Please, Mr. President, Get With the Plan

Obama Should Embrace Deficit Commission Report
President Obama has just received a great gift—a way to prove that he can pivot and a way to show those meanies at the G-20 that he really is serious about cutting our deficits. That gift was the preliminary report from the Deficit Reduction Commission. While such broad-minded thinkers as Nancy Pelosi immediately dismissed the bipartisan recommendations as “simply unacceptable,” the president has yet to comment. That is the right decision; he has a chance to put himself squarely on the side of the angels.

President Obama set up the Deficit Commission in what was widely viewed as a political ploy to put off dealing with our drastic budget deficits. How completely remarkable that the leaders of the body—former Senator Alan Simpson and former Clinton Chief of Staff Erskine Bowles --have actually produced a game plan that creates waves and shatters some glass. Bully for them. These proposals should be taken very seriously by the president and by Congress.

There are so many good ideas in their plan that it is hard to know where to start. One of the best ideas is cutting farm subsidies, which will be mourned only by those large agri-businesses that are today’s main recipients of funds once targeted at “saving” our small farmers. Another corker is cutting the federal workforce by 10%. Yes! The federal government has ballooned like a puss-filled boil; there are some 1.4 million civilians on the federal payroll today, compared to a steady 1.1-1.2 million from 1981 to 2008.  More shocking is that the number making over $150,000 has doubled since President Obama took office. This boil needs to be lanced.

I also applaud the idea of eliminating the mortgage deduction. This country does not need government encouragement or underwriting to embrace home ownership. Home buyers already receive assistance from Fannie Mae and Freddie Mac, which have long supported the mortgage market. Once can argue that much too much of our country’s savings has been funneled into home building and buying in the past twenty or thirty years. Our sorry infrastructure has arguably been a victim of that inappropriate (in hindsight, especially misguided) diversion of capital.

Many will squawk, but I also applaud the proposed $0.15 a gallon increase in gasoline taxes. It is in the country’s best interests to cut back on our oil imports, for security and balance of payments reasons. Raising the price of gasoline will cut down on its use. People will be encouraged to use mass transit, and buy smaller cars. This reaction is inevitable; we have seen it many times before.

Slowing the growth in foreign aid is entirely appropriate. Some of our spending in this arena is based on past priorities and makes no sense, as I have reported in prior pieces in this space. Cut funding for commercial spaceflight? Yes, I think in these hard times we can do without.

Who doesn’t want a simplified tax code? Eliminating the alternative minimum tax is a terrific starting point. A reduction in the corporate tax rate is a realistic response to global competitive pressures; among the OECD countries, only Japan has a higher tax levy on businesses.

The tougher sell will be efforts to prolong the useful life of Social Security by further raising the retirement age and by imposing some means-test on the program. We have all seen this coming, which is why I have never worried about the system going broke. It doesn’t make sense for billionaires to be receiving a payout intended to secure some peace of mind for retirees; few would argue the opposite. As long as the system is set up so that promises are kept, and payees recognize that they are in effect supporting a safety-net system, limiting payments to those who need them is entirely reasonable.

Republicans will bristle at further efforts to cut the defense budget. However, efforts by Defense Secretary Gates to tackle spending by our military were inspired by the view of those most informed that outlays were out of control, and due for review. It’s hard to imagine, as we shrink our presence in Iraq and hopefully in Afghanistan, that there are not further savings to be had.

Saving the best for last, the report laid out ways to rein in health care spending – a not-so-subtle reminder that Obamacare did no such thing. Simpson and Bowles want, among other things, to cap malpractice payments, an idea that surely should have played a bigger role in the president’s health care bill – now law. Better late than never.

Critics will complain that overall, tax payments will rise under the commission’s proposals. That may be, but is there anyone in the country who would not trade slightly higher taxes balanced by some intelligent reordering of our fiscal priorities? Since the plan will cut $2 in spending for every $1 in new taxes, the trade-off seems reasonable.

With luck, these proposals will lead to a grown-up conversation that could reassure Americans and our trading partners that we have the leadership and the will to put our country back on a sounder footing.

President Obama has the chance to restore the country’s faith in his guidance. For the good of the country, let us hope he goes for the gold.

Liz Peek is a financial columnist who writes for The Fiscal Times. She is a frequent contributor to Fox News Opinion. For more visit LizPeek.com.