Yesterday marked the beginning of either the most important or the most pointless work to be undertaken by an agency of government since well back into the past century. The National Commission on Fiscal Responsibility and Reform, commonly known as the bipartisan deficit-reduction commission, began its work under the darkest circumstances, a Congress more bitterly divided than it has been in a century.
That is why so many pundits label its work as pointless. Although it is bipartisan in makeup and President Obama decreed that its recommendations must be nearly unanimous, the expectation is that, no matter what it is, its product will be dead on arrival. Republicans had called for a bipartisan commission on the deficit, but when Obama said he would create one, the party switched and opposed it. It will be a cover for raising taxes, congressional Republicans said.
Taxes almost certainly will be a part of the package along with cuts in popular programs like Social Security and Medicare, and if one party is united against all or any part of it the other will never make the hard political decisions on its own, even if it has a majority in both houses. That is our grave national dilemma: trillion-dollar deficits as far as the eye can see and no political will to confront them.
We in Arkansas could hardly have more at stake in the commission’s deliberations. If the commission somehow reaches a consensus and the Congress musters the courage to embrace it, many of us no doubt will pay a few more taxes or have our pensions and/or medical benefits trimmed a little over time, in exchange for which we will have a safer, prosperous and more confident country.
If either the commission or the politicians who will inherit its work falter and the deficits grow as forecast, all of us, including the rich, face an uncertain future in which living standards will fall, we’ll pay enormous interest on everything we buy, investment in businesses and laboratories will vanish and global confidence in the creditworthiness of the U. S. government will collapse. Can you spell Greece?
President Obama struck the right note when he addressed the commissioners. Everything must be on the table, he said. No sacred cows, like taxes on the rich for Republicans and spending cuts on entitlements for Democrats. We presume that also means taxes on people with incomes below $250,000, which he vowed during his campaign not to increase.
So far, he has kept his word by lowering taxes on 98 percent of Americans and holding them harmless in the sweeping health-insurance reform law. But the deficit cannot be erased by taxing the wealthy alone, or by squeezing cream from entitlements or even by shutting down the Middle East wars, although those steps will help. We will all have to pay some dues if we are to have a healthy economy again.
Let’s review how we got here. Ten years ago, we were in the eighth year of a record growth binge and the third straight year of budget surpluses — $230 billion of black ink that year —and we were about to elect George W. Bush and a Republican Congress. There followed a period when the government lied to the American people about nearly everything — the need for and the cost of war, the consequences of huge tax cuts for the rich, the wholesomeness of raising Medicare benefits without paying for them. Vice President Dick Cheney’s famous scoff to the White House fiscal team — “deficits don’t matter” — set the course for the era.
The biggest part of the puzzle for the commission may not wait for its deliberations. Congress this year — very late, no doubt — will need to address the Bush and Obama tax cuts, which expire Dec. 31. Doing nothing would be the best course because it would restore the tax structure to its productive rates of that halcyon year 2000. That would close the deficit rapidly. But both Democrats and Republicans pledge not to let that happen.
President Obama proposes to maintain the low tax rates for people earning under $250,000 a year, continue the middle-class tax cuts that he passed last year as part of the economic-stimulus program and let the reductions of 2001-2004 on a range of taxes on the wealthy and corporations lapse.
We don’t like the congressional Republican plan, and we don’t think many Arkansawyers will either. They would keep the Bush tax cuts, including the elimination of inheritance taxes on huge estates, and restore taxes on the other 95 percent of Americans to their pre-2009 levels. There would be a very modest reduction in the deficit, borne entirely by working Americans.
Here’s how the Obama and Republican plans would affect people in Arkansas: The bottom 60 percent of Arkansans in income would pay $154 more on average in taxes next year under the Republican plan than under the Obama plan. The richest 1 percent of Arkansawyers — those averaging $830,000 in income — would pay $27,520 less in taxes on average under the Republican plan than under the Obama plan. The former would continue the roaring deficits, the latter close them.
Those votes will measure the national consensus. Deficits either matter or they still don’t.