“No Man’s life liberty or property is safe while the legislature is in session”.

- attributed to NY State Judge Gideon Tucker

Friday, November 19, 2010

The Deficit Commission's Recommendations

The Bowles-Simpson Deficit Commission's report last week contained something to upset voters of all political persuasions.

Despite the 'everything is on the table' verbiage, they didn't touch the disastrous new healthcare law, recommended some tax increases, but also a tax code overhaul, some small changes to Social Security eligibility, and a lower corporate tax rate.

However, between the Wall Street Journal staff editorial on the subject last Friday, and a more recent editorial citing the overall, unexepectedly strong, bi-partisan shift towards tax reform, it would seem a few important taboos have been broken by the commission.

While the near term arguments continue over extending the Bush tax cuts, that debate has quietly been overtaken by a sudden, widespread confirmation by many parties that the tax code really, no, really this time, has to be simplified. The decades-old pipe dreams of lower rates with fewer deductions and preference items actually seems to have gained a large, potentially legislatable following.

Is it the new, multi-lateral global economy featuring several other vibrant nations on the road to self-enrichment, sporting lower tax rates than America's?

The other major breach in the wall of denial is the commission's admission that federal legislators will have to swallow hard and grab the third rail of entitlement spending. Maybe it's Social Security, or Medicaid, or Medicare. Or all of them. But the commission's tiptoe into another Social Security 'fix' involving still-trivial, but at least identifiable admissions of the reality of a longer-lived population and fewer resources to fund them is heartening.

Look to Europe for reinforcement of this new political sanity. Who'd have believed that France, Greece and the UK would actually behave more boldly on social spending legislation to curb excessive deficits in the coming decades.

The larger perspective, of course, is inter-generational transfers. How can this currently-older generation, and its middle-aged brethren, be allowed to borrow, literally, for and from future generations, to fund retirements and benefits they cannot earn and fund themselves?

They can't. It worked for a couple of decades, but it seems to have finally run its course. There's just a lack of willingness on the part of global investors to fund this insanity anymore. And that's a good thing!

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