July 20 (Bloomberg) -- Six stalwart U.S. senators delivered yesterday the outlines of an intelligent and ambitious deficit-reduction proposal. It is, as President Barack Obama succinctly said, “good news” -- at a time when some is needed.
The bipartisan “Gang of Six” plan takes the sensible policy framework of the Bowles-Simpson fiscal-reform commission and turns it into a workable package for the Senate to consider.
Although the plan’s details are not all clear, the senators say it would reduce deficits by $500 billion immediately and by $3.7 trillion over 10 years. It would overhaul entitlements, in part by switching to a so-called chained consumer price index to calculate benefits. It would tighten the budget process using triggers and enforcement mechanisms to protect against lawmakers with an itch to spend. And it would move toward a simplified and pro-growth tax code.
Enthusiasm expressed by senators not involved in the talks suggests that there may be enough votes in the Senate to pass the package. The House will be a problem, perhaps even an impossibility. To make the odds even longer, it’s unclear how the plan might overlap with various proposals to increase the debt limit -- and very little time remains.
Hope Still Alive
But there’s reason for hope. Even staunch House conservatives should agree with the scope of the plan’s budget cuts. They should also find its tax changes appealing: The plan would cut the top individual tax rate to 29 percent from 35 percent, establish a single corporate rate and change how foreign income is taxed, eliminate the alternative minimum tax, and bring in $1 trillion in new revenue over 10 years by reducing tax breaks.
The senators say it will amount to a net tax cut of $1.5 trillion. We’ll know more when all the details of the plan are released.
The Gang of Six, if nothing else, has taken admirable steps toward shared sacrifice. Even as the plan was making the rounds, House Republicans were debating an ill-advised balanced-budget amendment that stands no chance of becoming law, a dangerous distraction from the critical task of raising the debt ceiling.
If the Senate plan is part of a last-minute grand bargain that helps prevent a government default, all the better. On its own, it’s a work of substance that could eventually guide us in solving our long-term budget woes.
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