Saturday, May 28, 2011

A deficit reduction plan worth considering

The Center for American Progress (CAP) has introduced a deficit reduction plan that is well worth considering.  The plan:
  • Balances the federal budget, except for payment on the national debt, by 2015.
  • Brings the federal budget into full and permanent balance by 2030.
  • Reduces federal debt to just over 40% of GDP (a sustainable level) by 2035.

The CAP plan does all of this WITHOUT destroying traditional Medicare and Medicaid or making draconian cuts in domestic spending like the Republican/Ryan plan.

In fact, CAP makes room for substantial new investments in all levels of education, renewable and clean energy technologies, transportation and infrastructure, and basic scientific research and development to the tune of $70 billion over current levels.

CAPs plan takes full advantage of cost-containment measures in Obamacare, pays for a permanent “Doc Fix” for Medicare, and provides a “failsafe” to ensure that health care cost containment goals are met.

The plan creates a single 15% tax bracket for 80% of Americans coupled with flat tax credits instead of standard, mortgage, and charitable deductions that results in 90% of taxpayers getting a tax cut or experiencing no change in their tax liability.  Tax calculations are greatly simplified for almost all Americans.

CAP makes strategic cuts to defense spending to return it to the same level it was during the peak of the Cold War (A reasonable goal that doesn’t jeopardize national security.)

CAP achieves these goals in part by: 
  • Returning the top tax rate to levels under President Clinton.
  • Restoring the estate tax to pre-Bush tax-cut levels, indexed for inflation.
  • Levying a temporary 5% surtax on millionaires until the budget is balanced. (CAP estimates this can be accomplished by 2030.)
  • Returning the top capital gains tax rate to the level it was under Reagan.
  • Eliminating or reforming dozens of “tax entitlements” such as those enjoyed by the oil and gas industry and hedge fund managers.
  • Levying a $5 per barrel fee on foreign oil imports.
  • Imposing a two-tenths of one percent tax on stock trades to discourage speculation a rapid turnaround day trading.
  • Removing the cap (currently $106,800) on the employer side of the Social Security payroll tax.

These tax changes will mean that 95% of income groups will, on the average, pay less or the same in taxes as they do now.

The top 5% of Americans will pay more but they will still enjoy after-tax incomes 30% higher than in 2001.  The richest 1% of Americans would pay more under this plan but would still enjoy after-tax incomes at least 47% higher they were in 2001.

CAP’s plan isn’t perfect.  However, it demonstrates that we can deal with the deficit problem without destroying Social Security, Medicare and other entitlement programs and without making drastic cuts in spending on infrastructure, education, and research and development that is vital for our future.

This is a deficit reduction plan well worth considering.

No comments: