Erskine Bowles and Alan Simpson have just released an updated version of their two year old plan to bring our national debt under control. The new plan is called A Bipartisan Path Forward to Securing America’s Future. It is very worthwhile to compare their new plan with a recent Report from the Congressional Budget Office.
Bowles and Simpson propose additional deficit reduction of $2.4 trillion over 10 years (which includes the $1.1 trillion in the sequester cuts currently scheduled to take effect on March 1, 2013). This would have the effect of reducing the national debt from its current level of 76% of GDP in 2013 to 73% in ten years. The CBO report presents three different scenarios. Their middle route would require an additional $2 trillion in deficit reduction over and above current law (i.e. assuming that the $1.1 trillion in sequester spending cuts will take place as scheduled). This CBO middle route would reduce the Debt/GDP ratio to 67% by 2023.
In other words, for an additional deficit reduction of $700 billion over ten years, we’ll get an additional 6% of Debt/GDP reduction. These numbers have huge practical significance. Simpson-Bowles says that we need an additional $1.3 trillion in deficit reduction over and above the sequester cuts, which presumably will soon be enacted, just to stabilize the national debt over a ten year period at the historically very high level of 73% of GDP. That’s $130 billion a year for ten years. Many people are complaining about the approximately 5% cuts in discretionary spending which will be required by the sequester. But just to stabilize, not really shrink, the Debt/GDP ratio over ten years will require more than twice as much deficit reduction as the sequester.
To even mildly shrink the Debt/GDP ratio to 67% by 2023 will require yet an additional deficit reduction of $70 billion per year. In other words, we will essentially have to triple the size of the sequester effect in order to achieve real debt reduction over ten years. And all of this assumes favorable economic conditions such as steady growth and continued low inflation.
Do our national leaders have the will to do what should be easily understood as needed by anyone looking at the numbers with any degree of objectivity? Let’s hope so because the future of our country depends on it!
It Does Not Add Up 
Are you looking at the numbers objectively?
Simpson-Bowles II contains less revenue than the original, but more spending cuts and still proposes budget-busting tax cuts. Just standard conservative boiler plate that’s been debunked again and again and again.
And the details of the plan have not even been released yet, so really no one can be looking at it at all, objectively or otherwise.
http://economistsview.typepad.com/economistsview/2013/02/how-do-bs-tax-cuts-help-with-deficit-reduction.html
http://jaredbernsteinblog.com/three-reactions-to-the-new-simpson-bowles-deficit-reduction-plan/
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/19/what-you-need-to-know-about-the-new-simpson-bowles-plan/?hpid=z5
Postulating the size of the cuts does not solve the problem. The hard part is where the cuts are to be made. When the choice boils down to your special interests versus mine, we have ample evidence that the beneficiaries of special interests will fight tooth and nail to protect their special interests. Solving both the short-term and long-term deficits will require a philosophical shift based on eliminating special interests across the board. While I am for eliminating taxation loop holes as a starter, keep in mind that history tells us that revenue increases will not result in smaller deficits but rather in more revenue to be doled out to special interests and entitlements in particular if bleeding heart modern liberals get their way. Furthermore, sticking it to the rich via solely relying on eliminating tax loopholes will also result in less for the rich to invest in expanding the economy with the obvious consequence of less economic growth. We desperately need an approach that gets the the heart of the matter, namely addressing all preferences including entitlements. Only by reducing and eventually eliminating preferences and entitlements will we avoid the plight of Europe with their bloated public sectors and out-of-control entitlements that they can no longer afford.
I agree that it would be best to eliminate all tax preferences but this will be very difficult, essentially impossible, to accomplish. Therefore limiting the amount of tax deductions which an individual can take, such as Romney proposed, would be a more feasible way to begin. As for eliminating entitlements, such as social security and medicare, ouch! Again, it will be a huge challenge just to get the rapidly increasing costs of these programs under control. But we have to do it, so let’s get started!
I can’t believe our national leaders will allow the spending cuts to go through. In January, they had a chance to force Obama to make rational decisions and to force cuts, but they buckled. So, I predict that the politicians will find some screwy reason to buckle again. It will go down something like this: first the politicians will put on a look of being labored and tough. They’ll probably have sound bites of regret deep show concern by staring off into space. The stock market will drop a few hundred points. They’ll be crying and sobbing speeches. The stock market will drop again. Finally they’ll announce us they just couldn’t stand it anymore and those squid-like spineless politicians will run out of committee and vote money to relieve the economy and facilitate Obama’s dream, a republican nightmare. Video of skinny mothers with children gratefully thanking government workers for handouts will play over and over on CNN and NBC. Obama will be declared as the savior of the poor.
