Why the Deficit Commission Proposal Flopped

Monday, December 06, 2010

dollar, andrew jackson, money On Friday, the National Commission on Fiscal Responsibility and Reform will vote on the chairs' contentious plan to reduce the federal budget deficit. (_J_D_R_/flickr)

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from political conversations on WNYC. On today's Brian Lehrer Show, Nobel Prize winner in Economics, Joseph Stiglitz and Robert Kuttner, co-editor of The American Prospect magazine and senior fellow at Demos, discussed the demise of the president's deficit commission's proposal.

President Obama created the bi-partisan National Commission on Fiscal Responsibility and Reform last February and the commission has been mulling over solutions to the country's fiscal dilemma ever since. After voting on the proposal last week, the Commission did not get the super-majority they needed to officially send the deficit-cutting plan on to Congress. The Commission needed 14 out of 18 votes to send the plan along; they only had 11.

Though there were a few things the commission's plan did well, according to Joseph Stiglitz, like eliminating the special treatment of the capital gains tax, he says the commission was basically "out to lunch."

What worries me is they didn't have a clear vision of the short-run, the recession that we're in... They didn't really have a growth agenda nor a set of principles underlying tax policy.

Robert Kuttner agreed. He said the commission's plan just wasn't good enough, but Obama's timing in creating this commission wasn't great either.

I think Obama has just made such a mess of the politics of this. If you think about it, with one hand he's appointed this fiscal commission...he has to show his good faith by being in favor of deficit reduction at a time when if anything, the economy needs more deficit spending in the short run. And then in the other ring of the circus, you've got the Republicans trying to have deficit-widening tax cuts... If you wanted a recipe for devastating both the economy and everything that Democrats stand for, you couldn't do much better than the policy and the strategy that President Obama has followed.

Both Kuttner and Stiglitz said stimulating the economy needs to be a priority, not taxing the wealthy. In Kuttner's words:

I think the whole approach of the fiscal commission was to put the cart before the horse. The problem is not how do we reduce the deficit. The problem is how do we get a recovery going. Once we get a recovery going, reducing the deficit partly happens of its own accord... and then at that point it makes sense to have more tax increases.

Commission members, meanwhile, are taking credit for fundamentally changing Washington, even though they didn't reach the 14-vote threshold. Former SEIU president and Commission member Andy Stern voted against the plan, but he told the Associated Press that the work was an "enormous tectonic paradigm shift" in the debate about federal fiscal policy.


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Comments [2]

Is the Simpson-Bowles TEAM voting THEIR WALLETS ? from Save our country from CLEPTOCRACY!

Here is ONE KEY QUESTION that the
public has a RIGHT to know about EACH
of the members of the Simpson-Bowles
deficit reduction committee :

1) How much would EACH one of them
PERSONALLY GAIN if their proposal
became LAW ?

Most are probably wealthy and gain disproportionately from Tax cuts, Most
are successful and therefore don't
have any family members who are unemployed, are on Medicaid or otherwise
depend on goverment services.

THEIR WALLET therefore says :
Slash taxes, Slash government services.

wealthy, many work hard but nevertheless
are not secure in their jobs or healthcare
or homes or other vital needs.

OUR INTERESTS are probably not the
same as THEIRS.


How about the Republicans (and Democrats) about to extend the Bush
cuts to the wealthy ?

GAIN *PERSONALLY* (including
family members) IF THE CUTS GET

This question should be answered
tax cut bill.

Dec. 06 2010 08:49 PM
John King from Virginia

Sorry, but Mr. Stiglitz and all the other mainstream economicst are wrong about Keynesian stimulus. The American, big European and Japanese economies have all "topped out" and no amount of stimulus will restart what was uncontrolled conspicuous consumption. (Thanks, Wall Street bankers, for all that cheap money for subprime mortgages and Wall Street buy outs by hedge and equity funds.) We are now in the norm, and it will last a very long time. We will save more, which will keep interest rates down without artificial intervention by the Federal Reserve, which is just an extension of the U.S. Treasury and continues to spend what it doesn't have.

Dec. 06 2010 02:26 PM

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