Gang of Six Deficit Plan: Where is the Actual Plan?

The Congressional Budget Office issued a report last month entitled “CBO’s 2011 Long-Term Budget Outlook”. It is around 100 pages and chalked full of nice graphs, projections, analysis and alternative scenarios. It paints a bleak picture, a dismal portrait. It is a bit hard to understand because instead of putting the crux in nominal numbers, it uses a percent of Gross Domestic Product as a standard. So for example, health costs would in 10 years equal x percent of GNP as compared to Y percent now. All the projections of the different federal spending and taxing categories increase as a percent of GDP. 

 The Report is a useful tool but, of course, it is wrong and will be wrong. It makes, and has to make, certain economic assumptions for the future and policy projections based on events that have not happened. However, what struck me in the context of the current action or lack thereof on the Federal Deficit is just how large these numbers are and how puny the numbers are of any of the proposed solutions.

The buzz and plan de jure to address these future deficits is one floated by 3 Republican and 3 Democrat Senators yesterday. This plan issued in a summary form and in an outline is absolutely void of any meaningful specifics. It purports to cut the Federal Deficit by $3.7 trillion in the next 10 years through a combination of accounting gimmicks, revenue increases and spending cuts. It is not worth going into details because there are none and the actual results would depend on future Congressional actions to enacted specific overall changes in current programs. Like the diet ads warn, not representative results. Your results may vary.

The figure $ 3.7 trillion is a huge number, but is it really? It is an average of $370 billon a year. WOW, the deficit will be 1.65 trillion this year and way over a trillion next year. While the annual deficit may decrease in the next few years as the stimulus money is finally exhausted and a modest pick up in activity increases tax revenue, the CBO projects the cumulative deficits in the next 10 years will be in the neighborhood of $13 trillion. Now that is a lot of money. So the conclusion has be that all of these plans-Gang of Six, Grand Bargain, Biden Group, Ryan Plan- even if based on real numbers, enacted as advertised- are not the sole solution. They would be merely a start, and a weak one at best. 

 As mentioned, the latest plan has been in the public domain for about 24 hours. President Obama bounded out into the White House Press Room like a run away jack-in the box- to sing- its off key praise. He asked Congress to come up with a plan. The House of Representatives voted yesterday on its plan but he did not like it, to put it politely. The President seems to love this one. Why, not? I am not sure it does anything at all but at least, he is cosmetically trying.

 The time to do anything meaningful for the moment seems to have run out. Maybe that was the plan all along. It should not have happened. Enough blame to go around and everyone should be blamed.

The Gang of Six plan should be examined. However, it has so many initial flaws and questions that it is not a serious solution. What exactly are the tax components, how does it reduce the entitlement costs, what about providing for the security of the country?  It may provide a framework to get started, may spur some further consideration but it will not have an impact on the actual problem of Federal Deficits and the Debt Limit.

The last few months have been disappointing both in results and in leadership. However, maybe all of this will actually result in getting seriously started. Oop, there is an election coming, silly me.