The Fiscal Commission Co-Chairs' Draft is released

Earlier today, the co-chairs of the Fiscal Commission released draft recommendations, which were soundly panned by activists on both sides (which is not unexpected). Every ox was gored by this proposal, from the anti-taxers to the defenders of Social Security. Whether this proposal is Dead on Arrival depends on several factors:

- How China and other bondholding nations respond to continued gridlock. If bond prices crash and people dump our debt or our dollars, something will likely be done fairly quickly.

- How much these proposals are the result of staff analysis vs. how much they are the result of Commission working groups. If these proposals bubbled up from the bottom, they might not be as dead as people think.

- Whether the Lame Duck Session passes the $3 Trillion middle class tax cut (the $700 Billion cut on the wealthy is a Republican Party fantasy for which the votes don't exist, even for a temporary extension). If the tax cuts are extended, some portion of the Commission's recommendations must be adopted to avoid another world-wide financial panic. If gridlock reigns in the Lame Duck session, it will certainly reign in the next Congress and no tax cut will be forthcoming - so the Commission's recommendations can safely die.

The next posting will address how these cuts relate to the recommendations of the Center for Fiscal Equity.