The draft proposal issued Wednesday by the co-chairmen of President Obama’s Deficit Reduction panel has both strengths and weaknesses.. Heritage Foundation analysts are still poring through this preliminary document, and we will have more to say in the days to come. Already, we see the following:
One great flaw in the proposal is the massive tax increase proposed by the co-chairmen, former Sen. Alan Simpson (R-Wyo) and former Clinton Chief of Staff Erskine Bowles. They would hike taxes to 21% of America’s economic output (i.e., gross domestic product or GDP), well over the historical average of 18% of GDP. The debt and deficit problems America faces stem from too much spending, and not too little taxes. We need to cut spending, and not raise taxes.
The co-chairmen did not go far enough in proposing spending cuts. For example, the $100 billion in cuts to domestic spending are a good start, including their ban on earmarks. But, they should go further. The Heritage Foundation seeks at a minimum an immediate freeze of Federal spending for fiscal year 2011 at the previous year’s level and cuts of $170 billion for 2012 (measuring from the CBO baseline). Heritage published a list of over $300 billion in spending cuts, so the options are available to reach or exceed the goal of cutting $170 billion.
But perhaps the worst flaw in the co-chairmen’s proposal is the substantial reduction to defense spending. A strong defense of America and its interests is the first obligation of government. Instead of cutting defense spending, the country needs to provide for defense an average of $720 billion per year (to be adjusted for inflation) for each of the next five fiscal years.
We’d be remiss, of course, not to mention the strengths. The Heritage Foundation has long recognized, as the chairmen’s proposal also recognizes, that the ultimate solution to a government that is too large and spends too much is to get entitlement program spending — especially medicare, medicaid, and social security spending — under control.
Watch this spot for a more in-depth analysis in the days to come.