November 10, 2010
By releasing a bold and far-ranging plan on Wednesday for eliminating nearly $4 trillion of deficit spending in the coming decade, the co-chairmen of the president’s bipartisan fiscal commission appeared to be trying to jump-start the deliberations of a politically divided panel and rally support on Capitol Hill after an election last week in which voters expressed outrage over excessive government spending and debt.
The massive savings proposals offered by Democrat Erskine Bowles and Republican Alan Simpson touched on virtually every sacred cow in the federal budget, from Social Security and Medicare for the elderly, to mortgage interest deductions and other expensive tax breaks long enjoyed by the middle class, to defense contracting and military operations, to the operation of virtually every governmental department and agency in Washington.
The 75 pages of ambitious plans and strategies, posted on the commission’s website with little fanfare, would trim the annual cost of living for Social Security recipients, gradually boost the retirement age to 69, clamp a three-year freeze on the pay of most federal workers, and impose a 10 percent cut in the federal work force. The Bowles-Simpson plan would also increase the gasoline tax by 15 cents a gallon to fund transportation projects, eliminate the perennial shortfall in Medicare payments to physicians by imposing cost-control measures – and even charge an admission fee at Smithsonian Institution museums in Washington and raise fees at national parks.
“We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today,” Bowles and Simpson said in their document. “America cannot be great if we go broke. Our economy will not grow and our country will not be able to compete without a plan to get this crushing debt burden off our back.” None of the proposed changes would take effect before 2012 to avoid undermining the slow economic recovery.
Richard Trumka declared that Bowles and Simpson
“just told working Americans to ‘Drop Dead.’”
But the strategy of abruptly releasing the proposals with little warning may have boomeranged, as House Speaker Nancy Pelosi, D-Calif., dismissed the plan as “simply unacceptable,” and signaled that it was unlikely she would be willing to bring commission recommendations up for a vote in the House before the end of the year.
“Any final proposal from the Commission should do what is right for our children’s and grandchildren’s economic security, as well as for our nation’s fiscal security, and it must do what is right for our seniors, who are counting on the bedrock promises of Social Security and Medicare,” said Pelosi, who is in charge of the House until Republicans take control in January. “And it must strengthen America’s middle-class families – under siege for the last decade, and unable to withstand further encroachment on their economic security.”
Pelosi and Senate Majority Leader Harry Reid, D-Nev., had promised Obama to bring to a vote late this year any recommendations emerging from the commission supported by at least 14 of the 18 members. The Bowles-Simpson proposals have been a part of the wish list of budget reformers and deficit hawks for years, but many of them are politically unfeasible and are anathema to the views of senior citizens’ groups, business and labor organizations, defense contractors, government employees, colleges and students, and the health care industry – many of whom issued strong denunciations Wednesday.
AFL-CIO President Richard Trumka declared that Bowles and Simpson “just told working Americans to ‘Drop Dead,’” adding, “Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare.”
“We’ll both be in a witness protection program
when this is all over, so look us up,” Simpson said.
Barbara B. Kennelly, president of the National Committee to Preserve Social Security & Medicare, complained that the proposal “relies far too heavily on benefit cuts which will hurt millions of Americans,” and that “lowering COLAs, raising the retirement age, and making benefit cuts in Social Security have nothing to do with solving this fiscal crisis.” Bowles and Simpson insisted that the Social Security savings would be dedicated to the solvency of the retirement program, and not reducing the deficits in the overall federal budget.
“We’ll both be in a witness protection program when this is all over, so look us up,” Simpson, a former Wyoming Republican senator, joked with reporters Wednesday. “We’re not asking anybody to vote for this plan – this is a starting point,” added Bowles, a former White House chief of staff during the Clinton administration.
Bowles and Simpson worked quietly with commission staffers during the past month while lawmakers on the panel were back in their home states vigorously campaigning for reelection. A committee source said that the resulting document was originally meant to be circulated among the members when they returned to Washington, but was not intended for public consumption. But at the last moment, Bowles and Simpson decided to make their plan public in order to “get ahead of the message” because “it was going to get leaked anyway,” the source said.
President Obama appointed the 18-member commission in April and ordered it to deliver a package of proposals by Dec. 1 that would balance revenues and spending for everything except interest on the debt by 2015. That would still leave a projected deficit of $571 billion in 2015, according to White House estimates, but it would still require either wrenching cuts in many federal programs or painful tax hikes.
