Bowles-Simpson II: a new plan to avoid the sequester(Read article summary)
The Bowles-Simpson framework seems a plausible alternative to the current game of sequester-and-gridlock, Gleckman writes.
With 10 days to go until the dreaded sequesterâ€”the automatic across-the-board spending cuts that most lawmakers profess to hateâ€”the Washington drama machine is starting to get in gear. Today, President Obama stood in front a group of uniformed first responders andÂ warned darklyÂ of layoffs if the spending cuts kick in.
Simpson and Bowles, who chaired a 2010 White House deficit reduction panel, presented aÂ broad frameworkaimed at reducing the debt to â€śbelowâ€ť 70 percent of Gross Domestic Product in 10 years. The debt/GDP ratio has become a favorite new target for both Democrats and Republicans though, naturally, they disagree on what it should be.
Many Democrats and some progressives want to aim for aboutÂ 73 percent of GDP, which is what it is today. Many Republicans and other deficit hawks are shooting for aboutÂ 60 percent, which was the upper bound of member state deficits set by the creators of the Eurozone (not that itâ€™s done them much good). For context, the Congressional Budget OfficeÂ figuresÂ that under the most likely fiscal scenario, the debt will approach 90 percent of GDP by 2022. Â Â
While Simpsons and Bowles offeredÂ few details today, their framework seems a plausible alternative to the game of sequester-and-gridlock, or what Obama calls â€śanother manufactured crisis every three months.â€ť Of course, the original Bowles-Simpson deficit plan was also plausible fiscal strategy. And it got no love from either the White House or Capitol Hill until after it died from lack of interest.
Their latest plan(which they say does not replace their original): Get about $2.4 trillion in deficit reduction over the next decade. Of course, every deficit reduction target is hopelessly tangled up in the many baselines that afflict the budget debate. But Bowles and Simpson say theyâ€™d cut about $1.9 trillion from CBOâ€™s current law projections and about $4.4 trillion from CBOâ€™s alternative fiscal scenario.
They get there through about a combined $600 billion in payment reductions and benefit cuts from Medicare and Medicaid, but no fundamental reform of either program; $600 billion from curbing tax preferences; and Â $1.2 trillion from lower caps on military and domestic discretionary spending, adjusting cost-of-living increases for Social Security benefits, and cuts in farm subsidies and other programs. Theyâ€™d give Congress until the end of the year to develop specific tax and spending changes to meet their targets.
Their plan attempts to steer a middle ground between the Obama Administration, which favors much more modest spending cuts, and congressional Republicans, who oppose using any new revenues to cut the deficit.
It is a perfectly reasonable alternative. As both men readily acknowledge, people will fight over the details and surely argue whether their debt/GDP ratio is the right goal. But that exercise is, or at least used to be, what the legislative process is all about.
What Bowles and Simpson are really saying is Congress and the White House should crawl out of the partisan muck of the manufactured crises Obama was complaining about. A stare-down contest does not substitute for legislating.
It is still early. With a deadline of March 1, the real drama wonâ€™t gear up for at least another week. And it isnâ€™t likely many lawmakers will take up the Bowles and Simpson plan yet. But if Congress and Obama ever decide to actually set serious tax and spending priorities, a consensus budgetÂ could well end up looking something like what the two men proposed today. Â
(Full disclosure: Bowles is a member of the Board of Trustees of the Urban Institute, which is a parent of the Tax Policy Center).