Simpson-Bowles
The plan created from the committee chaired by Alan Simpson and Erskine Bowles was a six-part plan that would "put our national back on a path of fiscal health, promote economic growth, and protect the most vulnerable among us." The plan would:
- Achieve nearly $4 trillion in deficit reduction through 2020.
- Reduce the deficit to 2.3 percent of (gross domestic product) GDP by 2015 which would exceed President Obama's goal of primary balance of around 3 percent of GDP.
- Sharply reduce tax rates, abolish the Alternative Minimum Tax (AMT) and cut backdoor spending in the tax code.
- Cap revenue at 21 percent of GDP and get spending below 22 percent at first and eventually reducing it to 21 percent.
- To ensure Social Security solvency by preventing the projected 22 percent cuts to come in 2037, reduce elderly poverty and distribute the burden fairly.
- Stabilize debt by 2014 and reduce debt to 60 percent of GDP by 2023 and 40 percent by 2035.
Source: The National Commission on Fiscal Responsibility and Reform
Two men who proposed a plan they felt would have put the country on solid fiscal and economic path said the current political brinkmanship and in-party disputes can be devastating to country’s future.
Former U.S. Sen. Alan Simpson from Wyoming and former Clinton White House Chief of Staff Erskine Bowles co-chaired President Barack Obama’s 2010 National Commission on Fiscal Responsibility and Reform. The plan by the committee, which consisted of 18 senators, representatives and financial experts, would have, in the opinions of Simpson and Bowles, brought spending under control and reduced the country’s deficit. It received a majority of support but not enough to allow it to be presented to Congress; it needed 14 of the 18 members to support it, but only received 11 votes.
Simpson and Bowles, who co-founded The Campaign to Fix the Debt, spoke Wednesday evening at Millett Hall on the campus of Miami University in Oxford as part of the Farmers School of Business Jack R. Anderson Distinguished Lecture Series. The two former politicos, known as "deficit hawks" still believe their plan — commonly referred to as Simpson-Bowles and would result in some "tough decisions" by cutting some so-called entitlement programs — is the best solution to fix the country's spending and avoid future shutdowns like the current partial shutdown that started on Oct. 1.
”I can tell you it won’t be long before the markets to wake up and they will look at our great country and they will say something like, ‘America, you are addicted to debt, you have a dysfunctional government, the fiscal path that you are on is certainly not sustainable, and for Lord’s sake you have no plan — none whatsoever — to deal with this,’” said Bowles, the former president at North Carolina University. “We are operating the largest economy in the world on a month-to-month basis, and that is crazy. And to make matters worse, every single month we get to the situation we are in today — we go through one of these debt default crisis — and we put the full faith and credit of our country in jeopardy.”
The plan, which was presented to the committee in December 2010, claims, among other things, to reduce the deficit by $4 trillion through 2020, ensure Social Security is solvent, reduce the debt by 60 percent of the country's gross domestic product by 2023 and 40 percent by 2035, and reduce tax rates by abolishing the Alternative Minimum Tax and cut "backdoor" spending in the tax code.
“The more we looked at the numbers, the more we studied the operating statements of the country, the clearer it became to us that we weren’t doing it for our grand kids. We weren’t even doing it for our kids. We were doing it for us,” Bowles said. “That’s how dire the situation is.”
U.S. Sen. Rob Portman, R-Ohio, who went through the last government shutdown in the mid-1990s as a member of the House, said his objective is to avoid “a debt limit crisis” and also work “to avoid the debt crisis we face as a country.”
”(Thursday) morning I spoke with Democratic colleagues, fellow Republicans and administration officials and I will continue to do that to try to figure out a smart way forward,” said Portman on a conference call with media across the state. “Every major deficit reduction agreement over the past few decades has been tied to the debt limit, and it’s the only thing that’s work.”
Portman, a member of the 2011 Joint Select Committee on Deficit Reduction known as the Supercommittee, said Simpson-Bowles had good elements, and some aspects were incorporated but "some of the numbers, quite frankly, didn't add up."
The Senator said the budget problem moving forward is driven by the mandatory spending side, which is the fastest-growing part of the budget and expected to increase from 55 percent of the budget to 76 percent in the next decade.
“If you look over the next few decades and you assume the Congressional Budget Office is accurate on where taxes are going to be and where spending is going to be, all of the deficit is on the mandatory side and in the next 10 years an over 100 percent increase on the health care mandatory spending, and that includes Medicare, Medicaid, but also Obamacare which is an entitlement,” he said. “That’s where the problem is, everyone knows it and that’s why I’m suggesting that where we ought to focus as part of the debt limit increase.”
But Simpson and Bowles said significant cuts will be needed in order to get out of this too frequent brinkmanship between both parties, the House and the Senate, and the White House over the debt limit and the country’s spending.
“The problems are real, the solution is painful, there’s no easy way out,” Bowles said. “All of us are going to have to make some sacrifices. It’s our generation that created this problem, whether we’re Republicans or Democrats, and it’s our generation’s responsibility to clean it up. We can’t be the first generation of Americans to leave this country worse off than we found it.”
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