Sacred Tax Cows: It's Them or Us

From HuffingtonPost.com:

The National Commission on Fiscal Responsibility and Reform is in a pickle. We can expect Republican members of the Commission to push for cuts in government spending but no new taxes, and Democratic members to argue that tax increases are necessary. With a supermajority required to approve any recommendation, what hope is there of success?

The best hope for bipartisan consensus lies in targeting the $1.2 trillion a year in hidden government spending embedded in the Tax Code in the form of "tax expenditures." These programs are styled as tax savings, but really function as replacements for explicit government spending. Some make sense, but a great many are poorly targeted and would never pass Congress if presented as an outright spending proposal.

Unfortunately, some of the most popular of these tax breaks - in particular, political "sacred cows" like the home mortgage interest deduction, the charitable contribution deduction and the deduction for state and local taxes - are incredibly expensive and give the country very poor returns relative to their cost. Everyone likes these tax breaks, but in light of the long-term fiscal crisis facing the country, we must choose: we can maintain our herd of hideously expensive tax sacred cows, or we can sacrifice them and set the country on the path to fiscal health.

Today the government spends more through tax expenditures than it collects from the personal income tax, and spends twice as much through the Tax Code as it does through explicit discretionary spending programs. Unlike explicit spending, tax expenditures show up in the budget process simply as reduced tax revenues. In reality the tax revenues are there, borne by taxpayers not eligible for the subsidy, and spent on those who do qualify. It's as if the government actually collected roughly twice as much in personal income taxes as it actually does, but then spent all those extra revenues on programs that today are invisible as a matter of budget presentation or debate.

Social Security, Defense Top List of Debt Panel's Targets

The bipartisan fiscal commission has been working on a plan to reduce the national debt, and Social Security and Pentagon expenses are at the top of their list of major federal expenses. The commission has yet to propose tactics to reduce these expenses, but they are already being confronted with major opposition. Check out the following story on this new development—courtesy of USA Today.

Social Security and the Pentagon are among the early targets of the bipartisan fiscal commission established by President Obama to address the USA's spiraling national debt.

The panel, which held its second public meeting today, barely mentioned the biggest reason for the $13 trillion debt and annual $1.5 trillion budget deficits: health care. The president recently signed an overhaul that's projected to save $143 billion over 10 years, but that won't be nearly enough to reverse the tide of red ink.

What's emerging on the 18-member panel is a split between a majority favoring tough action to tame the debt and a minority, led by House Speaker Nancy Pelosi's appointees, who appear more concerned about today's economy and jobs picture.

"Cutting now would be a mistake," said Rep. Jan Schakowsky, D-Ill. -- despite the fact that cutting spending and/or increasing taxes is the presumed goal of the panel. Her colleague, Rep. Xavier Becerra, D-Calif., raised one of Congress' sacred cows -- treating wounded war veterans -- as but one reason to avoid too much deficit reduction.

On the other side were panel chairmen Erskine Bowles, a North Carolina Democrat, and Alan Simpson, a Wyoming Republican; several powerful Democrats who long have favored deficit reduction; and most of the commission's Republicans.

Continue reading at USA Today.com…

Time Running Out for Bipartisan Health Compromise

With diminishing public support, time is running out for Obama to get his health care reform bill through Congress. Now that the holiday weekend is over, lawmakers are back to work and are trying to come up with a compromise in order to get the bill passed. Check out the following article explaining the latest activity on Capitol Hill courtesy of the Associated Press.

In a fresh sign of divisions in the president's own party, a key House Democratic moderate said he can no longer support legislation that includes a new public insurance plan to compete with private industry.

And in the Senate, any hope of bipartisan agreement hung in the balance as a small group of negotiators on the pivotal Finance Committee prepared to meet in a last-ditch effort to reach consensus on a compromise bill.

Rep. Mike Ross, D-Ark., took the lead in July in negotiating changes to House Democrats' health overhaul bill to make it more palatable to moderates. He voted for it in committee with a public plan — something most House liberals say they can't do without.

But Ross said Tuesday that after hearing from constituents during the August recess he could not support a bill with a public plan.

"If House leadership presents a final bill that contains a government-run public option, I will oppose it," Ross said.