The deficit reduction plan of the so-called ‘Gang of Six’

Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), issued a statement on the latest budget plan that Obama seems to be enthused about, although there is still some confusion about what the plan calls for since it is still in outline form. Baker’s statement is worth reading in full but here is his conclusion:

The budget plan produced by the Senate’s “Gang of Six” offers the promise of huge tax breaks for some of the wealthiest people in the country, while lowering Social Security benefits for retirees and the disabled.

It is striking that the Gang of Six chose to respond to the crisis created by the collapse of the housing bubble by developing a plan that will give even more money to top Wall Street executives and traders.

Obama seems to be actually proud that he is going along with the long-sought-after dream of the oligarchy to cut the safety net of older and poor people, saying that the plan is ‘broadly consistent’ with what he has been advocating, adding that “We have a Democratic President and administration that is prepared to sign a tough package that includes both spending cuts, modifications to Social Security, Medicaid and Medicare that would strengthen those systems and allow them to move forward, and would include a revenue component.”

The wingnuts seem to be mobilizing against the plan too so it may not go anywhere.


  1. Steve LaBonne says

    Obama seems determined to make it impossible for a lot of us to vote for him no matter who his opponent is. It’s sad, and infuriating.

  2. says

    The Gang’s Plan includes a typical Washington gimmick that will have a disproportionate impact on the poor and middle class. The consumer price index (CPI) has hitherto been based on prices of a defined basket of goods. That would be changed to something called a chained CPI, which forgoes the basket in favor of actual consumer purchases.

    What’s the difference? If consumers, feeling the pinch, substitute a cheaper item for something they used to buy, like a cheaper cut of meat, their spending will decline. This would be reflected in the chained CPI as downward pressure on consumer prices. It is this perverse version of the CPI that would be used not just as the basis of any annual increases in Social Security benefits, but also as the annual adjustment to the threshold between tax brackets and the phase-out point for numerous credits and deductions in the tax code.

    Thus, over the long haul, middle class benefits will decline relative to actual living costs, and lower-rate taxpayers will find themselves subject to bracket-creep and diminished credits.

    Republicans are very fond of the “boiled frog” analogy, likening the alleged advance of socialism to an imperceptibly slow increase in the temperature of the water in which the frog swims until boiled alive. Seldom do we see this analogy used against Republicans, but the chained CPI is a classic example of a slow, imperceptible, but ultimately deadly assault on the middle class.

    A modest transaction tax on derivatives trades would achieve far more in deficit reduction without these distributive consequences, yet such a rational policy will never make it to the floor of either chamber, not even as a “get it off your chest” symbolic vote for the left -- a Democratic mirror to the ridiculous Cut, Cap, and Balance bill.

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