With 10 days to go until the dreaded sequester—the automatic across-the-board spending cuts that most lawmakers profess to hate—the Washington drama machine is starting to get in gear. Today, President Obama stood in front a group of uniformed first responders and warned darkly of layoffs if the spending cuts kick in.
Simpson and Bowles, who chaired a 2010 White House deficit reduction panel, presented a broad frameworkaimed at reducing the debt to “below” 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 about 73 percent of GDP, which is what it is today. Many Republicans and other deficit hawks are shooting for about 60 percent, which was the upper bound of member state deficits set by the creators of the Eurozone (not that it’s done them much good). For context, the Congressional Budget Office figures that under the most likely fiscal scenario, the debt will approach 90 percent of GDP by 2022.
While Simpsons and Bowles offered few details today, their framework seems a plausible alternative to the game of sequester-and-gridlock, or what Obama calls “another manufactured crisis every three months.” 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 they’d cut about $1.9 trillion from CBO’s current law projections and about $4.4 trillion from CBO’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 $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. They’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 won’t gear up for at least another week. And it isn’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 budget could well end up looking something like what the two men proposed today.
(Full disclosure: Bowles is a member of the Board of Trustees of the Urban Institute, which is a parent of the Tax Policy Center).