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Simpson-Bowles Proposal Doesn’t Put The “End” In Budget Agenda
/ November 23, 2010

As the U.S. national debt approaches 14 trillion (that’s nearly 95% of the U.S. GDP), two politicians have finally made some concrete budget-cutting proposals. The chairmen of Obama’s deficit commission, former Republican senator Alan Simpson of Wyoming and former Clinton Chief of Staff Erskine Bowles, proposed a bi-partisan, compromise budget plan on November 10.

The Simpson-Bowles proposal plans to cut the budget by 200.3 billion by 2015 and reduce the deficit by nearly $4 trillion by 2020, thereby aiming for a budget that is no greater than 21% of the GDP. Although the co-chairs’ budget plan deals with the largest sectors of the federal budget, Social Security and Medicare, the proposal is at best only a suggestion of issues to discuss, for it fails to attack the real root of America’s fiscal problems.

To save on Social Security payments, Simpson and Bowles plan to raise the retirement age gradually to 69 by 2075 and index payments to a chained CPI to generate more accurate payment figures. But the proposal fails to recognize that Social Security in itself is a doomed program. There just aren’t enough people in America’s workforce to generate the revenue needed to make the payments. In addition, the Simpson-Bowles plan further burdens the existing structure by creating a special minimum salary benefit and including newly hired state and local workers in Social Security after 2020.

Although nearly a quarter of the federal budget is fixed in healthcare payments through Medicare and Medicaid, the Simpson-Bowles plan only spreads the cost rather than decreasing it significantly. In addition, Simpson and Bowles also fail to recognize that Obamacare will cost at least $2.5 trillion during the first ten years of real implementation. As with Social Security, these non-discretionary outlays will only decrease if consumers are given more control.

To pay for the deficit and other newly instituted programs, Simpson and Bowles propose increasing taxes up from the 19.8% of the economy to 20.5%, meaning an average increase of more than $8,000 in taxes from every American household from 2012 to 2020.

However, the proposal also includes heavy defense cuts, which amount to $20 billion. Aside from cuts in defense and changes in Social Security and healthcare, the Simpson-Bowles plan chips off parts of various sectors of government spending to reach its total of $200 billion in cuts, including the bold elimination of all earmarks and farm subsidies. The plan also proposes a 15-cent increase in gasoline tax.

Yet even if eliminating earmarks and increasing gasoline tax were feasible, the Simpson-Bowles plan will not result in a dramatic decrease in the budget and deficit, for it does not understand the fundamental reasons why the U.S. government expenditure is so great. The proposal is a start, but not an end.

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