The deficit commission chairmen weigh in

This week we saw a draft list of recommendations for eliminating the federal budget deficit, issued by the deficit commission's co-chairs Erskine Bowles and Alan Simpson.  I must say, after producing this document and finding Randy Woodson, Erskine has had a pretty good year.  In broad strokes, the commission has dealt with the fundamental issue -- the structural deficit is four percent of GDP and to close that deficit we must generate more tax revenue and reduce spending.  Roughly half of the gap will be closed through each mechanism.  Major changes: elimination of most major tax deductions including those for mortgages and health insurance, higher gasoline tax, delay the age for Social Security eligibility, higher ceiling for Social Security payroll tax, and cuts in domestic and military spending.  On the plus side, dropping the tax deductions opens up the opportunity for significant decreases in income taxes with top rates of 23 percent for individuals and 26 percent for corporations.  The latter development would be especially helpful as the current 35 percent rate is one of the highest in the world.

What's next?  The bi-partisan commission has 18 members and 14 of them must agree to any final recommendations.  If they pass that first test, the Senate and then the House would consider enacting deficit-cutting legislation during the lame duck session coming up.  Nancy Pelosi already has told NYT that the initial recommendations are "simply unacceptable," but that won't matter as much when the new Congress takes office next year.