The Deficit Panel's Balancing Act

Jonathan Chait complains that the preliminary deficit panel report is "tilted, overwhelmingly, toward Republican priorities." But is he right?

Ross Douthat has a perceptive post here on the deficit reduction commission's opening bid. Replying to Jonathan Chait's complaint that the preliminary report is "tilted, overwhelmingly, toward Republican priorities," Douthat answers:

Yes, it’s tilted toward spending cuts, and away from tax increases. But look at the em>way it cuts spending and raises taxes<. It means-tests Social Security benefits for high earners and raises the cap on taxable income, while also adding a larger benefit for the poorest seniors. Its hypothetical discretionary spending reductions don’t come from anti-poverty programs, for the most part: They come from cutting the defense budget, cutting the federal workforce, cutting farm subsidies, etc. It raises tax revenue by reducing tax credits and deductions that almost all overwhelmingly benefit the affluent. (This would be especially true in the scenario I’d prefer, in which the child tax credit and the earned-income tax credit stick around.) It would cap revenue at 21 percent of G.D.P., which would be higher than any point in recent American history, and well above the average for the last thirty years. And it does all of this, as Chait himself notes, while assuming that Obamacare — the capstone of the liberal welfare state — would remain essentially unchanged.

FF's own "Henry Clay" notes further that Bowles-Simpson preserves one enormous tax expenditure, the one most cherished by Democrats: the deductibility of state and local taxes from federally taxable income, a huge subsidy to high-tax "blue" states.

This is an especially severe omission since state & local deductibility is a bad policy measure even apart from its deficit implications. (And I say that as a Washington DC taxpayer!)

All that said: there's more to like than to dislike in the preliminary report - and the report's chances will be an important test of the capacity of the American political system to make necessary decisions for long-term growth and prosperity.