TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, October 3, 2012

CBPP: 2-to-1 Spending Cut/Tax Increase Ratio in Simpson-Bowles Is Now 0.5-to-1

Center on Budget and Policy Priorities: What Was Actually in Bowles-Simpson — And How Can We Compare it With Other Plans?:

Many policymakers have said that they “support,” “endorse,” or otherwise look favorably on “Bowles-Simpson” — the budget plan that Erskine Bowles and Alan Simpson issued in December 2010 as co-chairs of President Obama’s National Commission on Fiscal Responsibility and Reform. But despite this apparent widespread support, many policymakers and opinion leaders do not understand the specifics of what Bowles-Simpson actually included....

CBPP ChartBowles-Simpson was balanced almost equally between revenue increases and spending cuts: $2.6 trillion of the former, $2.9 trillion of the latter (if measured through 2022). ...  The authors built a significant share of their revenue increases into the “baseline” they used. They also counted interest savings as a spending cut. Under this approach to measuring the plan’s deficit reduction, the Bowles-Simpson plan was presented as containing $2 in spending reductions for every $1 in revenue increases.

Of the $2.9 trillion in program cuts (through 2022) that Bowles-Simpson contemplated, policymakers enacted half of them within a year of the plan’s publication through statutory caps on discretionary spending. These caps mean that the amount of Bowles-Simpson deficit reduction that policymakers have not yet achieved comprises another $1.4 trillion in program cuts, mostly from mandatory or entitlement programs, $2.5 trillion in revenue increases, and additional savings from both spending and revenues if the Social Security proposals are included. Put more simply, the remaining, un-achieved portion of Bowles-Simpson comprises $0.54 in program cuts for every $1 in revenue increases. In short, the real Bowles-Simpson plan embodies a ratio quite different from the 2-to-1 ratio that is frequently discussed.

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