My take on the debt commission is provisionally favorable, while Paul Krugman's take is unremittingly hostile. That's kind of interesting, because I generally agree with Krugman about economic policy. What, then, is the source of our disagreement? Let me go through a couple points in his column.
First, Krugman objects to the revenue cap and the cap on health care spending:
Start with the declaration of “Our Guiding Principles and Values.” Among them is, “Cap revenue at or below 21% of G.D.P.” This is a guiding principle? And why is a commission charged with finding every possible route to a balanced budget setting an upper (but not lower) limit on revenue?...
it becomes clear, once you spend a little time trying to figure out what’s going on, that the main driver of those pretty charts is the assumption that the rate of growth in health-care costs will slow dramatically. And how is this to be achieved? By “establishing a process to regularly evaluate cost growth” and taking “additional steps as needed.” What does that mean? I have no idea.
I find these two provisions vague, bordering on meaningless. With no enforcement mechanism, what does it mean? Very little. In theory, the commission could add some kind of triggering mechanism to make the cap powerful, at which point you have to vote the thing down. That seems unlikely anyway.
Second, Krugman sees the tax provisions as a sop to the rich:
Actually, though, what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.
It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans.
I have to admit I have no idea if he's right. Nobody has crunched the numbers yet. I think most liberals have the mental model of the 1986 Tax Reform Act, which lowered rates dramatically but still (slightly) increased the effective burden on the rich by closing loopholes, including preferential treatment for income from capital gains. The commission's plan does close those loopholes, but we don't know if the rate cuts are so low that they cancel out the distributional impact. It's actually a pretty interesting black box, with some liberals assuming the tax provisions are progressive and others assuming the opposite.
I've assumed the opposite because I've assumed the commission understands that any tax plan that shifts the tax burden downward is a dead letter. But that is a crucial piece of the puzzle that we'll have to wait on.