Yesterday the Deficit Commission used the New York Times as a messenger service to tell politicians -- and you -- exactly what they intend to do if the election goes as expected. It's all there in black and white: They'll cut benefits, increase the financial burden on the middle class, and make sure that wealthy Americans aren't troubled by the kind of sacrifices everyone else will be expected to make.
This isn't guesswork or speculation. The Commissioners just told us. It's all there. In fact, the only thing that isn't there is any mention of Alan Simpson, the many-million-tit man who co-chairs the Committee. If you needed any proof that this article is just a PR blast from the Commission, that's it. Even they know that Simpson has become a public embarrassment.
Why did the Commission use the Times article to send this little memo, which the paper then dutifully distributed? Probably to lay out the political groundwork for making sure their proposal gets passed by the next Congress. The only thing they haven't spelled out yet is how they'll soak the middle class, although they've made it clear it will be one of several Draconian options. Waiting to see which one they choose is like watching a horror movie to find out which medieval torture instrument will deliver the next gruesome death.
Will they abolish the tax deduction for employer health plans? That would result in a massive new regressive tax that could cost working families $3,000 or $4,000 right away, and would also lead to major cutbacks in health coverage.1
Or will they take away the deduction for mortgage interest, leaving strapped homeowners even more financially desperate than they already are? Homeowners have seen their assets evaporate as the result of bank speculation. Now that the banks have been rescued with their money, will those same homeowners bear the cost of paying for the rescue?2
The Commission may also remove the deduction for charitable giving, which would raise taxes and hurt those who depend on philanthropic organizations. Or it may hit Americans with a "backdoor tax increase" by taking away deductions for state and local taxes.
All of these ideas are being considered, and any combination of them may be recommended. But here's what the Commission will not consider: Raising income taxes for the wealthy. Oh, they pretend otherwise, but it's clear that any tax increase gesture they make would be strictly symbolic.
The article begins: "(P)eople in both parties say they have been surprised that the 18-member National Commission on Fiscal Responsibility and Reform reached an early consensus to put all three major budget parts on the table: taxes, annual spending for domestic and military programs, and the entitlement benefit programs Social Security, Medicare and Medicaid."
That's spin, plain and simple. In fact, the Commission's done little more than pay lip service to cutting military programs. That idea won't fly with Republicans, and the Commission's internal stonewalling on the subject has already been reported. (One report says they'd rather cut military pay that reduce waste and overruns!) And taxes aren't really on the table, just tax breaks, especially those that help the middle class or create jobs. Commission co-chair Erskine Bowles explains why:
"The panel is not considering higher income tax rates given Republicans' resistance. It is exploring ways to shave the roughly $1.2 trillion annual cost of 'tax expenditures,' the tax breaks for individuals and businesses."
That means the wealthy can breathe a sigh of relief. Their tax rates won't go up, because the Republicans won't stand for it. And "tax expenditures" is a Republican euphemism for any effort to use taxation in support of public policy. Examples include incentives that encourage businesses to hire people, be more environment-friendly, or stop outsourcing overseas.
Whenever a Republican call any tax break an "expenditure" it means they want to get rid of it. (That's why they'll never call the capital gains tax an "expenditure.") But the word can also be used to mean anything that relieves the middle class tax burden, and which therefore might be sacrificed to protect low tax rates for the wealthy. And sure enough, we're told that unnamed "supporters" told the Times 3 that it would be wise to "reduce" or "phase out" major "expenditures" such as "deductions for mortgage interest, state and local taxes, and charitable giving and the exclusion from income taxes of the cost of employer-provided health insurance." The message is clear: The Commission wants to go after these "tax expenditures," which disproportionately affect the middle class, so they don't have to affect the wealthy by "raising the income tax."
The Times reporter, Jackie Calmes, is reliably stenographic when it comes to repeating misleading Commission statements. "Spending for the entitlement programs Medicare, Medicaid and Social Security," she types, "is nearly half the federal budget and increasing." Social Security is self-funded, however, and has a $2.6 trillion surplus, facts that Calmes dutifully fails to note (that omission is vital to the Commission's propaganda spin). As for Medicare and Medicaid, Calmes writes:
"While the health programs are growing fastest, the dozen members of Congress on the commission do not want to reopen debate on them so soon after the battle over Mr. Obama's health insurance overhaul. 'There is health care fatigue,' said Alice M. Rivlin."
Well, we wouldn't want our Commissioners to get fatigued, would we? This paragraph is the Commission's way of letting you know that a) health care spending is out of control, but b) we don't want to consider the kinds of reforms that would control it, and c) that leaves us with just your Social Security check to carve up. And carve it up they will.4
In other words: The Commissioners plan to stick it to the middle class and small business so the wealthy can get a free ride, and it's going to cut Social Security benefits (even though Social Security is an enormously popular, self-sustaining program with a multitrillion-dollar surplus that only needs a minor long term revenue tweak). No wonder they hate the democratic process. The group, reports Calmes, has "purposely has done little to date ... and it has decided nothing lest any decisions leak and blow up in the flammable mix of a campaign year with control of Congress in the balance."
Right. God forbid that voters should actually participate in such crucial decisions.
"Decided nothing"? Actually, the group has "decided" plenty -- it just won't say so too directly until after the elections, when voters no longer have any say in the outcome. They've operated in secret, and it's increasingly obvious why: Voters won't like what they're doing. If the new Congress lacks the old one's resolve to defend Social Security (see who's pledged to defend it here), your future will suddenly look grimmer. A "gridlocked" Washington will want to prove it can get something accomplished, and the Commission's here to make sure that the "something" consists of cutting Social Security and slapping new financial burdens on the middle class.
As a nod to the current economic crisis, the Commissioners want to make sure you understand that they won't be enacting any of these changes right away. They assure us they have "a long-range focus." That means, as Republican Senator Judd Gregg said, that "you can phase things in much more effectively and you won't impact this recovery. " That would be imprudent -- especially since the Commission's elected members are still in office.
So, they say, don't worry. It's not like they're going to slash your retirement benefits tomorrow. They'll do it later -- when you're old.
(1) The average family health plan in the United States cost $13,770 in 2010. At a Federal tax rate of 25%, that's $3,440 in new taxes -- and the costs of these plans keeps skyrocketing. Employers would pass these costs on to employees, and would probably also reduce benefits (which is permitted to some extent under the new law) in order to reduce their own costs.
(2) The loss in middle-class wealth through plunging household assets is one part of the problem. Another is the fact that so many homeowners are paying mortgages based on grossly inflated home values, since banks have not had to write down any of the principal on these loans. And the bank bailout has not "broken even" or "made the taxpayer money," despite reports that suggest otherwise.
(3) About those "unnamed supporters": "Unnamed" by who, exactly? By Calmes herself, apparently. Are they "supporters" of the Commission, of eliminating these tax breaks, or of something else? Are they Commission staffers, or do they work for an advocacy group of some kind? Colmes doesn't say. Has she read the New York Times'own policy about unnamed sources? Unattributed sources are only to be used for clearly stated reasons, which should be provided in the article. But then, disclosure have never been the Deficit Commission's strong suit.
(4) Social Security's fully funded through 2037, and then 75% funded after that. Lifting the cap on the payroll (FICA) tax would fix it forever. But Republicans will resist that, so your benefits are going to be cut instead. How? By raising the retirement age and altering the price index and cost-of-living formulas. That would come to an estimated 16.5% across-the-board cut in benefits - all because Republicans have drawn a line in the sand.
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Strengthen Social Security campaign. Richard also blogs at A Night Light.
He can be reached at "firstname.lastname@example.org."
Website: Eskow and Associates