Keith Hennessey has two excellent posts on the so-called Gang of Six plan. Whichever side you fall on, they are must-reads. His first post is the best description of the plan that I have seen. It's very detailed, so perhaps it's not for the faint of heart, but it picks out the important issues. His second post is all about why he strongly opposes the plan as "absolutely terrible fiscal policy."
Although I cannot disagree with much of what Hennessey says about what he likes and dislikes about the plan, my inclination is to be in favor of the plan because it is probably the least bad choice from an array of plans that are "terrible fiscal policy." The Ryan plan and the Bowles-Simpson plan are both pretty good fiscal policy, but they are both academic exercises that cannot realistically pass through Congress and be signed by the President. All of the proposals that actually stand a chance of being enacted are terrible fiscal policy. We are not left to choose from among a mix of terrible and good plans, only from an assortment of terrible plans. Some, such as the Gang of Six plan, have elements that can pay big dividends in the future.
The advantage of the Gang of Six plan is that it contains four major structural changes: the technical correction to the CPI, elimination of the Alternative Minimum Tax, repeal of the CLASS Act, and a promise of tax reform that lowers marginal rates and reduces tax deductions. Hennessey's opposition is primarily based on the vague and unbinding nature of the tax reform promises. I agree that it would be much better if this was more binding, but this is something to be fought over in the future. At least the plan puts it on the table. Even if proper tax reform is not enacted right away, this is something that can be done when a more economically literate Senate and President are in place.
I am not among those who think that any change in policy that results in more tax revenue should be labeled a tax increase and, therefore, be dismissed out of hand. Structural improvments like the CPI fix make tax and spending decisions more honest. Under the proper measure of the CPI, income-tax brackets will be adjusted more slowly, resulting in more tax revenue. At the same time, increases in Social Security benefits would no longer rise faster than is warranted by actual cost-of-living changes. If you want tax revenue and/or Social Security benefits to be what they would have been under the existing CPI measure, then put the tax rates and benefit levels to votes. Don't let them be determined by hidden technical details. Obviously, I would like the amount of revenue and spending to be determined by me and me alone. Short of that, however, I want them to be determined by an open and democratic process. I think that much of the trouble that we find ourselves in is due to a terribly structured and undemocratic tax and spending apparatus. Because of this view, I am inclined to jump at chances to reform the apparatus.
Update: Today's Wall Street Journal has an editorial that is along the lines that I have been thinking.