Shared Sacrifice

The Republican election-day parties were less than two weeks ago, but they seem like a lifetime ago. With the balloons and streamers cleaned up, and the foggy-headedness of the next day cleared (I'm sure no-one offered any toasts that night) we can get down to training up these new Congress-people so they can take on the world in January. And they will be taking on some pretty tough issues.

One of the issues of the day, and decade, and for all time is the federal debt. Our federal government is currently spending trillions of dollars which we don't really have, and many are waking to the reality that we have many hard financial decisions to make in the very near future to avoid pushing our great nation (and by extension the entire world) into a financial crisis situation.

Recent economic events will likely keep meaningful budgetary and spending reforms in check for another year or so, but change is coming, and there will be much shared sacrifice.  To see some of the proposals to be battled out in Washington in the coming months, take a look at the "debt commission's" draft proposal. (http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf)

In this proposal are cuts and reforms that cover both domestic and defense spending, tax reform and Social Security and Medicare/Medicaid solvency. No popular or unpopular governmental program seems to be off-limits, and I argue that we can't afford to protect any project or budget from the surgeon's knife. The cancer of overspending has metastasized to all governmental organs, and we need a whole-body treatment.

Let's briefly hit on some of the more striking (to me at least) changes proposed to get deficits and debt under control.

Defense Spending

-Freeze salaries (civilian and non-combat military) for 3 years.
-Reduce overseas bases by 1/3
-Reform (I read reduced benefits) Tricare (military healthcare)
-Integrate military children into local public schools

Domestic Spending

-Reduce Congressional and White House budgets by 15%
-Freeze federal employee salaries for 3 years
-Cut federal workforce by 10% (through less drastic 2 for 3 replacement plan)
-Eliminate 250,000 federal augmentee contractor employees (non-defense)
-Eliminate earmarks

Defense and domestic spending cuts each account for $100 billion in savings.

Tax Reform

It sure is fun for politicians to talk about tax reform (I mean, who can't support, besides those employed by H&R Block, the idea of simplifying the tax code - and by extension the craziness of the forms) but generally the end result of any tax discussion in Washington results in further complicating the situation versus improving it.  The commission lays out 3 options for comprehensive tax reform. Personally I like their zero plan which takes out all tax "expenditures" (which I believe represent credits and deductions) and establishes a simpler tax rate to be applied without all the gyrations we go through today to "adjust" the income you earn. They then allow for the re-introduction of popular and potentially necessary credits like the child tax credits and earned income credits, but pay for them by actually increasing the tax rates themselves.

As a back-up to the ideas that are proposed, they recommend a third option, which allows Congress to come up with alternative plans, but holds Congressional feet to the fire by "haircutting" tax breaks annually (thereby creating an outcry from the populous) until tax reform is enacted.

Other Revenue

The commission recommends other revenue sources, like increasing the federal tax on gasoline. Raise some tax revenue and incent greener transportation development... PotentiallypPretty smart. (I didn't say popular)

Medicare

The Doc Fix proposal is to, well, not fix it... The proposal is to pay doctors less, increase incentives for quality and efficiency, and introduce tort reform to reduce liability expense for providers.

Additionally, the proposal includes generally increasing cost-share borne by Medicare beneficiaries to promote consumer engagement in healthcare decisions. The idea is to make sure people buy healthcare like they do other consumer goods - by seeing and feeling the actual price, and allowing consumers to decide the value of treatment for themselves. With the right information available to people, and education to what all that information means, it's something that can work. Think high-deductible health plan in Medicare.

The proposal also aims to increase brand-name rebates in the Medicare Part D space, collecting these from brand-name drug manufacturers. (sounds like we've been at this well before, but the commission looks to go back)

Social Security

Social Security did not escape the commission's eye. The plan here is to gradually increase retirement age to account for people living longer, update the way cost-of-living increases are calculated (there's been no increase for 2 years recently anyway) and increase the % of payroll income subject to withholdings.

All in all, if Congress does everything the commission recommends, just about everyone in America would be pissed off about something. But you know what, maybe that's the way it should be. And maybe, just maybe, our duly elected representatives in that little corner of what used to be part of Maryland will make those hard decisions, throw political longevity to the wind, and do what we need to so as a nation to survive financially. 

We should, as a nation do what we all know we must do to be financially solvent on our own balance sheets. We must spend no more than we earn, and, if we're smart, put something away for the proverbial rainy day. Perhaps of we'd done that over the last few decades, we'd not be in the mess we are today.

PS - I do not necessarily personally like or endorse any of the particular recommendations of the commission. I do support, however, the idea of universal sacrifice, and realize I will end up doing my fair share of it, like it or not.