Training the leaders... of tomorrow.

The Bowles-Simpson Plan or “How I Learned to Hate the Deficit…Passionately”

The following is second year MPP student Joseph Berger's response to Sean Aten's blog post on the federal deficit.

The Deficit Commission report is important to coming policy debates because it manages to present a balanced solution to deficit reduction and program maintenance. It is a far cry from being perfect, as Mr. Aten has so pointedly managed to illustrate in his initial submission to our debate. It is, however, much better at addressing these two goals than he let on, and his criticisms of the Plan are not wholly accurate.

Before I address these specifics though, I want to discuss the importance of deficit reduction as a policy goal. Many other solutions besides the Bowles-Simpson Plan suggest more revenue raising solutions than specific budget cuts. On the whole I would agree that revenue raising is the far more important aspect of deficit reduction – in the past decade Congress and the President have created a structural deficit simply by ceasing to raise enough revenue to fund programs. We cannot be a premier world power by raising too little revenue to fund policies even when times are good.

“Structural deficit” is a buzzword, if not a well know or oft repeated buzzword. It describes a situation in which the government is operating on an imperfect financial foundation, even if minor fixes are made and the economy is righted. Much of the current deficit is due to the Recession of 2009-10 and the economic stimulus Congress passed to fight that downturn. Even without these factors, the government will operate with an annual $500 billion deficit. Fighting this deficit ought to be a priority, even if the government ought also to be taking actions to fight the Recession – a much bigger priority. Mr. Aten states that much of the burden of deficit reduction falls on the middle class in the Deficit Commission’s proposal. On this he is correct, but the proposal also offers up such short-term stimulus as a payroll tax holiday to ease the burden on low- and middle-income families.

Is such a holiday enough? No, probably not; but at least the efforts are targeted appropriately and not on tax breaks for the highest incomes. The compromise that continued the Bush Tax Cuts will certainly help many by preventing immediate tax increases and providing continued unemployment benefits to those who cannot earn because they cannot find work. However, continuing these tax cuts for the highest earners  passes up a chance to prevent further deficit by ending a policy that has little to no effect on the economy. Returning those rates to their pre-tax cut levels also would have paid for those unemployment benefits. Instead of showing any signs of future fiscal responsibility, this deal instead signals an effort by Republicans to keep the Bush tax rates at all costs, hardly a compromising attitude.

Balancing Social Security?The Deficit Commission Plan sets forth a plan to balance the Social Security Fund. Mr. Aten objects to this plan because Social Security is fully funded for 27 years and he claims the Deficit Commission needlessly targets benefits for its savings.

While the former point is true, it is hardly comforting. The longer Congress takes to act on rebalancing Social Security the more difficult and drastic the fixes will need to be. Ten years ago far less annual revenue would have been needed to strike the balance in time. Waiting 27 years is asking for a world of fiscal hurt, though I imagine the panic involved could grease political wheels for action. Thus is the sad truth of modern government. Such a situation should not encourage delay – I would rather face a small contribution increase now than a much larger one in 20 years, presumably when I may have more people to support with my income than myself.

In the second case, the Deficit Commission proposes balance by a) raising revenue by increasing the amount of income taxed, not just the rate at which it is taxed; b) raising the retirement age gradually over the next 20 some years; and c) making benefits more progressive. This latter strategy involves cutting benefits (gasp!) for the highest income groups (wait…) and augmenting benefits (what?) for the lowest income elderly (oh, hooray!).  Yes people will need to wait longer to receive benefits; but those who need the most will get the most, more people will pay into the system, and the highest income groups will have plenty of savings thanks to those fancy IRA accounts and a lifetime of work. And if that wasn’t enough, the Commission also recommends that an early retirement age be set for those who cannot work longer.

Medicare Spending Growth?This one, admittedly, I just don’t get. Capping spending is a naïve approach to controlling costs that, literally, could mean life or death. It is possibly the biggest budget gimmick that has ever been fabricated to show lower future spending. Practical means to control health spending exist, and the Affordable Care Act implements an imperfect range of those solutions that we can study. But this…I have never seen any policy that better perceives the government as a sorcerer that can command reality to change as it pleases. It’s that sort of thinking that leads Conservatives into frenzies, gives Liberals delusions, and makes people like me wonder whether God has, finally, abandoned us for more sensible beings.

Why the Deficit Commission Actually Matters?There are certainly plenty of options that the Commission left off the table when it formed its report. This is because it brought people together from across the political spectrum to find a solution that, perhaps, both parties could agree on. That itself was a noble effort, even if the solution it produces is flawed. That, however, will be the case with any proposal put forward in the coming years. Many of them focus either on cutting spending or raising revenues; others are based on particular agendas. All will be viewed with suspicion and doubt by those who advocate for whoever is proposed to shoulder the burden.

Balance is necessary for any reform. This will require everyone to pay a little bit more, not just one group of people. In divided government it is entirely unclear what sort of compromises will be needed to make any reforms, but the products of bipartisan efforts will face better odds of passing. And yet, there may be no compromise that can get the job done.

I find it amusing that America recently gave the House of Representatives back to the Republican Party, which has done so much to create the current structural deficit. They spent 6 years spending for things without even trying to find money (wars, tax cuts) even with unified government. Those tax-and-spend Democrats we gave 4 years to at least try to pay for the spending they enacted with health reform (the stimulus needs to be set aside, because a stimulus is only ever paid for through economic recovery) even if they don’t try too hard. Hopefully they learned their lesson this last election and will never try to pay for anything they ever try to do again. Americans will have none of it.

Rather than debate the merits of a specific plan, I hope that Mr. Aten and I may have a more constructive discussion on how we may confront deficit reduction. While my mustachioed, disco-loving, Marxist opponent will certainly pose a problem for my somewhat more conservative views on the matter, this is what debate is really for: wading through the morass to find some points we can all agree on. 

Comments (Comment Moderation is enabled. Your comment will not appear until approved.)
Some changes are needed to get people back to work and the housing and real estate markets booming again. With any changes or amendments to social security or health care one must be careful not to give away everything and have systems in place that will lead us down the road that France, Italy and Greece find them selves. What ever the changes some one has to pay for it.
# Posted By Megan | 3/5/12 1:28 PM