Monday, May 09, 2005

The 1990 bipartisan deficit reduction plan

I was just reading about it today. I remember that conservatives had a huge fit over this plan. It contributed to President Bush's defeat in 1992. But I never knew the specifics of the plan, only the general outlines. And I've found that it really wasn't a bad plan. We could use such a plan today to reduce the deficit. For those who don't know, here were the specifics. I think every one of these could be used today to help bring down the deficit:


Gas tax increased by 10 cents.

Cigarette tax increased by 8 cents.

Liquor taxes raised by a total of $2 billion a year

A new 10% luxury sales tax on cars over $30,000, yachts over $100,000, jewelry over $5000, and furs over $5000.

The wage ceiling on the Medicare tax was raised by

Tax deductions were reduced for the top 2% of households.

Airplane ticket taxes rose by a total of $2 billion a year.

Spending cuts:

Defense reduced by $35 billion a year.

Meidcare payments to hospitals cut by $6 billion a year.

Doubled the deductible that Medicare beneficiaries had to pay.

Doubled Medicare premiums.

Cut farm subsidies by $2.3 billion a year.

All other discretionary domestic programs held to inflation for the following three years.

Total bill:

$134 billion in tax increases over 5 years.
$366 billion in budget savings over 5 years.

I'm not sure what's so bad about this plan, especially considering that Democrats controlled Congress at this point. Yet Bush still managed to make 72% of the deficit reduction come from the spending side! And no income tax rate increases! That's brilliant negotiating considering the circumstances.