Tuesday, February 19, 2013

Simpson-Bowles 2.0 and Its Sacred Cows

—By Kevin Drum
| Tue Feb. 19, 2013 10:45 AM PST

All morning I've been trying to decide whether I should care about the release of Simpson-Bowles 2.0. As you can guess from its name, this is yet another plan for deficit reduction from the folks who failed to get bipartisan agreement for their first plan.

So in one sense: who cares? Deficit reduction plans are a dime a dozen. There's really nothing special about releasing a fact sheet with a bunch of numbers that add up to some other number. Anyone can do that.

On the other hand: for some reason, Simpson and Bowles get more media attention for their deficit reduction plans than most other people. So I guess we have to take it seriously whether we want to or not.

So far, though, that's not really possible. There's literally no detail in the summary they released today, so there's nothing much to praise or complain about. I'm happy to see them agree that deficit reduction should be done slowly. I'm happy to see them agree that low-income workers and retirees should be protected from benefit cuts. I'm happy to see them agree that the federal tax code should remain at least as progressive as it is now. I'm happy to see them focus on healthcare costs, which really are the driver of most of our future budget problems. And I'm happy to see them name check 


farm subsidies and highway funding. But without details, it's impossible to say anything further.

Except for one wee thing. Ezra Klein, bless his heart, managed to figure out the ratio of spending cuts to tax increases (it's buried on page 3, in the phrase "and another quarter from tax reform") and then compare it to Simpson-Bowles 1.0. And guess what? Despite their brave talk about both sides needing to "put their sacred cows on the table," they've apparently decided that conservatives should put a whole lot fewer of their sacred cows on the table than they suggested in their first plan. The chart on the right tells the story. In SB 1.0, deficit reduction was moderately evenly divided between spending cuts and tax increases. In SB 2.0, they've suddenly decided it should be 75 percent spending cuts. That's despite the fact that spending cuts have already been 75 percent of the deficit reduction we've done so far.

Why? Beats me. I guess they figure that conservative sacred cows are a little more sacred than liberal ones. Or something. But even if you take deficit reduction seriously in the first place, this sure makes it hard to take Simpson-Bowles 2.0 seriously as a plan.

UPDATE: Ezra made a correction to the chart, so I've updated the post to reflect that. The new chart shows the spending cuts in SB 1.0 more accurately. When you account for interest savings, they amount to $3.8 trillion, not $2.9 trillion.

Deficit hawks Simpson and Bowles: Skirt the sequester
Susan Davis, USA TODAY12:08p.m. EST February 19, 2013

Congress faces a March 1 deadline to find an alternative to $85 billion in automatic spending cuts from defense and social programs.

  • Former co-chairs of President Obama's debt commission pitch another way to curb the debt
  • Their new proposal would reduce debt by $2.4 trillion over the next decade
  • Sequester starting March 1 threatens to slow economic growth and cost jobs

WASHINGTON — Congress must replace upcoming "dumb" across-the-board budget cuts with targeted spending cuts and program changes to help tackle the nation's growing $16.4 trillion debt without restricting economic growth, the former co-chairs of President Obama's debt commission said Tuesday.

Erskine Bowles, Bill Clinton's former chief of staff, and former senator Alan Simpson, a Republican from Wyoming, appeared at a Washington breakfast hosted by Politico on Tuesday to unveil a new proposal for deficit reduction to the tune of $2.4 trillion over the next decade.

The president's 2010 fiscal commission recommended $4 trillion in deficit reduction over the next decade, but it fell flat in Congress. However, Washington has separately passed as much as $2.7 trillion in deficit reduction measures in the previous two years.

The looming cuts, called a "sequester," will cut defense and social programs across the board starting March 1 — a consequence that threatens to slow economic growth and cost jobs. There is widespread agreement that the cuts will impact the nation's security as well as programs that help the most vulnerable Americans, but there is no consensus on how to replace the cuts with more targeted reductions and reforms.

At the White House Tuesday, Obama used the bully pulpit to pressure Congress to act to avoid the cuts. He placed the blame squarely on Republicans for opposing using any new revenues to replace the sequester "just because you want to protect a special tax interest loophole that the vast majority of Americans don't benefit from. That's the choice. That's the question," Obama said.

STORY: Obama says 'meat cleaver' cuts will hurt economy

Senate Democrats will vote next week on their proposal to replace the sequester with a combination of new revenues from higher taxes on the wealthy and savings from ending the wars in Iraq and Afghanistan and cutting some government subsidies. Senate Republicans oppose the plan and say it stands no chance of passage in the GOP-controlled House.

House Republicans have previously approved legislation to replace the sequester with alternative spending cuts, but that bill expired at the end of the 112th Congress in January and they have not offered any new legislation. Republicans oppose raising any new taxes after the year-end "fiscal cliff" deal that secured $620 billion in new revenues by allowing tax cuts to expire for wealthy Americans.

A spokesman for House Speaker John Boehner, R-Ohio, said it was "patently false" that Republicans don't want to close tax loopholes, the two parties just differ on what to do with the revenue it raises.

"We view tax reform as an opportunity to make America more competitive and encourage private sector job creation. The president sees tax reform as an opportunity to raise revenue to fund more government," said Brendan Buck.

The two parties are also arguing over who is to blame for the sequester.

The cuts were included as a failsafe in a 2011 budget law forged by Republicans who used the threat of a default to pass a bill to shrink the size of the federal government. The across-the-board cuts were included as a worst-case option that would take effect if Congress didn't adopt a better plan. The White House initially proposed the sequester and Republicans supported it, but at the time both parties did not believe the sequester would actually occur. "This was all designed to say, 'We can't do these bad cuts, let's do something smarter,'" Obama said Tuesday.

In their new plan, Bowles and Simpson propose replacing the sequester with targeted cuts and overhauls that won't disrupt economic growth. The sequester cuts $1.2 trillion indiscriminately over the next decade, with $85 billion in cuts that will kick in March 1 through the end of the fiscal year on Sept. 30.

Bowles conceded to reporters that Congress is likely to miss the March 1 deadline and only when the public starts to feel the effect of the spending cuts will Congress feel pressure to act. "When you guys have to go out here to Reagan airport and you have to wait three hours to go through airport security, you are going to be pissed, and so is everyone else," he said, referencing how the cuts could impact the number of Transportation Security Administration employees at the nation's airports.

In their proposal, Simpson and Bowles caution against sharp austerity measures and oppose cutting low-income programs for the purpose of deficit reduction — two arguments promoted by Democrats. There are also policy proposals that will find support among Republicans, such as calls for entitlement reform, spending limits and overhauling the tax code, including lowering the marginal tax rates for individuals and corporations.

The proposal also calls for indexing the nation's borrowing authority, the debt limit, to the rate of growth once a deficit reduction plan is enacted to forever remove the threat of default due to political fights in Washington. They also endorse using a stingier method called "chained CPI" to calculate Social Security benefits.

The deficit hawks were clear-eyed that their proposal faces long odds for enactment. "Just the idea of a 'Grand Bargain' is at best on life support," said Bowles. "We'll just keep at it," added Simpson.

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