Mike Klein Online

Debt Commission: Restore Public Option, Reduce Mortgage Deduction

The bipartisan National Commission on Fiscal Responsibility and Reform appointed by President Barack Obama caught nearly everyone by surprise Wednesday with its unexpected release of a draft report.  The White House said the traveling President would not comment until the Commission’s work is complete, which was already anticipated sometime next month.

Here is a link to the complete 50-page report.

Notably, the Commission draft report buries one of its potentially biggest and most controversial headlines:  “Add a robust public option and/or all-payer system in the exchange” to achieve long-term health care savings.  The very first mention of that idea is found on page 36.

Among its dozens of recommendations, the Commission draft proposes the federal government should move to a biennial budget, rather than the current cumbersome annual budget.  Georgia legislators write annual budgets but some states, Texas included, write biennial budgets.

Most media will report primarily executive summary headlines, so rather than repeat the obvious – America Is in Trouble with a Capital T – here is some detail from inside the report:

Social Security

The Commission would propose to gradually move Social Security toward “a more progressive benefit formula” over the next 40 years.  State and local public workers hired after the year 2020 would automatically enroll in Social Security.  Personal income subject to Social Security tax would increase to 90% from its current 86%.  Retirees would have an option to collect half their benefits early but delay full payments until later.  Workers in physically demanding jobs would have an early retirement option.

Health Care

These ideas are certain to attract scrutiny, starting with the “robust public option.”  Other proposals include further reduction of payments to doctors, other medical providers and lawyers who have health care clients. There would be expanded cost-sharing in Medicare and Medicaid co-payments would increase.  Medicare Advantage and home health care service cuts that already are planned would be phased-in more quickly.  Health care cost-saving cuts would remain in place even when health care spending itself did not exceed targeted growth rates.

Taxation

The draft proposes two primary comprehensive reform ideas, but both include elimination of the alternative minimum tax.  One model proposes 8% to 28% individual income tax rates depending on how deductions are treated.  The other model standardizes individual rates at 15%, 25% and 35%.  Corporate income tax rates range between 26% and 28% in both models.  Another proposal would limit mortgage interest deductions to exclude second residences, home equity loans and mortgages over $500,000.

The Commission seems to recognize that tax reform is a process much like walking through tar pits. Therefore, it proposed forced reductions in some individual tax deductions and corporate business credits if comprehensive tax reform is not accomplished by the end of 2012.

Other Highlights

Eliminate 10% of all federal government employees.  Create a bipartisan committee to review and sunshine agencies and programs that are outdated, low priority and unnecessary.  Reduce agriculture farm subsidies by $3 billion per year.  Close one-third of U.S. overseas military bases.  Terminate one-quarter million non-defense federal government contractors.  Freeze salaries, bonuses and other compensation for federal employees, including defense department employees, for three years. Increase federal gasoline tax to fund transportation improvements.  Several proposed changes to military and federal civil service retirement programs.  Eliminate interest subsidies for in-school student loans.

There is a lot to digest in this document.  Let the debate begin!

Mike Klein is Editor at the Georgia Public Policy Foundation.

November 10, 2010 - Posted by mikekleinonline | Uncategorized | Barack Obama, Georgia Public Policy Foundation, health care, Medicaid, Medicare, Mike Klein, National Commission on Fiscal Responsibility and Reform, Social Security, Tax Reform