Commentary | Budget Taxes and Public Investment

Deficit commission leaders are not addressing the root causes of the long-term deficit

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Today the National Commission on Fiscal Responsibility and Reform released a preliminary proposal as devised by co-chairs Alan Simpson and Erskine Bowles.  While the specifics of the proposal are not yet set in stone, the report shows that the commission is running severely off track.

In particular, nearly half of the adjustments come from cuts to discretionary spending – a portion of the budget that is not responsible for long-term deficits. The suggested reductions include a wide range of cuts that would cost jobs and increase financial burdens on working families. For example, the report suggests cutting the federal workforce by 10%, or 200,000 jobs, by 2020. The proposal suggests increasing health care fees on low-income veterans.  It proposes budget cuts to national parks, the Smithsonian, water programs and airports. It even suggests eliminating funding for the Corporation for Public Broadcasting (sorry, Elmo). In total, the reductions in discretionary spending would be 16% below the president’s request in his 2011 budget, and 18.5% below the 2020 levels.

The report also does little to increase tax revenue, with only about 5% of the savings coming from increased general revenue (4.8% in 2015 and 6.4% over 10 years). On health care costs—the prime driver of longer-term deficits—the report suggests “establishing a process” to control cost growth. The commission makes several changes to Social Security, mainly in the form of benefit cuts for all but the bottom fifth of the income distribution, but also states that the program changes would not be used for deficit reduction—thus placing their work on Social Security outside the mandate of the commission.

More importantly, there is little acknowledgement that unemployment remains high and it is expected to remain high for years. By beginning austerity in 2012, the report does not allow enough time for the economy to recover, nor does it call for the policies necessary to get the economy back on track. The spending reduction of over $68 billion in 2012 ramping up to $140 billion in 2015 would mean a slower economy and higher unemployment for an already weakened labor market.  (See also John Irons and Andrew Fieldhouse on the Pew-Peterson Commission on Budget Reform’s report, also released today.)

This preliminary set of policies strongly suggests that the commission leaders are not addressing the root causes of the long-term deficit. It’s time for the Obama administration to become more engaged in the bipartisan commission it established, or to make it clear that the commission does not represent their viewpoint on these issues.


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