The White House was noncommittal today in responding to the co-chairmen’s proposal, saying that the president will wait until the commission finishes its work before commenting. “He respects the challenging task that the co-Chairs and the commissioners are undertaking and wants to give them space to work on it,” said White House spokesperson Bill Burton. “These ideas, however, are only a step in the process toward coming up with a set of recommendations, and the president looks forward to reviewing their final product early next month.”
Obama and the leaders of the commission have insisted from the start that in order to be successful, every major spending category had to be on the table, and vulnerable to cuts – including politically sensitive entitlement programs like Social Security and Medicare and the raft of tax breaks that drain the Treasury of hundreds of billions of dollars annually. But for months, Democrats have been squeamish about tampering with entitlement programs critical to their political base, and Republicans were adamant that raising taxes was unnecessary in taming the deficit. The commission source said that “conservative members were as uncomfortable with the proposals as liberals” when the plan was unveiled.
Social Security, the income support program for retirees, would be subject to major change, including lower benefits for the wealthiest 50 percent of recipients and a higher retirement age. Under the current law, the retirement age is set to hit 67, but the commission plan would raise it to 68 in 2050 and to 69 by 2075. The early retirement age, when recipients can first make claims for benefits, would remain at 62. Along with reducing retirement benefits, Bowles and Simpson have proposed to ensure Social Security’s long-term solvency by raising the payroll taxes that finance the program. The tax rate would be kept the same, but the amount of income subject to tax would gradually rise from $106,800 this year to about $190,000 in 2020.
The deficit reduction plan outlines a five-step plan for stabilizing the federal debt by 2014, and bringing it down to more historic levels over the next 30 years. This approach includes enacting tough caps on discretionary spending for domestic programs and defense; implementing tax reform to simplify the code and reduce rates; permanently protecting doctors from a sharp scheduled cut in Medicare payments in exchange for other forms of payment reform and cost-sharing; achieving savings from farm subsidies; tightening spending on military and civil service retirement programs, and ensuring Social Security solvency for the next 75 years.
The plan leaves in place much of Obama’s health care reform law, despite GOP calls to dismantle it.
Taken together, the recommendations would be expected to cut the deficit – now regularly exceeding $1 trillion a year – to 2.2 percent of gross domestic product by 2015, or exceeding Obama’s goal of 3 percent of GDP.
Many of the commission members contacted today agreed that the Bowles-Simpson proposals were merely a starting point, with no guarantees that any of the proposals could attract a supermajority of members necessary to pass them along to the president and Congress.
‘I wouldn’t say it’s a good package to end up with,
but it’s certainly a good package to start with,’ Rivlin said.
“It reveals just how difficult it is to put the nation on a sound fiscal course,” said Senate Budget Committee Chairman Kent Conrad, D-N.D., an ardent deficit hawk. “Some of it I agree with; some I strongly disagree with. We will have a chance to offer alternatives as we advance the process.” Sen. Judd Gregg, R-N.H., the ranking member of the Budget Committee, said, “This will not be the final proposal, but it is a significant step down the path of establishing fiscal responsibility.”
Alice Rivlin of the Brookings Institution, a former director of the Congressional Budget Office, described the plan as “a very solid, broad-based set of proposals and a good starting point.”
“I wouldn’t say it’s a good package to end up with, but it’s certainly a good package to start with, and that was all it was intended to be,” Rivlin told The Fiscal Times. “Erskine and Alan worked very hard with a small staff and put together a very broad proposal which actually gets to the goal we’re supposed to get to, and that’s a considerable achievement. This was the first time anyone had anything to chew on.”
One member, Rep. Jan Schakowsky, D-Ill., rejected the proposals out of hand. “This is not a proposal I could support,” she told the Associated Press. “On Medicare and Social Security in particular, there are proposals that I could not support.”
Anti-tax advocate Grover Norquist also rejected the proposal, saying it would be breaking the president’s promise not to raise taxes.
“It is hardly surprising that the Commission, which is stacked in favor of tax hikes, has refused to make its final budget negotiations public,” Norquist said. “The Commission was proposed to give Democrats political cover for the midterm elections, excusing their refusal to pass a budget or stop the deluge of government spending...the Commission’s fiscal façade didn’t fool anyone.”
By contrast, David M. Cote, chairman and chief executive of Honeywell International, a global technology company, applauded the plan and declared, “It’s time for us all to stop arguing for our self-interest and start working together.”
Cote said in an e-mail to Bowles that unless the commission and Congress address the mounting national debt, “How long will foreign countries like China be willing to loan us money? What happens when they decide they don’t want to loan us money anymore? What do we do then?”