JONATHAN COHN NOVEMBER 10, 2010
The chairmen of President Obama's fiscal commission have released a preliminary proposal on how to get the federal budget under control. You can download it yourself at the website or read a summary in any number of media outlets. Rather than rush to publish a verdict, I'm going to take some time with it and, in the spirit of equanimity, merely highlight two specific proposals--one that I like and one that I do not.
The idea I like is to revisit the tax break for home interest mortgage payments--a tax break that is as misguided as it is large. It gives bigger tax reductions to people with more expensive homes. And it skews government resources away from renters, who, on the whole, need more help than homeowners anyway. It's part of a strategy for tax simplification, a goal that responsible members of both parties can embrace.
The idea I don't like? It's actually a number: 21. The two chairmen recommend that, over the long term, the federal government limit both taxes and expenditures to 21 percent of the gross domestic product. I don't know what makes 21 percent a magic number. I do know that taxes and government spending reach 50 percent in Scandinavian countries. Their economies have not suffered, while their societies are more equal and their citizens have more economic security.
Of course, to reach that 21 percent goal, I gather the federal government would have to raise taxes a little and cut spending a lot. That balance--er, lack of balance--is far from ideal.
OK, so that really wasn't so equanimous. But I'm trying to keep an open mind as I read through the report. In the meantime, Ezra Klein has an early take on the report that is, as always, worth reading in full.