The Bipartisan Senate Proposal is being pushed by the so-called Gang of Six - Saxby Chambliss (R-Georgia), Tom Coburn (R-Oklahoma), Kent Conrad (D-North Dakota), Mike Crapo (R-Idaho), Dick Durbin (D-Illinois), and Mark Warner (D-Virginia). Four of them were members of the National Commission on Fiscal Responsibility and Reform which was unable to pass a proposal to cut the Federal Budget deficit. This proposal has been welcomed by President Obama, who said that he endorsed the thrust of the proposal.
In contrast to the House Republican proposal to end Medicare, cut programs for the poor and give big tax cuts to the rich, the mainstream media has described the Bipartisan Senate Proposal as a more balanced plan that would raise $1 trillion in tax revenues while cutting $3 trillion in spending.
Don’t believe this hype.
If one reads the actual proposal the executive summary states on page one that “If the CBO (Congressional Budget Office) scored this plan, it would find net tax relief of approximately $1.5 trillion.” The proposal would lower the top tax rate for high income individuals and families from 35% to 29% and repeal the Alternative Minimum Tax, which would allow high income individuals and families to not pay any taxes at all. It would also cut the corporate tax rate from 35% to 29% or less, and not tax foreign profits at all, at a time when corporations are sitting on record amounts of cash (about $2 trillion).
The bipartisan proposal would also cut Social Security by cutting cost of living increases. Social Security payments are indexed, which means that they are adjusted each year for inflation. Social Security currently uses the Consumer Price Index or CPI to make this adjustment. The bipartisan proposal would shift to the chained-CPI, which they claim is more accurate than the CPI, but would result in Social Security payments losing about 0.25% in adjustments each year, or about $3 a month for a typical person getting Social Security. While this doesn’t seem to be much, it adds up each year, so a 65 year old retiring to go on Social Security would lose almost $55 a month if they live the average 18 years, and more if they live longer.
The fact is that seniors almost certainly face a higher inflation rate than the CPI, since they have to use more health care services. Over the past year, prices for medical goods and services have risen almost twice as fast as for all other prices, excluding food and energy.
So why is President Obama backing this proposal? One reason is that Wall Street wants a big cut in spending to make sure the price of billions of dollars of U.S. government bonds is maintained. The bond rating company Standard and Poor’s warned that unless there was a $4 trillion deficit reduction, they would reduce the rating on U.S. government bonds from the current AAA (the highest) rating. This would cause the price of bonds to drop and interest rates to go up. Time and again, Obama has shown that he is more interested in protecting the interest of big banks and Wall Street than the interests of poor and working people.
Next: the Congressional Progressive Caucus proposal