The new Simpson-Bowles plan adds an additional $2.4 trillion in savings onto the approximately $2.4 trillion in deficit reduction the United States has already carried out since 2010. Roughly three-fourths of that new $2.4 trillion would come from spending cuts and savings on interest payments:
The outline below is not meant as a revision to the original Fiscal Commission plan, but rather builds upon where elected leaders were in their negotiations last year. […]
[W]e call for an additional $2.4 trillion of deficit reduction over the next ten years. Roughly one quarter of those savings should come from health care reforms and another quarter from tax reform. The remaining savings should come from a combination of mandatory spending cuts, stronger discretionary caps, cross-cutting changes such as adopting the chained CPI for inflation-indexed provisions in the budget, and lower interest payments. This $2.4 trillion should exclude savings from policies such as the war drawdown.
There’s a very simple problem with Simpson and Bowles’ latest proposal: It represents a massive shift away from their own previous target and towards even more spending cuts.
As the Center On Budget and Policy Priorities previously laid out, the original 2010 Simpson-Bowles plan split its $6.3 trillion in deficit savings between $2.9 trillion in spending cuts, $2.6 trillion in tax revenue, and $800 billion in reduced interest payments on the debt. Since then, the country has passed roughly half of those recommended spending cuts — but less than a quarter of the recommended tax increases, according to recent calculations from the Center for American Progress.
Between the budget deals in the spring of 2011 and the Budget Control Act, which averted the debt ceiling crisis that same year, spending has been cut by $1.5 trillion and interest payments reduced by another $200 billion. Then the American Taxpayer Relief Act, which solved the impasse over the “fiscal cliff,” raised $600 billion in new tax revenue.
So if Simpson-Bowles are interested in “building upon” what lawmakers have already achieved, the logical thing to propose is another $1.4 trillion in spending cuts plus another $2 trillion in additional tax revenue. Or if they’re happy with their new $4.8 trillion target — rather than the original $6.3 trillion — their new proposal should heavily favor tax increases, since deficit reduction so far has favored spending cuts by three to one. Instead, Simpson and Bowles are proposing $1.8 trillion in new spending cuts and reduced interest payments, and only $600 billion in additional revenue.
This continues a trend amongst Republicans and deficit hawks. They’ve consistently treated every new round of deficit reduction as if it exists in a vacuum, throwing the cumulative spending cuts already achieved down the memory hole.
It’s also worth mentioning that their goal of bringing debt below 70 percent of GDP by early next decade is likely major overkill. There is no magic debt-to-GDP ratio at which safety is guaranteed or doom is assured. There’s also plenty of reason to the think America’s debt-to-GDP ratio can be stabilized at well over 70 percent without significant threat to the budget’s fiscal sustainability. The Economic Policy Institute recently calculated that debt stability over the next decade could be achieved with as little as $670 billion in additional deficit reduction — $580 billion in actual policy savings, plus $90 billion in resulting interest savings.