July 18, 2012
The latest wrinkle in the ongoing drama over the looming “fiscal cliff” has some lawmakers and budget policy experts trying once again to resurrect and rewrite the Bowles Simpson commission deficit reduction plan. Their goal is to provide substantially more in health care savings than the two parties have been able to agree to until now.
The long-heralded blueprint for reducing the deficit by $4 trillion – first unveiled in December 2010 by a presidential commission headed by Democrat Erskine Bowles and Republican Alan Simpson – proposed $341 billion in long-term reforms of Medicare and Medicaid, a relatively modest effort in the face of the nation’s massive health care cost. Last year, lawmakers on both sides of the aisle floated ideas for hundreds of billions of dollars more in health care saving during deficit reduction talks, but couldn’t reach agreement.
Now, more than 40 Senate Democrats and Republicans have met to discuss the feasibility of using many of those ideas to rewrite the Simpson-Bowles plan and have it ready to offer after the election, in a lame duck session, or early next year. That’s when Congress must address a staggering number of budget and tax issues that, if left unresolved, threaten to jar the economy and possibly push the nation back into a recession.
“There’s a very significant effort under way to implement a Bowles-Simpson type of plan,” Senate Budget Committee Chairman Kent Conrad, D-N.D., one of the organizers, told The Fiscal Times on Tuesday. “There are lots of conversations under way about how we get in place a long-term plan to get the country back on track. . . . If you look at where we are, health care is the 800 pound gorilla in terms of the budget of the United States.”
Medicare and Medicaid alone accounted for 23 percent of all federal spending last year, or $835 billion. About 18 percent of GDP now goes to health care, with those costs growing at a rate that most economists say is unsustainable.
Sen. Richard Durbin, D-Ill., another leader of the exploratory effort, said there could be common ground for additional savings in Medicare, the national health care for seniors, “but how you do it makes all the difference.” Durbin stressed that Democrats would not consider a plan authored by House Budget Committee Chairman Paul Ryan, R-Wis., that would privatize Medicare for future beneficiaries by adopting a government-subsidized voucher system.
Amid the political chaos on Capitol Hill as the presidential and congressional election campaigns heat up, the latest effort to breathe life into the Simpson-Bowles plan is the equivalent of lawmakers putting more cards on the table but with no expectation of playing them until after November. Many lawmakers agree that any serious effort to negotiate a comprehensive package now would get caught up in a bitterly fought campaign, with little hope for compromise.
“The last thing I’m going to do is talk publicly about these discussions, because the quickest way to kill any of this is to talk publicly about this before an election,” Conrad explained. “Then people will line up and say, Oh, I’m against that.”
TAX CUTS—ALL OR NOTHING?
All the Bush-era tax cuts are set to expire by the end of the year, but President Obama and the Republicans are at loggerheads over whether to extend them to all Americans, including the wealthiest, as the Republicans insist, or only to individuals making up to $200,000 a year and families earning up to $250,000 a year. Some $1.2 trillion of cuts in defense and domestic programs will automatically begin to take effect in early January under sequestration, unless Congress and the president agree to cancel or blunt them. And Congress and the president could be headed for another showdown over raising the federal debt ceiling late this year, with no indication things would go any better than last summer’s negotiating debacle that nearly triggered the first ever default on U.S. debt.
Federal Reserve Board Chairman Ben Bernanke, the non-partisan Congressional Budget Office and other analysts have warned that the economy would suffer a major setback if these issues are left to fester and the country heads over the “fiscal cliff.” Sen. Patty Murray of Washington State and other senior Democrats stirred the pot this week by declaring they were prepared to weather a fiscal crisis at year’s end unless Republicans drop their opposition to higher taxes for the richest Americans.
“I will not agree to a deal that throws middle class families under the bus and forces them to bear this burden alone,” Murray said in a Monday speech at the Brookings Institution. “Unless Republicans end their commitment to protecting the rich above all else, our country is going to have to face the consequences of Republican intransigence.”
Yesterday, fuming Senate Republicans rushed to microphones at the Capitol to condemn the Democrats for saying they were willing to risking another recession in order to prevail in their fight to raise taxes on wealthy Americans, including many small businessmen who create jobs. “Our Democratic friends are willing to play Russian Roulette with the economy so that they can raise taxes on a million small businesses,” said Senate Republican Leader Mitch McConnell, R-Ky.
As for the emerging effort to revisit the Bowles-Simpson plan, some Republicans said that it would be up to Obama to show leadership on any effort to overhaul major health care programs for elderly and poor Americans and address other fiscal issues. “The person who drove a stake through the heart of Bowles-Simpson was the same man who created it, President Barack Obama,” said Michael Steel, a spokesman for House Speaker John Boehner, R-Ohio. “We need to see some leadership out of the Democrats who run Washington to get anything done at this point.”
Obama never fully embraced the plan because of its unpopularity among liberal Democrats, and neither chamber of Congress could ever muster even a fraction of the votes needed to endorse the approach. Former Sen. Judd Gregg, R-N.H., a one-time Budget Committee chairman, told Congressional Quarterly that the Bowles-Simpson commission “didn’t do anything [of substance] in the Medicare health care area because that was the directive that came from the president.”
“But I think everybody understands you really can’t get there from here without doing something on health care,” Gregg said.
Meanwhile yesterday, Bowles appeared with a group of civic leaders, top CEOs and leading budget experts to announce the launch of The Campaign to Fix the Debt, a nonpartisan coalition to educate the public on government spending and mobilize support for a comprehensive plan to fix the long-term debt and deficits.
"We need our leaders to make these hard choices, these politically difficult choices,” said Bowles, a co-founder of the new group. “I'm confident that if this campaign succeeds in getting politicians to put partisanship aside and pull together, rather than pull apart, that the future of this country is very, very bright.”
"But I'm equally sure that if we continue to kick the can down the road, duck the tough choices, shirk our responsibilities, then America is well on its way to becoming a second rate power,” he added."
Others who took part in the meeting included Dave Cote, Chairman & CEO, Honeywell; Maya MacGuineas, president of the Committee for a Responsible Federal Budget; former Sen. Sam Nunn, D-Ga.,; Pete Peterson, chairman of the Peter G. Peterson Foundation and owner of The Fiscal Times; Steve Rattner, chairman of Willett Advisors; former Pennsylvania governor Ed Rendell; Alice Rivlin, former director of the Office of Management and Budget; Paul Stebbins, executive chairman of World Fuel Services and Robert Zoellick, former president of the World Bank Group.