Obama appointed a bipartisan deficit panel to make recommendations for how to lower the deficit to 3% of GDP. They have completed a draft which has been released and it is a mix of across the board spending cuts including entitlements and defense and broad changes to the tax code (tax increases). It will be interesting to see how this plays out. I think we're screwed. People want to cut the deficit but nobody wants to make a sacrifice.
Deficit Panel's Leaders Push Cuts - WSJ.com
Quote:
WASHINGTON—The leaders of a White House commission laid out a sweeping proposal to cut the federal budget deficit by hundreds of billions a year by targeting sacrosanct areas of U.S. tax and spending policy, such as Social Security benefits, middle-class tax breaks and defense spending.
The preliminary plan in its current form would end or cap a wide range of breaks relied on by the middle class—including the deduction for home-mortgage interest. It would tax capital gains and dividends at the higher rates now levied on wage income. To compensate, one version of the plan would dramatically lower and simplify individual rates, to 9%, 15% and 24%.
For businesses, the controversial plan would significantly lower the corporate tax rate—from a current top rate of 35% to as low as 26%—but also eliminate a number of deductions. It would make permanent the research and development tax credit.
Overall, the plan would hold down the growth of the federal debt by roughly $3.8 trillion by 2020, or about half of the $7.7 trillion by which the debt would have otherwise grown by that year, according to commission staff. The current national debt is about $13.7 trillion.
The budget deficit, or the amount by which federal expenditures exceed revenues each year, was about $1.3 trillion for fiscal year 2010, which ended on Sept. 30.
The interim report by the panel's co-chairmen stands as an opening bid in what will likely be a heated debate over the future of spending and taxes, issues that exploded in the midterm elections. Many of the plan's more provocative elements are intended as starting points for negotiation, not final recommendations.
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