Interesting Take on Deficit Commission’s Co-Chair’s Proposal

From, by Steve Manacek:

The National Commission on Fiscal Responsibility and Reform has released its “co-chairs’ proposal” – the first shot across the bow, as it were, from the “Deficit Commission” that will likely define the terms of debate on fiscal policy for years to come. Initial reaction from Republicans (including Paul Ryan) and moderate Democrats has been fairly positive. Initial reaction from the Left has been far more negative; Nancy Pelosi was quick to call it “simply unacceptable.”

A lot of the introductory verbiage could have come straight from the mouth of Ronald Reagan (via the pen of Peter Robinson, no doubt) – “cut and invest to promote economic growth,” “cut spending we simply can’t afford, wherever we find it,” “reform and simplify the tax code – broaden base, lower rates, and bring down the deficit,” and so on. And there are pages and pages of more-or-less specific proposals, some more pleasing to conservatives, others to liberals.

But here’s what I don’t get about the initial reactions. Putting aside all the minutiae and detail, the crux of the proposal comes down to two points: capping federal government expenditures at 22% — and eventually 21% — of GDP, and capping revenues at 21% of GDP. And each of these represents a BIG problem. The first is on the spending side. Except for the anomalous stimulus/bailout/recession years of 2009-2011, federal government expenditures haven’t reached 21% of GDP since the collapse of the Soviet Union – and since World War II only exceeded 21% of GDP during the Reagan-Bush military buildup of the 1980s and early 90s. For virtually all of the Clinton and G.W. Bush years – and during all the Kennedy/Johnson/Nixon years – federal expenditures ranged between 18 and 20% of GDP. So while the 21% figure represents something of a cut versus the out-year projections of the President’s most recent budget, it leaves plenty of headroom to establish and make permanent even more government than we had in the immediate pre-Obama years.

Read the rest here: What Am I Missing?



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