New Bowles-Simpson Fiscal Plan Shows Promise
April 26, 2013
In 2010, President Obama created a fiscal commission to draft a grand debt plan to put the United States on a sustainable long-term fiscal path. The result was the bipartisan Bowles-Simpson plan, which was championed by many but never acted upon. Following up on the hopes of that bipartisan plan, Erskine Bowles and Alan Simpson have released a new deficit reduction plan that could bridge the political divide, says The Hill.
- The new plan has about $800 billion more in spending cuts than President Obama is seeking in his proposed 2014 budget and $1.1 trillion more than Democrats have proposed.
- The new plans calls for $585 billion in tax revenue by eliminating all deductions and only adding the ones that are truly necessary.
- According to projections, the Bowles-Simpson plan will achieve $5.2 trillion in deficit reduction compared to $4.3 trillion in reductions in the Senate-passed and Obama budgets, which both anticipate the revocation of $1.2 trillion in sequester cuts.
- The plan would also reduce the national debt from 78 percent to 69 percent of gross domestic product.
- The House-passed budget authored by Rep. Paul Ryan would reduce the ratio to 55 percent, while the Obama and Senate budgets reduce the ratio to around 70 percent.
The new plan cuts deeper into health care by raising the eligibility age for Medicare, which Obama has firmly opposed.
- The plan also embraces changing the Consumer Price Index, which affects how inflation is calculated and would raise $280 billion.
- The plan also gets $265 billion from other mandatory programs, including $40 billion from farm programs, $585 billion from health care, $220 billion from defense and $165 billion from non-defense discretionary funding after stopping the sequester.
To address the problems of raising the debt ceiling, the plan suggests indexing the debt ceiling so that it only needs to be raised if the size of the debt relative to the economy is not declining. The plan also seeks to cut Medicare spending on prescription drugs but leaves Medicaid largely untouched.
Source: Erik Wasson and Sam Baker, "Bowles, Simpson Release New Debt Plan," The Hill, April 18, 2013.
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