As I noted earlier, if we stay on the same course, budget-wise, in just 5 years the interest on our national debt will approach what we spend to defend the country. This must be dealt with.
Yesterday, a White House commission put together by President Obama released a draft proposal to do just that.
The leaders of a White House commission laid out a sweeping proposal to cut the federal budget deficit by hundreds of billions a year by targeting sacrosanct areas of U.S. tax and spending policy, such as Social Security benefits, middle-class tax breaks and defense spending.
The preliminary plan in its current form would end or cap a wide range of breaks relied on by the middle class—including the deduction for home-mortgage interest. It would tax capital gains and dividends at the higher rates now levied on wage income. To compensate, one version of the plan would dramatically lower and simplify individual rates, to 9%, 15% and 24%.
For businesses, the controversial plan would significantly lower the corporate tax rate—from a current top rate of 35% to as low as 26%—but also eliminate a number of deductions. It would make permanent the research and development tax credit.
There’s much more; cutting $100 billion from defense, raising gas taxes, raising the Social Security retirement age, cutting federal work force by 10%, and others. It’s quite a sweeping proposal, and it’ll call on the government and the people alike to share the burden.
But what will it wind up doing?
Overall, the plan would hold down the growth of the federal debt by roughly $3.8 trillion by 2020, or about half of the $7.7 trillion by which the debt would have otherwise grown by that year, according to commission staff. The current national debt is about $13.7 trillion.
The budget deficit, or the amount by which federal expenditures exceed revenues each year, was about $1.3 trillion for fiscal year 2010, which ended on Sept. 30.
Even with all this, it’ll only cut the growth by half, with debt still rising by trillions every year.
This is where we find ourselves; overextended and really unable to do anything about it despite some Herculean efforts. Our government has made so many promises that it can’t renege on, that the most we can hope for is "only" growing slower. Well, ya’ gotta’ start somewhere, and this is just a draft proposal. But this is a good start.
Or is it? How do other politicians see it? (Warning: Easily anticipated reactions follow.)
Read the rest of this entry