A deficit of good ideas

Fix the Debt is more concerned with its wealthy donors than building a bright future.

By Luke Brinker

Alan Simpson and Erskine Bowles want you to know that they’re In It for the Children.

The co-chairmen of President Barack Obama’s 2010 fiscal commission recently launched Fix the Debt, a pressure group seeking deep cuts in federal spending and an overhaul of the nation’s tax code. On the organization’s Web site, supporters of the campaign invariably link their project to the prosperity of “future generations.”

Without significant cuts now, we will imperil “the strength of our economy, our standard of living, and the prosperity of future generations,” according to former Senator Judd Gregg (R–NH).

Former Senator Sam Nunn (D–GA) calls for a grand, bipartisan bargain in order to “save future generations from an unbearable debt burden.”

Wall Street investor Steve Rattner inveighs against borrow-and-spend politicians whose policies “are hurting future generations.”

Mark Bertollini, the chairman, CEO, and president of health insurance behemoth Aetna, urges leaders to “fix” the nation’s “entitlement programs” (read: Social Security, Medicare, and Medicaid) in order to “meet the health needs of future generations.”

Tom Quinlan, the president and CEO of the Fortune 500 company R.R. Donnelly & Sons, pleads with politicians to come up with a “sustainable” fiscal policy, for “our country, our children, and future generations deserve no less.”

And so on. Scrolling through Fix the Debt’s Web site, you’d think that a cast of graying establishment politicians, elite investors and hedge funders, and CEOs of corporate giants were the best friends Millennials have. Never mind that they’re trying to sell us a bill of goods, one that includes less support for an already pitifully weak welfare state, lower tax rates for the wealthy under the guise of “tax reform,” and counterproductive cuts that will likely grow the nation’s deficit.

Let’s first dispel the notion that investors see indebted America as a fiscal train wreck—and that today’s young people should therefore work longer and pay more for their education and health care. It’s difficult to see where the alarmists are coming from. The 10-year yield on U.S. Treasury bonds currently hovers at around 1.6 percent. When Simpson and Bowles warned in November 2010 that we needed to implement drastic cuts in spending lest investors lose faith in America, the rate was about 3.5 percent. In September 2008, at the dawn of the financial crisis, the rate was 3.7 percent. Investors have grown more confident, not less, in the nation’s ability to pay its bills.

Perhaps there’s no demand for deficit reduction now. But as they negotiate to avert the “fiscal cliff” this January, wouldn’t President Obama and Congress be well-advised to provide markets with some certainty via a grand bargain of spending cuts and revenue increases? Not if such a deal resembles anything along the lines of Simpson and Bowles’s 2010 proposal. These self-appointed guardians of future generations called for further increases in the retirement age, asserting that longer life expectancies would strain Social Security and Medicare. The problem, as economist Paul Krugman points out, is that life expectancy has risen for the affluent but generally stalled among members of the working class, who most rely on those programs.

The Simpson-Bowles commission’s pie-in-the-sky tax plan includes lower rates for the wealthy and for corporations. How, precisely, does one square this with the goal of deficit reduction? The commission called for the elimination of loopholes and subsidies in the tax code—some of which, like the mortgage interest deduction, are indeed skewed toward the wealthy. There are two problems with this, however, one pragmatic, the other moral.

It’s wildly unrealistic to expect to make up for lower tax rates by eliminating loopholes. Behind each of those loopholes is a lobbyist—and a constituency. Call me a cynic. But I have a hard time seeing a majority of congressmen giving the finger to the National Association of Realtors and all their affluent mortgage-holding constituents—who turn out to the polls much more often than do the poor.

What’s most troubling about Simpson-Bowles, however, is the pernicious discourse in which it operates. Some wealthy citizens would pay more under their proposal, but the principle of lowering corporate and individual tax rates on the affluent is antithetical to the notion of an egalitarian society. If the nation wishes to live up to its ethos of equality, then both the wealthy and the middle class will need to pay more in taxes. And since a complete revamp of the tax code isn’t going to happen, that’s going to require higher rates. It also demands that policymakers redress the stupidity of a Social Security system in which only the first $106,000 of income is subject to payroll tax. I can’t tell you the number of times I’ve heard fellow Millennials say they doubt Social Security will be around for them. But extending the cap to income over $250,000 would guarantee the program’s solvency until I’m 99.

Simpson and Bowles may present themselves as saviors of Americans born and unborn, old and young, but their policy proposals represent the preferences of the rarified Beltway and corporate elite to which they and their supporters belong. Bowles earned $335,000 in 2009 as a board member of banking firm Morgan Stanley. As economist Dean Baker asked, is it any wonder that Bowles never proposed a tax on financial speculation? But that plum position may not have been quite as lucrative as Simpson and Bowles’s Fix the Debt gig. In an otherwise laudatory profile, The New York Times revealed last week that the two men often receive $40,000 each for their appearances on behalf of the group.

Just remember, though: It’s all about the kids.

Luke Brinker is a graduate student in the MAPSS program.