The sham of Simpson-Bowles

By Rep. Jan Schakowsky
October 24, 2012

Erskine Bowles and former Senator Alan Simpson deserve some kind of medal for creating the widely held perception that their plan for reducing the deficit and debt is anything other than a bad proposal.

It has been nearly two years since the commission they chaired, which I served on, finished its work. The duo’s proposal has attained almost mythical status in Washington as the epitome of what a “grand bargain” should look like.

But everyone look again. They will discover that it is far less than meets the eye.

Have Simpson-Bowles’ champions read it? Given any real scrutiny, this plan falls far short of being a serious, workable or reasonable proposal – from either an economic or political analysis.

In one of its few specific points, for example, Simpson-Bowles mandates a top individual tax rate of 29 percent “or less.” Much like the vague Romney proposals, the Simpson-Bowles plan would make up the shortfall by eliminating tax loopholes, suggesting options such as having employees pay taxes on their health benefits. Not only is this likely to increase costs to middle-income families, it could threaten coverage altogether. The proposal for corporate tax reform would eliminate taxes on profits earned overseas, rewarding companies that move jobs offshore.

Somehow, being willing to cut “entitlement” benefits has been called a “badge of courage” for those who purport to be serious about deficit reduction– despite the fact that Social Security has not contributed one thin dime to the deficit.

Under Simpson-Bowles, long-term solvency for Social Security is achieved mostly by cutting benefits. Seventy-five years out, the ratio of spending cuts to revenue increases is 4 to 1.

They propose raising the age of full Social Security benefits to 69 – claiming that everyone is living longer. But a sizable percentage of Americans, mostly lower-income workers, especially women, are actually living shorter lives, and a large chunk of other Americans just can’t work that long – even if they can find a job. Their plan cuts benefits for current and future retirees by reducing the cost-of-living adjustment.

For future retirees, all these changes taken together would reduce the average annual benefit for middle-income workers – those with annual earnings of $43,000 to $69,000 – by up to 35 percent.

Simpson-Bowles also targets Medicare and Medicaid – though the real problem is rising healthcare costs across the board. Yet it would cap them at arbitrary rates  and simply shift the growing costs to patients, providers and employers. To start, they would ask Medicare beneficiaries – seniors and disabled people – to pay $110 billion more out of pocket.

“Obamacare” took a different approach, lowering costs without reducing benefits. Medicaid cuts could result in block grants that would threaten care to pregnant women and children and those needing long-term care services.

Bowles and Simpson like to say their plan was designed to protect “the truly disadvantaged.” Really? They put spending caps in place that would force a 14 percent cut in domestic programs by 2013, increasing to a 22 percent cut in 2022. The severity would absolutely require cuts in programs vital to low-income people, including housing, Head Start, nutrition programs and job training.

No doubt some of the principles undergirding the Simpson-Bowles plan are solid. They raise some revenue as well as make cuts, though they rely much more on the cuts. They put the military budget on the table and make significant cuts there. They focus for the first time on tax expenditures – tax breaks of all sorts. They modestly raise the wage cap for Social Security.

At the end of the day, however, if the only real debate about what do for the economy and how to address our fiscal challenges falls somewhere between the draconian “VoucherCare” Romney-Ryan budget and Simpson-Bowles, the middle class and those who aspire to it are in serious trouble.

It’s time for a robust defense of the social insurance programs that have helped build the middle class and have made America great, as well as a tax structure that asks the wealthiest Americans to pay their fair share.

Simpson-Bowles deserves a lot more scrutiny, and alternative proposals – such as the one I offered the commission and the Progressive Caucus’s “Budget for All” – should get another look.

The good news is that there is a better way.

PHOTO: Former Senator Alan Simpson directs a response as he and Erskine Bowles testify before the Joint Select Committee on Deficit Reduction during a hearing on Capitol Hill hearing in Washington.  REUTERS/Jonathan Ernst

11 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Wow. Who is this woman? Representative Jan Schakowsky should be considered for the Medal of Honor for her courage. Okay, that’s a stretch considering what real heroes have to do on the battle field to earn one, but Rep. Schakowsky does earn my deepest respect for having the courage to tell the truth, a truth that rightfully challenges what has become accepted orthodoxy. Simpson-Bowles is not the best we can do. And shouldn’t we be striving for the best we can do? Why is everything being considered in our government now formulated to benefit the richest .1% and requiring everyone else to sacrifice dearly?

A top income tax rate of 29% or less when we’re trying to make up a budget shortfall? Makes no sense. Even Republican Ben Stein believes the rich should pay more in taxes. The wealthy plutocrats are pressuring and bribing our government to lower their taxes, and this is why I’m so impressed with Rep. Schakowsky for having the courage to put her country first and telling the truth. Our country would be so much better off if we had more representation like her. We need to get money out of our elections and end the corrupting practicing of lobbying.

Thank you, Rep. Schakowsky. And I hardily agree with you. Simpson-Bowles is bad medicine. We can do better and do it in a way that benefits ALL of our country and not just the filthy rich.

