A Fool's View On The Deficit Panel
I thought a few words about today's release of the deficit panel's proposal was in order considering the attention it is getting in the press.
A moment for disclosure: I am a conservative and consider myself a Democrat. Maybe that makes me an oxymoron, maybe it makes me a moderate, in either case I think I view ideas from both sides of the aisle with a fair amount of reason.
With that out of the way lets get on to the real issues. Today's proposal by the deficit panel contains cuts to government jobs, defense spending, eliminate the mortgage deduction and lower taxes for some and tax capital gains the same as income (which Fools may want to pay attention to). And I think it's all great... Why?
Because there is plenty for everyone to scream about. Therefore no one is favored, everyone is punished, we all pay the price to save this great country from... itself. Lets go on to who's complaining and why I don't feel sympathy for them.
Homebuilders: This industry lived on the high hog during the bubble and now that its being cut down to size is complaining about everything. But is there merit to the thought the housing market would tumble if we quit deduction mortgage interest from taxes? That didn't seem to happen in Canada. Buyers may give a little thought to the change but over time prices will adjust, the housing industry will return to normal and the world will go on.
Investors: There could be a lower corporate tax rate to go along with increased capital gains taxes so this hit might not be as hard as initially thought. In either sense I'm OK with it. I don't think it's fair investors get to pay less taxes than working folks and I don't buy the argument that lower capital gains rates spur growth. Did that happen when Bush lowered rates? NO!
Seniors: Cuts to Medicare and Social Security are absolutely necessary and none of the changes sound too crazy to me. As someone far from retirement I never expected the same deal as my grandparents and maybe my parents will get. But that's OK. I would like to see more with Medicare but haven't we seen these cuts coming for years?
This debate will probably rage on longer than necessary but I for one hope they pass quickly. Obama is starting to get out of stimulus mode and into deficit cutting mode (stimulus was necessary when he took office so this will be a key transition for him). With most economic indicators (besides unemployment) giving strong signals the economy can do its part to balance the budget by growing a little more than anyone expects. We aren't quite at a crisis point yet but see Europe get there might give us the kick in the pants we need. Here's to hoping we can work together, share in the sacrifice and get something done in Washington.