November 7, 2011


A Look Inside the Super Committee (Stephen Moore, 11/07/11, WSJ)

But raising rates and raising revenues are different. Eliminating loopholes in exchange for making the Bush tax cuts permanent after 2013 is on the table--and by broadening the tax base, this could bring in tens of billions of new revenues each year. Says Mr. Hensarling: "Republicans want more revenues. We want more revenues by growing the economy; we're not happy with revenues at 14% of GDP, but we don't want to do it by raising rates."

One positive development on taxes taking shape is a deal that could include limiting tax deductions, perhaps by capping write-offs on charities, state and local taxes, and mortgage interest payments as a percentage of each tax filer's gross income. That idea was introduced on these pages by Harvard economist Martin Feldstein. [...]

The big fiscal breakthrough Mr. Hensarling and his GOP colleagues are hoping for on the spending side of the ledger is first-stage reforms in the big three entitlements--Medicare, Medicaid and Social Security.

Republicans want a gradual rise in the retirement age for the giant cost drivers Social Security and Medicare; higher co-pays and premiums for Medicare; and a tweak in the cost-of-living benefit formula to more accurately reflect the real inflation rate.

A change in the index formula (substituting the rise in prices rather than the rise in wages) to calculate benefits for Social Security and other federal programs would save about $200 billion over the next decade. And it would reap two to three times more in future decades. As Mr. Hensarling puts it, these reforms "are huge, because they start to bend the cost curve downward on the big entitlements." 

Posted by at November 7, 2011 9:23 AM

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