The Debt Commission's Free Ride for Boomers

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It sure doesn't seem fair. The co-chairs of the National Commission on Fiscal Responsibility and Reform have largely given Baby Boomers—the generation that created the current fiscal mess—a pass on fixing the problem.

One major recommendation from Erskine Bowles and Alan Simpson is to scrap the tax deduction for mortgage interest. That's fine for older Boomers, since many have paid off that debt or have little interest left to deduct. No child credit? Hey, they're (hopefully) out of the house. Boosting the retirement age for Social Security to age 69 by 2075? The Boomers will be dead then. Gradually hiking the federal gas tax by 15¢ per gallon from its current 18.4¢ starting in 2013? Aging Boomers won't be driving much in their dotage. End the employee-sponsored health-benefit exclusion from income taxes? Boomers will be on Medicare.

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Bowles and Simpson, long-time political operators, have much of official Washington in a frenzy. They've made it clear that bringing the budget into balance and the debt under control mean abandoning cherished positions.

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Bowles and Simpson have attracted their share of fear and loathing. For instance, Americans for Tax Reform, the antitax advocacy organization headed by Grover Norquist, blasted the Bowles-Simpson plan. The government would be still "spending too much" and the panel ignored how to balance the budget "without raising taxes," it said. The group pointedly reminded more than 235 congressmen and 41 senators that supporting the plan would violate a no-tax-increase pledge that they made to their constituents. Richard Trumka, president of the AFL-CIO, said the co-chairs' scheme for fiscal balance "tells working Americans to 'Drop Dead.'"

The anxious rush to defend familiar positions is why the nation owes Bowles and Simpson a big "thank you." The report has made it clear just how daunting a fiscal challenge the U.S. faces. Anger doesn't cut it, let alone business as usual. "There is no way to get on top of the debt and the deficit with policy changes that are easy or fun," MacGuineas says. "This is about the hard stuff." Adds Leonard Burman, professor of public affairs at the Maxwell School, Syracuse University: "They did a real service. What they came out with is unpalatable to everyone, and now people can get serious negotiating."

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The scale of the national debt and budget deficit is well known ... In one of its scenarios, the Congressional Budget Office assumes that the Bush tax cuts are permanent, the alternative minimum tax patch is lasting, and health-care costs rise at close to their historic levels. The national debt explodes to 100 percent of GDP by 2023 and 200 percent of GDP by 2038—a mere 13 and 28 years, respectively, from now.

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Odds are that the Bowles-Simpson preliminary plans will go the way of most blue-chip panel studies: Directly into the dustbin of history. Washington is gridlocked, especially since the Nov. 2 midterm elections. The nation's political class is mired in a giant game of chicken. Everyone knows a deal has to be struck eventually. But the players don't want to cede anything too soon. "You're a fool and weak if you're the first to give in on the things you care about," says Daniel Shaviro, professor of taxation at New York University. "But on the other hand, if you don't give, nothing gets done."

http://www.businessweek.com/investor/content/nov2010/pi20101112_509030.htm