saying “Man Up”

It’s going to be noisy for awhile. This is what happens when you ween them off the government tit…they are going to cry, the louder they cry, the deeper I would cut, until the cry babies get the message STFU.

There is a list they can start getting rid of, starting at the top of my head, the Department of Education. How do we unload the freeloading, Freddie and Fannie?

Dr Evil on November 13, 2010 at 2:32 PM

Count to 10 on November 13, 2010 at 2:17 PM

I pretty much agree. I’d add that this may be the perfect opportunity to phase social security out. I would say that everybody under 35 is out of the system and should start planning their own retirement. Those over 35 up to ,say, 45 can opt in or out; if out, they no longer have to pay into the system, but once that choice is made it is final.Forty five and older remain in the system as it is. We can’t get back to constitutional government if we keep tinkering with these pyramid schemes the government was never meant to do.

cartooner on November 13, 2010 at 2:45 PM

Charles Blahous’ study on the subject only addresses the Social Security reforms, which aren’t bad.

However, the co-chairs accepted the non-negotiable demand of Dems on the panel to leave ObamaCare in place, thus making the problem $2.5 trillion worse. And the Medicare reforms aren’t much better. Federal spending would be allowed well above the historical average.

Moreover, the history of deficit deals — TEFRA, GHWB’s 1990 deal — is that we get the tax increases while spending still goes up. I would like to see a “trust but verify” approach to implementing any future deal.

Karl on November 13, 2010 at 2:50 PM

The point is, we don’t have to accept every line item of this proposal without proper debate and adjustment, but the rudimentary formula seems to be in place.

Exactly! Something that the Democrats could never concede. Just imagine Nancy Pelosi asking for ‘proper debate’.

One thing that needs to be skipped at present is any notion of eliminating the mortgage interest credit. The housing market is on it’s knees at the moment. Taking away that credit right now would just about kill the market for years to come.

GarandFan on November 13, 2010 at 2:52 PM

Tell you what. I’m going to take a reverse George H Bush approach to this. Pass the spending and entitlement cuts first, then come back and talk to us about revenue increases (i.e., increasing taxes).

We’ve been burned way too many times with this “shared sacrifice” and “everybody needs to do their part” bit wherein the tax increases go into effect, but somehow the spending cuts never materialize.

Not being that stupid to let this happen again, demonstrate the spending cuts first.

AZfederalist on November 13, 2010 at 3:01 PM

sorry guys, shared sacrifice is going to be a one way street. when we get something like a sacrifice on prevailing wage laws then i might start to believe. when we get some law on forbidding public employees from striking, then yes….maybe something about not bailing out state governments…how’s that for sacrifice.

when Andy Stern starts to howl, i know we’re getting close. but no, he’s on the commission. you can see his handywork in beginning the process of making 62 the age at retirement for those “unable to work”….i.e. all the physical laborers. This is France.

We have SSDI for those unable to work…he’s building a whole new structure

r keller on November 13, 2010 at 3:08 PM

As I get closer to a well-earned retirement, the fact that, for more than half of my life any form of retirement savings other than Social Security was closed to me, do you think I want to be denied anything that the Government promised me in return for my contributions?

Unlike Obamacare, there are a whole generation of people who’ve paid into a system with defined output benefits, and if you change that, you do so at your peril.

unclesmrgol on November 13, 2010 at 3:15 PM

I just posted this on yesterday’s Scarborough thread, but it bears placement where it will be seen today.

In order to swallow any kind of bitter bill, people need to be persuaded as to why it’s beneficial. That means Congresscritters and their constituents alike. Chris Christie understands this.

We need to sweep away the cobwebs of liberal misconceptions, and get down to the nitty gritty of reality and common sense.

=========================================

There’s a difference between 2010 and 2008 – in 2008, conservatism was overshadowed by “moderate” Republicans who had been growing government. In 2010, we’ve had 2 years of wild liberal spending, and every attentive person can see how destructive it is. Oh, there are always crazy liberal spins, like “we didn’t go far enough” or “we didn’t spend enough.” It’s as though the liberal mind believes in some financial Doppler effect where, if you waste spend enough money fast enough, it’s suddenly like saving money.

Regular people (the ones despised by the ruling class) don’t waste time in mental masturbatory exercises, training themselves to perceive that black is really white and vice versa. To the contrary, they understand the hard reality of having to balance and prioritize.