I hope I am wrong, but I just don’t see it with the current crop of politicos. H. L. Mencken once said the only way to look a a politician was down upon him. I guess we’ll get a measure of whether he was right or wrong in the next few weeks.
My point in the above post is that we now have two serious plans on the table for dealing with our ballooning national debt. They differ slightly but are consistent with each other and this lends credibility to each.
I’m more optimistic than Pierce is that something will get done; I just hope that it is enough to do more than just stabilize the Debt/GDP ratio at its currently very high level of 76%. The House Republicans are doing a lot but they can’t get the job done by themselves. There are plenty of Democrats in Congress who are fiscal conservatives and understand the mess we’re in but they’re not asserting themselves by bucking their liberal leaders. Let’s hope that they start to challenge them on fiscal and economic issues real soon!
I know you support broadening the base by and closing loopholes, but what *specifically* would you cut in order to achieve more than *twice* the savings of the (already pretty draconian) sequester? And do you have data on what those kinds of cuts would do to growth?
Even if you don’t support them, do you know how much taxes would have to be raised to achieve the same amount of deficit reduction? If so do you know what the effect of those would be on growth?
Republicans *always* talk in the abstract about cuts but will never, never, never say what they would be. They also never consider tax increases because they say it would be counter-productive. But there are few studies that support that view and many that say it wouldn’t hurt growth nearly as much as cuts would.
How about you?
First of all, the looming sequester cuts amount to about 5% of current discetionary spending and so are hardly “draconian”. Secondly, I agree with many commentators that it should should not be a huge challenge for Repulicans and Democrats to get together and agree to give the Executive Branch the authority to decide which specific cuts would be less damaging than others, as long as the overall amount of cuts remains the same. In fact the House has already passed two bills along this line which have so far been ignored by the Senate.
As important as the details are, on how to shrink the deficit, with what combination of spending cuts and increases in revenue, and precisely how to identify the specific cuts and revenue enhancements, the biggest problem by far is how to mobilize the public support which will be needed to get this job done. The challenge is to get more people to accept the fact that we’re living beyond our means and must cut back. And then to understand that everyone has to be part of the solution, not just someone else.
This also means that neither party can dictate the specific measures to get the job done and so it must be a joint effort to figure it out. In this respect it is more fruitful to suggest directions to proceed in rather than to get bogged down in the details. The details are far less important than the absolute imperative to move things in the right direction towards a real solution.
Just as I suspected. You’re just giving a bunch of political-speak that deftly avoids the question and instead serves up platitudes. That’s why neither of the two plans that you say are “serious” are even close to serious. They just talk about hypothetical cuts with no specifics. Unless you actually put pencil to paper and come up with a fully specified plan that actually adds up, it’s not serious.
Not one single Republican will spell out what they would cut and how much savings there would be. Not Simpson-Bowles (at least not yet, anyway), not the CBO study you cite (they just talk about hypothetical cuts of various amounts), not Paul Ryan (his plan could not be scored by the CBO because none of the loopholes to be closed were specified), and not you. It’s always “the details will come later,” or “the details will have to be negotiated,” or “it’s important to take a first step,” or “we need to start moving in the right direction.”
And that’s because they know that those cuts won’t be popular or painless. So they’re hiding the details just like any snake-oil salesman would. YOu can’t let people know that the “wonder-medicine” you’re hawking is just a bottle of tap water!
Your statement that “the details are far less important than the absolute imperative to move things in the right direction towards a real solution” is 100% wrong. The devil is *always* in the details, and I think the Republicans know it. There’s really no other reason to be hiding the details as fastidiously as they do. And I believe that *that* is the reason the Republicans are having so much trouble getting people on board with their plans.
People aren’t that stupid– they’re not going to buy a pig in a poke knowing that these plans (and the politicians that create them) are bought and paid for by the super-wealthy and that they’re going to get clobbered by them while the rich are excused form any suffering (for the good of the country, you know!).
Anyone that truly had a serious plan would have no problem laying it out. I certainly could. I really don’t think you can.
No two people are going to agree on what spending cuts to make or what tax deductions to eliminate. What we need is a mechanism which forces all sides to come together and hammer out an agreement one way or the other. The sequester is such an example. Is it too rigid? Of course, so then make it more flexible! As Simpson-Bowles and the new CBO Report show, the sequester is not nearly enough. We need a triple sequester to begin to decrease the size of the Debt/GDP ratio. This constitutes a framework to understand the scope of what needs to be done.