12/01/2010 04:44 pm ET Updated May 25, 2011

Austerity Coming to the USA? Not so Fast

Today, the National Commission on Fiscal Responsibility and Reform released and met to discuss its final deficit proposal entitled, "The Moment of Truth." The Commissioners will have until Friday to read through the details of the plan before their expected formal vote. Though it appears unlikely, in order to obtain an official recommendation, 14 of the total 18 commissioners would need to be in favor of the plan.

It will be key to watch who votes for and against the proposal and what commentary they provide on Friday in order to determine what level of support specific aspects of the plan may garner in the new Congress and the president's budget proposal to be released in February.

According to my friends at DC Tripwire the key provisions worth noting in the final proposal are:

  • Proposed discretionary spending cuts: Establish firm caps on security and non-security discretionary spending and require equal spending cuts from both sides. Also, establish a separate Overseas Contingency Operations account with annual limits to fund ongoing military operations. Provides way to achieve50 billion in immediate cuts and200 billion in illustrative 2015 savings.
  • Increase gas tax by 15-cents per gallon to fund transportation trust fund.
  • Consider a temporary payroll tax holiday in FY2011.
  • Tax reform: Reduce top individual rate to between 23 and 29 percent and establish single corporate tax rate in that same range. Tax dividends and capital gains as ordinary income or offset reduced rates for them with increase in top rate for ordinary income. Reduce or eliminate various individual tax deductions, including limiting mortgage interest deduction to500,000 and for principal residences only. Eliminate business tax expenditures and move to a competitive territorial tax system.
  • Health care savings: Gradual reduction in the Medicare Sustainable Growth Rate ("doc fix") and reform and repeal the CLASS Act. Offset those costs by seeking400 billion in savings from 2012 to 2020, including increasing Medicare cost-sharing.
  • Social security: Gradually increase retirement age by indexing to life expectancy and make retirement benefit formula more progressive.

This "National Commission" seems designed to fail. Talk about a high hurdle? 14 of the total 18 commissioners would have to agree? Last time I checked that's 87.5% agreement. Since when do you get that time of agreement in Washington on anything? After all in the United States, Congress may override a presidential veto by having only a two-thirds majority vote in both the House of Representatives and Senate, thus enacting a bill into law despite the president's veto. All you need is 2/3rds or 66% agreement to over rule the President of the USA!

Making things more difficult there seems to me growing factions inside the Commission which will make this 87.5% goal line even more unlikely.

I'm not surprised. When have we ever seen a "Presidential Commission" actually accomplish anything tangible other than an educational discourse?

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