Revamped Simpson-Bowles Plan Shows A Path To U.S. Deficit Deal

Published Apr 25, 2013. By John Shaw.

WASHINGTON (MNI) - Of the many things that could be said about the fiscal policy aspirations of former senator Alan Simpson and former White House chief of staff Erskine Bowles, perhaps the most obvious is that they have been persistent in their call for a significant deficit deal.

Since coming together as co-chairmen of President Barack Obama's National Fiscal Commission in 2010 and offering a more than $4 trillion deficit reduction plan over a decade, Simpson and Bowles have been traveling the lecture and conference circuit, pleading with policymakers to do a deficit deal.

Bowing to political reality, Simpson and Bowles released a revised fiscal plan last week that is less ambitious than their previous proposals, but builds on the 2011 debt ceiling agreement and the fiscal cliff talks last year between Obama and House Speaker John Boehner.

The plan that Simpson and Bowles propose achieves $2.1 trillion in additional deficit reduction over a decade.

It identifies $585 billion in health care savings, $385 billion in discretionary savings, $330 billion by adopting the chained CPI and other general government savings, and $265 billion in other entitlement savings. The new Simpson-Bowles plan also seeks $585 billion in additional revenues generated by tax reform.

They say this $2.1 trillion in savings would provide $350 billion in debt service savings, making the full savings of their package about $2.5 trillion.

Their plan calls for locking-in these savings by December of this year and then setting up a "parallel process" to reform Social Security, transportation funding, and health care programs.

"The plan we have put forward is not our ideal plan, it is not the perfect plan, and it is certainly not the only plan. It is an effort to show both sides that a deal is possible; a deal where neither side compromises their principles but instead relies on principled compromise," Simpson and Bowles write in their new report.

"Such a deal would invigorate our economy and demonstrate to the public that Washington can solve problems, and leave a better future for our grandchildren," they add.

The new Simpson-Bowles package has been praised in the think tank world.

"This is a credible, responsible and comprehensive framework for addressing the nation's growing debt burden, which will reach unsustainable levels if no action is taken," Bob Bixby, executive direction of the Concord Coalition, said in a statement.

"It cuts through partisan rhetoric and confronts the hard trade-offs that must be made between spending, taxes and debt. For those who are afraid to 'go first,' it offers a way forward," Bixby said.

The Committee for a Responsible Federal Budget said in a blog that the new Simpson-Bowles plan "builds off of the White House and House Republican offers in the fiscal cliff negotiations, but pushes both sides to compromise further to achieved the needed additional deficit reduction."

Democratic senator Chuck Schumer and Republican senator John McCain said Thursday at a breakfast hosted by the Christian Science Monitor they see a flicker of hope on the fiscal front, building on the bipartisan cooperation that has occurred on immigration reform in the Senate.

"There is every opportunity....for a Grand Bargain," McCain said.

The seemingly endless fiscal battles between Obama and congressional Republicans have largely paused, but seem poised to resume this summer as Congress and the White House move toward another debate over the debt ceiling.

Boehner continues to say he will require spending cuts as large as the size of any debt ceiling increase. And at a recent briefing, Boehner vowed to keep fiscal issues in sharp focus.

"I would argue that one of the biggest challenges facing us is our long-term structural debt problem that's going to imprison the future for our kids and our grandkids. It's hurting the economy today, hurting the ability of people to get jobs, holding down wages. There are a lot of things that we need to do--we need to deal with and we're going to hopefully deal with all of them," he said.

--MNI Washington Bureau; tel: +1 202-371-2121; email: [email protected]