Count me among those who always believed that President Obama made a big mistake when he created the National Commission on Fiscal Responsibility and Reform — a supposedly bipartisan panel charged with coming up with solutions to the nation’s long-run fiscal problems. It seemed obvious, as soon as the commission’s membership was announced, that “bipartisanship” would mean what it so often does in Washington: a compromise between the center-right and the hard-right.
Actually, though, what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.
The one advantage to owning a home was the deduction on interest on a home mortgage. On a typical 30 year mortgage the payment in the first few years are almost entirely payments on the interest. A $1,200 a month mortgage would give the homeowner at least a $10,000 tax deduction. Take that away in the current economy where a significant increase in the equity on a home is at least a decade away and there is no advantage to owning a home. For the howowner this would amount to a $10,000 ta increase. Add in the deductions for health benefits and the middle class who own homes are screwed.
The Commission also wants to raise the age for Social Security to 69 as average life expectancy has increased over the years, but as Krugman explains,
But beyond that, the proposal seemingly ignores a crucial point: while average life expectancy is indeed rising, it’s doing so mainly for high earners, precisely the people who need Social Security least. Life expectancy in the bottom half of the income distribution has barely inched up over the past three decades. So the Bowles-Simpson proposal is basically saying that janitors should be forced to work longer because these days corporate lawyers live to a ripe old age.
If this comes into being, America, and most Americans will be screwed. Without a strong, vibrant middle class, the economy will never grow.
The full article is here.