In fact, the real reality is the only reality they know. In this world, people who get paid to stay home and watch TV for a year or more become intimidated by the idea of having to look for work and be judged as unsuitable or unqualified. To try to impress strangers who have power over them, to feel like a supplicant trying to please, to justify their own hiring. To get up every morning, make themselves look presentable, and go to a job where (if they don’t perform) they will be judged and reprimanded or eventually fired. To deal with the daily commute. To do what has to be done to support themselves and their children.

It’s very stressful when you haven’t done it for awhile. This is something Democrats don’t want to talk about, because it makes 99 weeks of unemployment checks suddenly less appealing.

I think that conservatives need to find a way to educate “default” liberals who have been led into darkness by false liberal prophets like Obama. To explain to them the soft tyranny of liberalism, and the inherent evil of being supported by the state (which is in turn supported by the people whose ideas and hard work provide jobs for themselves and others). To understand that government is too huge and inefficient to judge who is a deadbeat and who is really in need of temporary help, or who is permanently disabled (mentally or physically). Those people we can all afford to help. What we can’t afford is those who fly under the radar of misfortune, looking for a soft place to land.

Sadly, there will always be a percentage of lazy, dishonest people who look to con anyone in their path. Let’s not corrupt basically honest people to behave that way, which is what Rick Santelli’s rant was all about.

The fact is, bad things happen to people, and no government can stop that from happening unless it puts everyone into a cell. Even then, people get sick and die. It’s called life.

The whole notion of a utopia is utterly ridiculous. What would be the point of living?

disa on November 13, 2010 at 3:25 PM

As I get closer to a well-earned retirement, the fact that, for more than half of my life any form of retirement savings other than Social Security was closed to me, do you think I want to be denied anything that the Government promised me in return for my contributions?

Unlike Obamacare, there are a whole generation of people who’ve paid into a system with defined output benefits, and if you change that, you do so at your peril.

unclesmrgol on November 13, 2010 at 3:15 PM

I don’t know how old you are but, well first of all you should have had more kids… zero population is what really happened that upset the system, but I think everyone is pretty resigned that for people nearing retirement nothing can be changed.

But there are lots of people who are not nearing retirement, and for those… me included, we need to rework how things work.

A blanket closed mindedness to fix anything about SS is a guarantee that SS will fail.

We can exempt people of a certain age. And then work on the rest!

petunia on November 13, 2010 at 3:29 PM

when Andy Stern starts to howl, i know we’re getting close. but no, he’s on the commission. you can see his handywork in beginning the process of making 62 the age at retirement for those “unable to work”….i.e. all the physical laborers. r keller on November 13, 2010 at 3:08 PM

If you can sit in a chair and watch TV, there is some kind of sedentary work you can do. And if you aren’t productive, you won’t eat. Voila! People find something productive to do.

And this goes for people with “bad backs” on SSI, too. I’m sick of seeing dirtballs on Judge Judy who are on SSI, but somehow find the energy to rip off other people and birth babies to collect more government handouts.

As I understand it, when Social Security was instituted, life expectancy was 65. So you could expect to collect, on average, for 3 years.

Is anyone up for a ceiling on the number of years you can collect?

I didn’t think so.

disa on November 13, 2010 at 3:37 PM

We the people sacrifice enough for our government.

It is time for our government to start sacrificing parts of itself… or be sacrificed.

Until the overgrown beast is chopped down to a few manageable functions, it will grow, it will eat up more of our money, and it will become more powerful. That must end. Beyond the ‘entitlements’ there are great sacrifices that government can make where it has failed: Agriculture, Energy, Education, Labor, Federal Reserve, Fannie, Freddie, Sallie, Ginnie, EPA, FTC, FDA…

This is a solvency problem, not a liquidity problem. Until you get rid of the drags on the government, it will not get close to liquidity save by taxing the living hell out of the people. It is not worth the cost. Government can ‘sacrifice’ this time: stop the spending, shed the functions, shrink the reach.

ajacksonian on November 13, 2010 at 3:53 PM

Unlike Obamacare, there are a whole generation of people who’ve paid into a system with defined output benefits, and if you change that, you do so at your peril.

unclesmrgol on November 13, 2010 at 3:15 PM

Here’s some hard reality, Uncle Smergol – people in Sweden who paid a third of their income into the system all their lives find that in old age, when they need major surgeries or organ transplants, they are denied (by that fabulous national health care system) in favor of younger people who need them more, or consigned to long waitlists.

