One noticeable thing lacking from politicians’ speeches this past election was specific ideas about how to cut the massive budget deficit. However, in a sign that government might be finally seriously taking reducing the budget deficit, a White House commission put forth a preliminary action plan to reduce the national debt growth by $3.8 trillion.

The plan is notable in that it targets many of the politically sacrosanct but costly aspects of fiscal policy such as raising the Social Security retirement age, eliminating itemized deductions on mortgage interest and other items, and defense spending. It also suggests a 10% downsizing of the federal workforce. It contains a fair balance of spending cuts and tax increases. But most importantly, it serves as a starting point for negotiations on reducing the budget deficit. It functions in a similar way as the starting price for an auction- it’s not going to be the final price, but it starts the process of bidding or, in this case, negotiations over the deficit.

But this may be an auction that nobody wants to participate in. Americans are vehemently against “government spending” as a concept, but will fight tooth and nail to keep the government subsidies and tax policies that benefit them. As a result, the politicians representing them will reflect their wishes in Congress and defend against the cuts that would harm their constituents. The farm state congressmen will protest agricultural subsidy eliminations, the red state congressmen tax increases, and Florida’s congressmen will probably attack anything the AARP tells them to. Don’t expect the plan to be implemented line-by-line.

The part I disagree with most, however, is the unequal distribution of the impact of these recommendations have on us- generally, it seems like it seems to affect older people- the very ones that started the supply-sided fiscal excess in the Reagan years- less. Maybe Florida isn’t the only state that the AARP has influence over.

Let’s take a look at some of the big-item cuts and tax increases in the proposal. Increasing Social Security retirement age to 68 by 2050 is not going to hurt those that are 65 in 2010 (on the other hand, at 2050, I turn… 59. Better start looking into them 401(k)s). Losing the ability to itemize mortgage interest is not going to affect those who have already spent 30 years paying off their mortgage. The tax increases are not going to affect those with no income due to retirement. And if seniors aren’t burdened by the deficit reduction proposal, the people most likely to shoulder that burden would be those that will buy a house, start making an income, and pay Social Security in the next 10 years. Maybe what I should be doing is looking into residency options in Canada.

The deficit proposal clearly isn’t perfect; it’s about as politically viable as Nancy Pelosi in Texas and disproportionately affects youths such as your humble commentator. However, its true value is as a conversation starter that will hopefully lead to concrete debt reduction policies by the government. With the deficit now past the trillion-dollar mark and the debt being $13.7 trillion, such conversations will be sorely needed to avoid America’s worst-case scenario- having to replace the current debt clock with one containing even more digits. And, I suppose, the ramifications that come with it.


(Photo: JohnSeb)