Fiscal Commission Analysis: Progressive Cost Savings, Carbon Tax, and Streamlined Government

Today's part will conclude the series on the Fiscal Commission Co-Chair's proposal.  I have already discussed tax reform proposals and their proposed health care and social security changes.  Today, I will focus on the cost savings in other parts of the budget proposed by the Co-Chairs.  These are reforms being proposed that are among the things that fiscal progressives have been hammering on for a long time, including cutting defense spending, instituting biennial budgeting, and reducing big agribusiness subsidies.

Let's go through the main reforms and discuss them seriously.

Reduce Defense Spending

I wrote in September about Secretary Gates' initiative to cut Defense contracting by $100 billion in five years.  The Fiscal Commission Chairs' proposal not only doubles down on that initiative, it aims to cut Defense spending by $100 billion per year by 2015.  Not only that, it does so while doing these other things:
  • Reduces overseas military bases by one-third.
  • Doubles Sec. Gates' cuts in defense contracting
  • Cuts the weapons research and testing budget by 10%.
  • Cuts procurement by 15%.
We have been clamoring to reduce the Defense budget and at the same time, reduce American military presence overseas.  The chairs' proposal does both.  It takes a swipe at the arms race, by cutting down on new weapons research and cutting procurement.  I should note here that procurement reform has been an important issue for Speaker Pelosi, and President Obama already signed a bill on the subject.

The Chairs' illustrative defense cuts also include a freeze on compensation of Defense department employees and freezing the non-combat pay at 2011 levels for three years, however, it also recognizes the sacrifices being made by those who are actually serving on the battle field, and does not propose a freeze on combat pay.

Reducing Agribusiness Subsidies

No matter how much Congressional Republicans like to tout fiscal responsibility (their record of the past decade notwithstanding), Representatives and Senators beholden to the big Agrabusiness lobby have proven unlikely to attack Farm subsidies.  The Chairs' proposal cuts farm subsidies.
Reduce farm subsidies by $3 billion per year by reducing direct payments and other subsidies, Conservation Security Program funding, and funding for the Market Access Program.
It's important to note where the cuts are being proposed: direct payments and the Market Access program, specifically.  Direct payments are about a total of $5 billion a year (out of about $15 billion in total farm subsidies), and given that the cuts being proposed are substantial.  The Market Access Program is basically a cheap loan program so to help agribusiness, you know, advertise.  Seriously.  If there is a progressive reason why we should not cut direct payments and advertising subsidies to big agribusiness, I don't know it.

A Price on Carbon

The co-chairs' proposal also has this idea that gas taxes should fund the transportation trust fund.  To fulfill that, it raises the gas tax by gradually, beginning in 2015, by 15 cents.  This is a good, progressive idea for two reasons: first, it fully funds the transportation trust fund, thus eliminating it from being subjected to Congressional pie-division and allowing infrastructure development projects to move more freely.  That not only means a better infrastructure for our country but also more jobs in construction.

Second, a gas tax is, in essence, a price on carbon.  A carbon tax has been advocated by environmentalists and clean energy advocates, and for good reason.  Not only will a higher gas tax fund transportation projects and invest in our economy and jobs, it will also provide an incentive for consumers (and businesses) to switch to hybrid vehicles, enact more conservation measures and help us move away from fossil fuels.

Streamlining Government

The proposal also eliminates 250,000 non-defense contractors.  Somewhat more controversial savings come from freezing federal civilian compensation for three years, cutting the federal workforce by 10% (not by directly laying people off but by slowing the replacement rate to two new workers for every three retired), and requiring federal workers to contribute 1/2 the cost of civil and military retirement (as opposed to the current 1/14th).

Before we go on a big critic spree of this, however, let's remember that streamlining the federal government is an idea implemented successfully during the Clinton years by none other than Vice President Al Gore, who proposed to cut 252,000 government workers by 1998.  There is nothing progressive or liberal about not having the most efficient and streamlined government possible.  To his credit, President Obama has already done what is possible within his power to tighten the belt, freezing high salaries within the White House and raising federal pay by 2%, the smallest since 1975.

There may be a lot of grumbling on pension reform in the federal government, but it is necessary.  Federal employees are good people who work hard, but so are other Americans who do not have the good fortune of working for the federal government.  Not only has the gap between private and public employees in terms of overall compensation widened, overly generous pension plans are already putting state and local governments into jeopardy.  Just this election, in deep blue Silicon Valley and throughout California, voters approved pension reform plans for the city's police and firefighters.  San Jose voters approved an arbitration measure by a two-to-one margin.

Concluding Remarks

Streamlining government and fiscal responsibility are not conservative issues.  It was Howard Dean - no friend of the conservatives - who has said that in the long run, a balanced budget is essential for social justice.  Right now, we have a chance to reduce defense spending, cut agribusiness subsidies, put a price on carbon and streamline government, in addition to progressive tax reforms and starting a serious conversation about bridging the long term gaps in federal health care spending and social security without privatizing either.  Budget reforms are never without pain.  This plan isn't perfect, and there will be additional input.  But this is the first serious plan to address the nation's long term fiscal health, and it actually entails shared sacrifice (sorry, but shared means shared, not borne by any one group alone) while protecting federal benefits for the most needy.  This conversation and action are seriously needed, because without reform, we will be looking at far more pain in the future, and no, we will not solve everything by raising taxes on the rich and reducing the military budget alone.