On February 18, 2010 President Obama set up a bipartisan panel to address the deficit and debt.  Dubbed the National Commission on Fiscal Reform and Integrity, the effort was co-chaired by former White House chief of staff Erskine Bowles and former Republican Senate Whip Alan Simpson (R-Wy.).

On December 3, 2010 the report was released with a list of spending cuts, tax increases and questionable economic scenarios.

The $200 billion in savings from spending cuts by 2015 is arranged by loose categories such as Leading by Example; Cut Outdated, Low Priority, and Under-Performing Programs; Securing a Better Return on Taxpayer Investment; Getting Full Value for Federal Resources;and Creating a Leaner, More Efficient Defense Department.

Included in the Leading by Example category are savings of $15 billion by freezing “federal salaries, bonuses, and other compensation at non-defense agencies for three years,” and saving $13 billion by cutting the federal workforce by 10 percent.  Total savings in the category are $50.4 billion.

Recognizing the inefficiencies inherent in government programs, the Commission’s Cut Outdated, Low Priority, and Under-Performing Programs includes reducing wasteful spending at the Department of Justice, which would save $1.6 billion, and eliminating a “number of programs administered by the Rural Utility Service,” which would save $500 million.  Total savings in this category are $23.3 billion.

Securing a Better Return on Taxpayer Investment includes eliminating all earmarks with a savings of $16 billion, and reducing voluntary contributions to the United Nations, which would save $300 million.  Total savings in this category is $19.2 billion.

Getting Full Value for Federal Resources includes eliminating grants to large and medium sized hub airports, saving $1.2 billion, and selling excess federal property, which would save $1 billion.  Total savings in this category are $7.3 billion.

The last category, and definitely not the least, is Creating a Leaner, More Efficient Defense Department.  Two of the recommendations include applying “the overhead savings Secretary Gates has promised for deficit reduction,” which would save $28 billion, and reducing “procurement by 15 percent” which would save $20 billion.  The report also outlines specific weapons systems that should be cancelled or scaled back.Total savings in this category are $100 billion.

Goals for tax reform include: lowering rates, simplifying the code, broadening the base, cutting spending in the Tax Code (tax expenditures), improving compliance, making America the best place in the world to start and grow a business, and reducing the deficit.   The report outlines a number of specific tax changes, but the most disturbing is the gradual increase in the gas tax to fund transportation spending.  Transportation funding is in disarray and raising taxes will do nothing to solve that problem.

While the spending cuts are encouraged, there are concerns with the commission because of the bloated budget baseline estimate, and no plans to reform the massive healthcare plan that Congress passed earlier this year.  According to the Heritage Foundation, “The commission report could be interpreted as much heavier on spending restraint than tax hikes. This effect is overstated, because the commission measures all tax and spending changes against a baseline that already assumes nearly $2 trillion in tax increases from letting parts of the 2001 and 2003 tax cuts expire and from no longer renewing many other annual tax cuts.The proper way to measure the commission’s proposals are against a current-policy baseline that assumes today’s spending and tax policies continue.”

Additionally, the Commission’s recommendations are top heavy with discretionary versus mandatory spending.  The $3.8 trillion in deficit reduction through 2020 breaks down as follows:

• $1.5 trillion in discretionary spending;
• $751 billion in spending in the tax code/ tax reform;
• $733 billion in mandatory spending;
• $673 billion in net interest savings; and
• $210 billion in other revenue.

The Fiscal Commission is not perfect and will not solve the country’s deficit and debt problems,but the spending cuts should be taken seriously.  CAGW recommends a thorough reading of Prime Cuts,which could save $2.2 trillion over five years.

  -- David Williams