Tuesday’s presentation of a debt reduction proposal by the “Gang of Six” received good reviews. It sounds very compatible with the views of fiscal conservatives. In fact, it sounds almost too good to be true. (Lower overall tax rates, repeal of the Alternative Minimum Tax.) But the fact that many Democrats – including President Obama – seem interested, makes my skepticism radar beep.
As a few Congressmen have noted, the details will make the difference. So far this plan is more of an outline. The proposed new tax rates and other changes are given in ranges, the specific numbers to be worked out in the appropriate Congressional committees. And the decrease of $3.7 trillion in the deficit includes revenue generated by the changes in the tax code. Since no one can be sure how tax changes will affect each family and business, this part of the math is just a guess.
Decreasing the deficit $3.7 trillion over a decade is just a $370 billion reduction per year. The US borrows $3.5 billion a day according to defeatthedebt.com. So the savings per year would be only 105.7 days worth of government borrowing. The Congressional Budget Office estimates that we will add almost $7 trillion to the deficit between 2010 and 2020 at current spending rates. The Gang of Six plan would cut that in half, but our accumulated deficit would still climb to almost $18 trillion. To save the country for our grandchildren, I think we need to do more.
The fact that gives me hope is that the Gang of Six used the recommendations of the Simpson-Bowles Debt Commission as the basis of their work.
But I have to wonder: why release the proposal now? The Gang of Six has been working on this plan for months and it does not include any action on the debt ceiling. Most of the Congressmen and Washington experts interviewed agree that this outline of a plan cannot be fleshed out by the August 2 debt ceiling deadline. So why create more chaos in the debt ceiling negotiations? I don’t have even a speculative answer for this, only questions.