That’s called reality, bub. I’m sorry that you actually planned on getting your fair share at 62. You must be a rather stupid individual, because at 55, I understood a very long time ago that there would be nothing left for the likes of me.

As it is, I’m trying to explain hard realities to my mother (age 76) who is disinterested in math but in denial of her own financial circumstances. I send her a check for 10% of my take-home pay, because I want to make her life better (because she made sacrifices for me when I was young). That’s my choice, because it’s my money. I’m not going to ask you to send part of your paycheck to her, because I have no right to do that.

My husband and I have next-to-no savings (we’re average people with so-so benefits, whose savings always had to be drawn upon). We’ve put 2.25 children through college, are $100K underwater on our mortgage, and may very well lose our home if they take away the mortgage deduction. We still support it, and believe this plan is still not enough to save the country.

We have no plans to retire at all. We understand that at some point we need to make arrangements for the day when we can no longer produce, but that’s our problem and not yours.

Snap out of it.

disa on November 13, 2010 at 3:54 PM

One thing that needs to be skipped at present is any notion of eliminating the mortgage interest credit. The housing market is on it’s knees at the moment. Taking away that credit right now would just about kill the market for years to come.

GarandFan on November 13, 2010 at 2:52 PM

Take away a portion of it then, to be lowered each successive year. It’s gotta be done. That’s what they did in Sweden in the 90′s (after George Soros did his dirty work with the British pound).

disa on November 13, 2010 at 4:07 PM

This entire document is garbage.

It was NOT even agreed to by the actual committee, it is the product of the 2 main OBAMA appointees.

In total, this approach FORCES a long term EXPANSION of the Federal Government from 18.5% to 21.5%. In no way does it ACTUALLY CUT ANYTHING!

Freddy on November 13, 2010 at 4:14 PM

Boy, am I glad I quit cigarettes last month. Talk about unaffordable luxuries.

We won’t be burying coffee cans of gold in the backyard, we’ll be burying coffee cans of coffee.

disa on November 13, 2010 at 4:23 PM

Now Masseurs Simpson and Bowles have served up low, hanging strike to the outside corner.

I hate to ruin a metaphor, but hanging strikes are anything but low and outside. ;-)

nukemhill on November 13, 2010 at 4:24 PM

Same old same old … crank up the size of government then crank up the taxes to pay for it.

Who is stupid enough to fall for this again. If so, you really must have just fallen off the turnip truck.

tarpon on November 13, 2010 at 5:01 PM

If you envision an America of a more socialist nature, you’re going to have to admit that somebody has to pay for the required corrections.

What the hell, NO I do not want an America with a more socialist nature, that is a death knoll! Did I miss read this?

Teleycoman on November 13, 2010 at 5:01 PM

Nothing like a few millionaires deceiding how the prolaterians should pay up. I favor the elimnation of the Dept of Ed, Dept of Labor, EPA, and many other tax dollar sucking leftist goverment agencies. Bring on the flat tax and stop taxing my Social Security, I already paid taxes on that money once.

Santa

SANTA on November 13, 2010 at 5:21 PM

Good piece, Jazz. It could have an alternate title of “We’re not happy, until you’re not happy”. Nobody likes this bitter pill.

simkeith on November 13, 2010 at 5:37 PM

The sad fact is that most people get all the money they put into SS in the first few years of benefits, it then reverts to a welfare program. This plan is like trying to repair the Titanic with silly putty. It’s not even remotely enough. The other sad fact it that no one has the political will to really do what’s needed (hint privatize most government services and institute a flat tax that EVERYONE pays). It looks as if we will suffer a few more years of slow decline before it crashes, then we will see real pain.

Ann NY on November 13, 2010 at 5:57 PM

There’s a few intriguing notions in there but as a package i can’t see where it get’s us much past the poison that got us here in the first place. The Congress of the United States is NOT going to give up it’s prerogative to diddle with the details of every program they can get their grubby little paws on, in the eternal quest to reward their friends and punish their enemies. They will ALWAYS seek to gather power into their own little bloodstained hands and they will NEVER willingly cede their ability to micromanage anything in view.
The name of the game for them is “Looking good on camera spending other peoples’ money!”.
We’re going to have to begin thinking in terms of Constitutional Amendments to solve these problems. If we keep trying to do it with statutes, we’ll spend the rest of eternity just one election away from ruin. We need a truly massive redistribution of power away from the top of the federal pyramid and outward to the States and Counties and Cities and Towns of America. Without that, America itself dies a slow tortured death from a thousand cuts!