Posted by flashrooster | Report as abusive

unfortunately rep schakowsky speaking truthfully has earned her the scorn of teapsters and grover numbnuts. this will guarantee a huge effort to smear her and put a teabagger in her district next election. this is what we’ve come to – destroying those few individuals who speak out against unfair and downright wrong policies.

Posted by jcfl | Report as abusive

““Obamacare” took a different approach, lowering costs without reducing benefits”

I still am not understanding how the ObamaCare plan of cutting Medicare and Medicaid by $715 BILLION will not effect the care provided. PLEASE SOMEONE EXPLAIN THIS TO ME.

Posted by BBFmail | Report as abusive

Tinkering with the tax code will do no good. How did we get into this mess? Reform is not possible. We have the most complex and corrupt tax system on the planet. Replacement and simplicity is the only hope for salvation. With what? A universal transaction tax. Tax all transactions at a single low rate that is sufficient to balance the budget. We have the computer modeling power to manage such a system. Consult with the credit card companies. Get rid of the income tax and the 100,000 page tax code that no one understands. Rebate to the poverty level to all voters.

Posted by Anonymous | Report as abusive

Unfortunately, today’s so-called national conversation takes place between those who think that the rich should take it all but that we should at least make it look like we care versus those who think the rich should just blatantly get it all. Rep Schakowsky clearly hasn’t read the playbook.

BBFmail: Obamacare is not a voucher plan. Beneficiaries are eligible for a defined package of services. It cuts costs by reducing the payments for those services without cutting back on what’s in the package. This may present problems, but it is certainly not some underhanded sleight of hand. DO YOU STILL NEED IT EXPLAINED? ARE YOU SLOW OR SIMPLY TOO CLOSE-MINDED TO TAKE IN SUCH SIMPLE IDEAS?

Posted by Sanity-Monger | Report as abusive

That would be my congresswoman. Yay!

BBFmail: It has to do with the pay outs providers, states, insurance companies, and other intermediaries. It wasn’t targeted at cutting front-line services. Medical care is a big huge beast, and you can get more efficiencies without cutting the number of surgeries that are performed each year. Those intermediaries will of course deny that, since they’re the ones being affected, but when you can get a multi-billion dollar savings just be standardizing paperwork across the industry (yes, previous studies have suggested that is the case), there’s plenty of room for improvement before you start cutting services.

Not that those intermediaries won’t argue to the contrary, because it’s their inefficiencies that would be cut…

Posted by Crell | Report as abusive

Don’t drink the cool aid.

Simpson Bowles proposed lowering tax rates AND eliminting some tax deductions and tax credits in order to broaden the tax base. Almost everyone pays something, some will pay more, the rich can’t get away with paying nothing. An overall increase in tax revenue. It proposed a reduction in spending. You could lower defense spending simply by ending two wars. This is not rocket science.

The Representative is clearly not our best and brightest.

Posted by johnb710 | Report as abusive

johnb710 — the purported goal of Simpson Bowles was to come up with a deficit reduction plan. Proposing tax rate cuts at the top was a clear signal that the stated goal was a mere charade — pay no attention to the robber baron behind the curtain folks. Some of us have been around long enough to know that the rate cuts are the only part that ever happens. There’s never any loophole closing, only more opening up. And defense never gets cut either — it’s only spending that benefits the general population (medicare, education) or programs for the needy that are expendable.

A top tax rate of 29% is immoral in a complex society where the wealthy benefit the most from the infrastructure provided by the government. The newfound mantra of the right — “broaden the tax base” — is yet another in the long line of shenanigans designed to get the least fortunate to fund the lifestyle of the most fortunate. And let’s recall that the 47% who pay no federal income taxes have had their taxes lowered over the decades by conservatives who’ve also pulled the safety net rug out from under them. Now they are hoping to get their taxes back up but of course we don’t have any money to help them stay on their feet through it. Oh no, we can’t have that. We have to reduce the deficit. But somehow we can find the funds to lower top tax rates?

Apart from the fiscal ramifications, it’s just plain unseemly to propose tax rate cuts for those who have benefited the most at the same time that you’re proposing benefit cuts for the most vulnerable.

Posted by Sanity-Monger | Report as abusive

The thing that no one seems to remember about the Simpson Bowles report is that it was required to receive a certain number of votes in order to be accepted out of the committee, and it did not. It didn’t even pass it’s own committee vote. Shortly after the report did not pass the committee, Jan Schakowsky presented her own budget proposal that would have balanced the budget in a relatively few years, reduced the deficit, paid down the debt, reduced spending, and not caused economic hardship for the most vulnerable in our society. It was a very reasonable and balanced approach, but was not even considered because it would raise taxes slightly on the very wealthy. You can find it if you google Schakowsky Budget Proposal. When you see something that sensible and reasonable be totally ignored by our lawmakers, it makes you wonder if they really even want to fix the economy.

Posted by Heartlight3 | Report as abusive

A round of applause for your blog.Really looking forward to read more. Cool.

Very neat article post.Really looking forward to read more. Much obliged.