G’Day!
On April 1, I posted the article, “Bowles & Simpson Have it Right!”, suggesting that the Bowles-Simpson Debt Reduction Commission’s proposal was a good solution to our country’s deficit and debt crises. Subsequent articles have repeatedly referred to this proposal as a reasonable bipartisan way to address our federal fiscal problems, especially long-term debt, (see “Obama Ignores Bowles-Simpson Debt Reduction Commission – AGAIN!”, “Is Obama Really Serious about Debt Reduction?”, “Fiscal and Debt Crises – Tax Reform Essential!”). Approximately eight months after publishing the Commission’s preliminary report and 5 months after formal submission to President Obama, the “Gang of Six” in the Senate finally appears to be considering it. Perhaps there is some intelligent life in Washington after all. I hope so.
To resolve our unsustainable deficit and debt crises, we need significant comprehensive changes to improve revenues through comprehensive tax reform, to reduce discretionary spending including defense, and reduction/reform in entitlement programs for Medicare, Medicaid, and Social Security. All of these reforms: taxation, government spending, and entitlements, are essential to a comprehensive solution for our country’s problems and ALL must be addressed if we are to succeed.
Bowles-Simpson, which is still an appropriate bipartisan starting point, addresses all of these issues and was approved by 61% of the commission members. I hope it now gets the attention it deserves. The “Gang of Six” and Bowles-Simpson have identified nearly $4 Trillion in deficit reductions over ten years with an immediate reduction of $500 Billion. Both plans rely on government spending cuts and tax reform to lower tax rates, broaden the tax base, and increase tax revenues. These are all good initial actions and I would also suggest the addition of the House “Cut, Cap, and Balance Act, which specifically “Caps” government spending relative to GDP and includes a “Balanced Budget Amendment” provision to insure that our government performs its future fiscal requirements in a responsible way. Currently, polls indicate that over two-thirds of the American people want a “Balanced Budget Amendment” and do not want a further increase in our National Debt. Now is an appropriate time to deal with these issues to insure not only our own future but also more importantly, the future of our children.
If Congress and the President had seriously considered Bowles-Simpson earlier in the year, the debt crisis could already be resolved. We must bring responsibility to the country back into our government and significantly reduce its size.
The Old Guy PhD
Note: The original Bowles-Simpson article with “links” is repeated below for those who missed it.
Bowles & Simpson Have it Right!
In my previous posts, “Big Government IS Our Problem” and “Is Our Government Broken”, I laid out the current and projected fiscal and debt problems facing our nation and argued that significant contraction in government spending is immediately essential. Also essential is tax reform. Our taxes MUST be simplified, the tax base broadened, and tax rates reduced (especially business taxes), if we are to be able to compete in a global economy.
The Debt Reduction Commission’s “Co-Chair’s Proposal” released in December 2010 by the Co-Chairs, Democrat Erskine Bowles and Republican Alan Simpson and submitted to the President in February 2011, is an excellent and understandable overview of the recommendations, which, with minor modification, were approved by 11 of the 18 bipartisan members (61% approval) in December 2010. Unfortunately, the final vote fell short of the 14 votes necessary for the “Supermajority” needed to directly submit the recommendations to Congress. While the Co-Chair’s Draft Proposal differs slightly from the final report submitted to the President, it is worth reviewing for its importance, focus, clarity, and brevity. They have done an excellent job and their proposal deserves the immediate attention of the President and Congress. While no one will be fully happy with all of the commission’s proposals, rational behavior combined with cooperation and compromise by our elected government is necessary if we are to remain a solvent and great nation. The time for government to act is NOW!
The bipartisan Debt Reduction Commission worked from April – December 2010 to develop and present overall comprehensive recommendations to solve our country’s short and long term fiscal and debt crises. They have done their work well. The report addresses all the necessary areas required to resolve the issues including setting out ten (10) objectives, “Guiding Principles and Values”, beginning with “#1-We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today”; and “#2-The Problem is REAL – the Solution is Painful – There’s no Easy Way Out – Everything Must Be On the Table – and Washington Must Lead”. The other 8 can be read by clicking the link in paragraph above. After establishing the Guiding Principles, the following comprehensive “Five Part Plan” is recommended:
1.Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.
- Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.
- Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.
- Achieve mandatory savings from farm subsidies, military and civil service retirement.
- Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.
Implementation of the comprehensive Five Part Plan is projected to achieve nearly $4 trillion in deficit reduction through 2020, in addition to other specific improvements in debt and budget reductions summarized below:
- Achieves nearly $4 trillion in deficit reduction through 2020: 50+ specific ways to cut outdated programs and strengthen competitiveness by making Washington cut and invest, not borrow and spend.
- Reduces the deficit to 2.2% of GDP by 2015, exceeding President’s goal of primary balance (about 3% of GDP).
- Reduces tax rates, abolishes the AMT, and cuts backdoor spending in the tax code.
- Caps revenue at or below 21% of GDP and gets spending down to 22% and eventually to 21%.
- Stabilizes debt by 2014 and reduces debt to 60% of GDP by 2024 and 40% by 2037.
- Ensures lasting Social Security solvency, prevents projected 22% cuts in 2037, reduces elderly poverty, and distributes burden fairly.
The proposal outlines how to achieve the above results through specific recommended actions to improve revenues through “Comprehensive Tax Reform” alternatives, to reduce spending through “Discretionary Budget Options” including Defense cuts, reductions for entitlement programs through “Mandatory Budget Options” for healthcare and “Reforming Social Security”. All of these reforms: taxation, government spending, entitlements for healthcare and social security, are essential to a comprehensive solution for our country’s problems and all must be addressed if we are to succeed.
The Co-Chair’s Proposal is controversial but responsible, realistic, and deserves the serious consideration of the President and Congress, who are currently engaged in irrelevant political bickering over trivial spending cuts instead of the substantive fiscal and debt problems we face. Congress and the President should get together, agree on or revise as appropriate the “Guiding Principles and Values” above, and start to work for the American people and our country. Political posturing for re-election is NOT a valid course of action.
Currently, neither the Congress nor the President is addressing our fiscal and debt crises with any sense of urgency. The President and the Democrats are not only totally ignoring the problem but are fighting to avoid even minimal reductions from the inflated budget spending of the last 2-3 years. Federal Budget inflation nearly tripled our federal deficit from $0.459 trillion in 2008 to $1.3 trillion in 2010 and is expected to increase again to $1.7 trillion this fiscal year. Obama’s recent budget proposal for 2012 continues spending at $3.7 trillion and the deficit at $1.6 trillion. Additionally, Obama’s new budget projects a further cumulative deficit of $7.2 trillion for the next ten years – bringing our debt to approximately $22 trillion! This is not leadership; it is madness! Only the Republicans are even attempting to address the issue and, to date, their proposals are woefully inadequate. To be fair, the House Republicans through Representative Paul Ryan are promising to present a comprehensive budget in April that does address the looming long-term catastrophe we face. I hope they deliver.
Given the magnitude of our fiscal and debt problems, the current congressional squabbling is an inappropriate distraction from solving the overall crises facing our nation! Without an agreement on debt limits and/or spending cuts by April 8, our government may shut down. As noted in “Is Our Government Broken”, except for national security and some essential services, shutting down might actually be a good thing. Our government is too big, too irresponsible, and too self-centered. Can’t our Congress or Administration do math?
Where is President Obama’s leadership in all of this? Actually, at the time of this writing he’s currently travelling again and making speeches at a Democratic Party Fundraiser – big surprise. As usual, when leadership and responsibility for our country are required, Obama is absent. Last week with a national debt deadline imminent, Congress took a week off rather than stay in session to attempt to resolve the current national debt limit issue. Brilliant! Our elected representatives need to make financial solvency and economic growth a priority and get to work NOW!
We are on unsustainable fiscal and debt crises that, if not corrected quickly, will lead to potential financial and economic disaster for our country. Our government is oppressive and out of control, its growth must be stopped, and its intrusion in our lives and businesses reversed. We MUST maintain the entrepreneurial spirit necessary for economic growth and global competitiveness. We need to bring back the constitutional freedoms and personal liberties that led us to become the greatest nation on earth. Our government should immediately take up the Bowles-Simpson Co-Chairs’ Proposal.
The Old Guy PhD
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