Lew on November 13, 2010 at 6:29 PM

here’s the sad thing, the people don’t know this. in the UK they are talking, among other things, about requiring the “unemployed” to do x number of hours cleaning the streets, or some other low skill job. Now, of course, the unions here would go ballistic…I don’t know about the UK.

In the old Soviet Union, people were required to work, and also, unions were disallowed.

So, to me, the historical inevitability is that once you have a certain number of people on more or less permanent “unemployment” then there will be, after time, a natural inclination, in any society, to require them to work.

And if they don’t, you’ll need a pretty strong group to enforce that. Well, I think you can see where this heads.

In the riots in France/Greece, etc. it is amazing that these young healthy men and women would prefer to riot for benes than to work. Obviously, this is a modern distortion of the social contract. How many societies thru history permit young people to not work?

r keller on November 13, 2010 at 6:34 PM

The sad fact is that most people get all the money they put into SS in the first few years of benefits, it then reverts to a welfare program.

But whose fault is that? The same thing could be said for other savings plans or pensions or 401k’s if the money was simply put away in low-interest accounts. The fact is that the principal being stored away should be invested in something that earns money. Even the old canard about getting all the money back in a few years is a bit misleading. The money put in is supposed to go into reserve notes (yeah, I know, that’s why it really should be other investments) that do earn interest. If you are putting money away for retirement, you shouldn’t be expecting to live off of just the principal. Same thing applies to the SS system.

AZfederalist on November 13, 2010 at 6:40 PM

If there were no tax greater than 15% this would all be moot and we’d be rollin’ in dough. We are going to have to raise the retirement age soon. 62/65 is idiot given how long we live now.

On the other hand the death panels will take care of that now won’t they.

Mojave Mark on November 13, 2010 at 9:29 PM

The deficit is so large, the debt so huge, and the available tax base so limited, these suggested measures would hardly make a dent. While I’m all for reducing the size of government and trimming entitlement programs(I paid into social security for 18 years and will not get a dime out of it), the only remedy is to grow our economy at a rapid pace. I suggest the fair tax as one solution.

NNtrancer on November 13, 2010 at 10:10 PM

I find that my comments and those of a few others have vanished – hope this is some bug in the comments system that will be taken care of and not any…errr… censoring.

nagee76 on November 13, 2010 at 11:08 PM

“Masseurs”? Do you mean “Messrs.”?

KS Rex on November 14, 2010 at 8:41 AM

This thread, right now, is the clearest illustration of the total corruption of Americans and by extension America itself, that anyone needs to see. “Yeah, let’s get this country back on track and get our house in order, as long as it doesn’t take away MY little piece of the goody train!”

“I have met the enemy, and he is us!”

Putting it as bluntly as it can be stated, we got the government we deserved and now we’re sniveling and whining about the perfectly predictable consequences? Well count me out boys and girls! Freedom isn’t free and until you’re willing to pay the price for your emancipation you’ll just have to get to like the decor in your little velveteen gulag and learn to smooch Ol’ Massa’s ring just right so he keeps the goodies coming.

Good Luck

Lew on November 14, 2010 at 11:51 AM

The deficit is so large, the debt so huge, and the available tax base so limited, these suggested measures would hardly make a dent. While I’m all for reducing the size of government and trimming entitlement programs(I paid into social security for 18 years and will not get a dime out of it), the only remedy is to grow our economy at a rapid pace. I suggest the fair tax as one solution.

NNtrancer on November 13, 2010 at 10:10 PM

Agreed. We won’t fix our financial problems by flipping old people the bird and saying “sorry, you don’t get what you paid for.” Not even close.

The fair tax would be a great idea, but we also need some legal power to stop employers from running off to 3rd-world countries to replace US citizens with peasants en masse.

Dark-Star on November 15, 2010 at 3:45 PM

The fair tax would be a great idea, but we also need some legal power to stop employers from running off to 3rd-world countries to replace US citizens with peasants en masse.

Dark-Star on November 15, 2010 at 3:45 PM

Yeah, cuz that whole “iron curtain” thing worked SOOOOO well last time it was tried. I can’t believe you posted that.

runawayyyy on November 15, 2010 at 4:57 PM