Liberal Dems Try Their Hand at Deficit-Reduction

Liberal Dems Try Their Hand at Deficit-Reduction

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Less than thrilled with the deficit-reduction proposal the president’s bipartisan fiscal commission chairmen released last week, a few liberal-leaning lawmakers and groups are firing back with their own—more progressive--suggestions.
Yesterday, Rep. Jan Schakowsky, D-Ill., a member of the president’s fiscal commission chaired by Democrat Erskine Bowles and Republican Alan Simpson, announced her alternative plan

“Lower and middle class Americans did not cause the deficit,” Schakowsky said in a statement.  Their [Bowles and Simpson’s] proposal would have serious consequences for lower and middle class Americans….I believe there is a better way to achieve our goal.”

Conspicuously absent from Schakowsky’s proposal are many of the  health care, housing, and energy subsidy spending cuts and the Social Security rollbacks the co-chairmen’s plan called for to eliminate about $4 trillion from forecasted deficits through 2020.  Instead, her plan would lower the deficit by almost $430 billion by 2015, largely by eliminating special tax treatment for wealthy individuals and businesses.  The plan would allow the Bush tax cuts to expire for the top two percent of earners, enact a cap and trade program to tax firms for carbon dioxide emissions, and return the estate tax to 2009 levels.  It would also cap how much debt interest companies can deduct from their tax bills, cancel tax breaks on foreign source income, and subject capital gains to the higher regular income tax rates.  

“It’s a much more revenue-heavy plan than we saw from the fiscal commission chairmen, but the numbers work,” said Michael Linden, associate director for tax and budget policy at the left-leaning Center for American Progress.  “The idea that huge cuts are needed in order to get deficit reduction is only true if you think we shouldn’t raise any new revenue or much new revenue.”

Republicans and many moderate Democrats argue that any tax increase would badly upset the economic recovery, which would make adoption of a plan along the lines of Schakowsky’s proposal virtually impossible.

Though less reliant on spending cuts than the Bowles-Simpson recommendation, Schakowsky’s plan would slash defense spending by about $111 billion in 2015--slightly more than the $100 billion in defense cuts the commission chairmen proposed.  It also includes $200 billion worth of proposed stimulus funding for states to help them continue unemployment insurance extensions, build infrastructure, and avoid hiking taxes. 

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