Thursday, November 11, 2010

Preliminary report of the "debt" committee

The co-chairs of the president's appointed "debt" commission have come out with some preliminary recommendations that should be taken with extreme skepticism. First of all, this was not a committee report in any sense, but just the work of the chairs Erskine Bowles, Clinton's former Chief of Staff and graduate of Morgan-Stanley U., and Alan K. Simpson, one of the least significant Senators in recent (non) memory, representing Marlboro Country in Wyoming. It's hard to understand how important matters were entrusted to these lightweights, but better go ask Obama for reasons.

Anyway, their personal report calls for lots of spending cuts -- mostly for socially useful programs, but even in the military (which will never happen) -- and some of the usual silliness about tax cuts. There's a little of a lot of stuff, but the axe will, as usual, fall on the middle class. Tax rates for the wealthy will be cut the most, of course: from a max of 35% to a max of 23% (way, way below Reagan-era rates). The comparable figures on the low end are 10% down t0 8% on those who spend nearly all of their money on necessities. This could only have sprung from the brow of Homer ... I mean Alan Simpson.

The plans for Social Security are worse. First of all, Social Security, contrary to popular rhetoric, is already means tested: up to 85% is subject to tax for higher income levels. However, money "earned" from investments is not subject to Social Security tax, nor is income in excess of$106,800. Bowles and Simpson are suggesting some sort of further means testing as well as reduction in cost of living adjustments. What can be the logic of not adjusting people's retirement income to compensate for a decline in the value of the dollar? Punish people who collect social security? They further suggest that the retirement age be increased to 69. That may be fine for people like them: lawyers, consultants, CEOs, professors; it's not so great for people who really get worn down working tough jobs: brick layers, construction workers, public school teachers, fishermen, etc. Frankly, I never heard of a "burnt out" investment banker -- did you?

Also, it is well-known that the problems of Social Security can be fixed very easily and elegantly by simply removing the cap on the income subject to the SS tax. This would guarantee life to the system for another half century at least, be a built-in means tester, and eliminate the need for lowering of benefits and raising the retirement age. Too bad that so many people who can afford to pay it -- that natural constituency for the eponymous Party for The Rich (formerly the GOP) -- oppose the idea.

I don't see any mention of a tax on individual stock transactions. What could be simpler than a flat tax -- like a sales tax -- of say 1/2 % on the market value of stocks bought/sold? True investors would hardly notice it. Furthermore, it just might reduce, if only slightly, the "churning" of the market caused by day traders and other social parasites who are trying to make quick bucks on non-productive speculations.

The "plan" of Messrs Bowles and Simpson should be DOA. Let's see what the Committee as a whole can come up with.

Obama comes up a loser again. When will he begin to take his job seriously?

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