Here’s why President Barack Obama’s National Commission on Fiscal Responsibility and Reform failed: It never acknowledged that the federal government’s dire economic condition is a product of excessive spending, not inadequate taxation. Co-chairmen Erskine Bowles and former Sen. Alan Simpson have received plaudits for raising vitally important issues that must be confronted, but in the final analysis they failed because their commission came up with a report that only Washington insiders would call “serious.” Their plan would require massive tax increases because it assumes the Bush tax cuts will expire and it eliminates major tax deductions, including the one for mortgage interest payments. It also barely touches Social Security and Medicare spending, reducing them by only $442 billion in the first decade when outlays for the two programs are projected to be $20.2 trillion. In other words, the commission avoided Washington’s carcinogenic addiction to spending by focusing primarily on the revenue side of government fiscal policy — which is to say, taxes.
As Brian Reidl of the Heritage Foundation notes, “despite nearly all long-term deficits arising from soaring spending, the commission report nearly splits the difference between tax hikes and spending reductions in the first decade.” Politicians talk big about the need for “compromise,” but who’s doing most of the compromising when American citizens are told they need to pay more to cover the cost of a reckless political class that seems incapable of doing what needs to be done to boost economic growth? The Department of Labor answered that question Friday, reporting that unemployed Americans made up 9.8 percent of the job market in November.
The problem is that the so-called “higher earners,” who would foot a big part of the bill, include millions of small businesses. In 2008, an estimated 60 million tax returns were filed reporting income from a variety of small businesses, such as sole proprietorships and partnerships, according to Americans for Tax Reform. Three-fourths of those returns come from individuals claiming business income, not corporations, meaning that an increase in taxes on who earn more than $200,000 means an increase in taxes on their businesses. ATR also notes that the Census Bureau “reports that the top three percent of small businesses employ a majority of everyone who works for a small business.” Thus, raising taxes on the most successful small businesses would kill a disproportionate number of jobs.
The Obama-Simpson-Bowles commission has essentially told working Americans that their government is in trouble because they don’t pay high enough taxes. The commission should instead have told Washington politicians they are spending too much. Rep. Jeb Hensarling, R-Texas, said it best: “You cannot change the ruinous spending path of our government if you leave the recently passed health care law virtually untouched and leave out fundamental reform of Medicare. It cannot be done.”