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The National Commission on Fiscal Responsibility and Reform (often called Bowles-Simpson/Simpson-Bowles from the names of co-chairs Alan Simpson and Erskine Bowles; or NCFRR) is a Presidential Commission created in 2010 by President Barack Obama to identify "…policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run."[1] The commission first met on April 27, 2010.[2] A report was released on December 1, 2010,[3] but failed a vote on December 3 with 11 of 18 votes in favor, with a supermajority of 14 votes needed to formally endorse the blueprint.[4]

History

The original proposal for a commission came from bipartisan legislation that would have required Congress to vote on its recommendations as presented, without any amendment. In January 2010, that bill failed in the Senate by a vote of 53–46, when six Republicans who had co-sponsored it nevertheless voted against it.[5] Thereafter, Obama established the Commission by Executive Order 13531. Former Republican Senator Alan Simpson (R-Wyo.), after his appointment to co-chair the Commission, criticized the former supporters who had voted against the bill, saying that their purpose "was to stick it to the president."[6] In the absence of special legislation, the Commission's proposals are not guaranteed to be considered by Congress in a single up-or-down vote.

Commission members

The Commission includes 18 members and one executive director appointed by the president. They include six members of the U.S. House of Representatives, and six members of the U.S. Senate.[7]

The first vote on the final recommendations, originally set for December 1, 2010, was delayed until December 3 when the commission fell short of the supermajority of 14 of 18 votes needed to approve the report.[3][4]

Republican Democratic
President's Appointments
House
Senate

Working groups

The commission decided to create 3 working groups to focus on discretionary spending (DS), mandatory spending (MS), and tax policy (T).

Member Tax Mandatory Discretionary Party
Cote x x R
Fudge x x D
Rivlin x x D
Stern x x D
Baucus x x D
Becerra x x D
Camp x x R
Coburn x x R
Conrad x x D
Crapo x x R
Durbin x x D
Gregg x x R
Hensarling x x R
Ryan x x R
Schakowsky x x D
Spratt x x D

Public outreach

Simpson was interviewed by Neil Cavuto on Fox News in April, covering tax-vs-spending balance in the Commission's work ("Everything's on the table," Simpson said), the value-added tax ("[T]o drag this great specter,… like a dead rat through the room, without doing something with the income tax, is a fakery. …I haven’t the slightest idea. But if you’re going to mess around in that area or flat tax or any other tax… you’re going to go adjust all the other taxes in accordance"), the general fiscal situation ("This country’s in a mess"), and a response to Grover Norquist calling Simpson "old and grumpy, and [saying Simpson] doesn’t like Reagan Republican Party members" ("old Grover Norquist and his happy band of goofy warriors, all they do is make money off of people," Simpson replied).[8] Simpson and Bowles were also interviewed by Chris Wallace, also on the eve of the first Commission meeting,[9] Simpson's latter appearance, particularly as it bore on entitlements, attracted comment from the Columbia Journalism Review[10] and James Ridgeway,[11] among others.

A health-care component of the overall U.S. federal and state fiscal-management challenge was addressed by a panel including Rivlin on the Diane Rehm Show in June.[12]

Chairmen's draft proposal

Report of the National Commission on Fiscal Responsibility and Reform-Public Debt as % GDP Under Various Scenarios

On November 10 NCFRR co-chairs Simpson and Bowles released a draft proposal for consideration by other commission members. The proposal presented five "steps"

  1. $200 billion reduction per year in discretionary spending[13] with proposed cuts including reducing defense procurement by 15% and closing one third of overseas bases, eliminating earmarks, and cutting the federal work force by 10%.
  2. $100 billion in increased tax revenues through various tax reform proposals,[13] such as introducing a 15 cent per gallon gasoline tax and eliminating or restricting a variety of tax deductions such as the home mortgage interest deduction and the deduction for employer-provided healthcare benefits.
  3. Controlling health care costs by maintaining the Medicare cost controls associated with the recent health care reform legislation,[13] in addition to considering a public option and a further increase in the authority of Independent Payment Advisory Board.
  4. A reduction in entitlements, including farm subsidies, civilian and military federal pensions and student loan subsidies.[13][14]
  5. Modifications to the Social Security program to raise the payroll tax and the retirement age.[13]

The co-chairs also recommended some measures they felt would stimulate economic growth, such as a cut in the corporate tax rate from 35% to a more internationally competitive 26%.[13][15][16]

After the chairmen's briefing to the commission members, two Democratic Party members, Senator Durbin and Representative Schakowsky, publicly criticized the plan.[13] Senator Kent Conrad (D-ND), however, declined to criticize the proposal, saying "[i]nstead of shooting this down propose an alternative. But one that does as good a job as this one does in getting us back on a sound fiscal course."[17] Senator Judd Gregg, the senior Republican on the Senate Budget Committee, noted that the report was a "starting point" which shows the size of the problem.[13]

The proposal was dismissed as "unserious" by Paul Krugman for its large cuts in income tax rates.[18] Krugman dismisses the idea that current marginal rates are a drag on economic growth. Further, he doubts that proposed combination of rate cuts and removal of deductions and loopholes will be revenue neutral, let alone increase revenue. The proposal had the stated goal of increasing Federal government revenue from 15–16% of GDP to 18–21%. Since 21% is still less than projected spending levels, the proposal calls for spending cuts. These cuts are greater in magnitude than the increases in revenue. Krugman has been consistent in his opposition to government spending cuts in difficult economic times (often called austerity). Krugman points out that there is nothing magic about the 21% and the Federal government could collect enough revenue to eliminate the deficit, without harming economic growth. Conservatives, such as US Congressman Dennis A. Ross have replied that that the Federal government has never collected revenue above 21% GDP, except during WWII, and the average rate has been closer to 18%.[19] This is true even though marginal rates since 1945 have been much higher than they were in 2010. Krugman was not alone in his concern about spending cuts. Union leaders such as Richard Trumka and several Democrats such as Speaker Nancy Pelosi and Representative Raul Grijalva rejected the plan saying it cut spending, especially on Social Security, too much.[20] The Economic Policy Institute calculated that the proposed spending cuts would reduce payroll employment by roughly 1.9 million jobs by 2014, and that the resulting loss in the government's tax revenues would cut the proposal's deficit-reducing effect in half.[21] The institute called instead for "budgeting for more desperately needed fiscal stimulus in the near-term...."[21] The chairmen's proposal was also criticized by conservative interest groups such as defense contractors, for cutting spending on defense,[22] and Americans for Tax Reform, a group opposed to both increases in marginal rates and overall Federal revenue.[23]

The proposal was better received by the Democrat-affiliated but business-friendly think tank Third Way,[24] Representative Jim Cooper (D-Tenn.),[25] Senator Ron Wyden (D-Oregon)[26] and Harvard economist Greg Mankiw.[27] Senator-elect Rand Paul (R-KY), a Tea Party supporter, stated that the proposed changes to entitlement spending should take effect sooner instead of in future decades but praised the proposal for also having "some good ideas".[28] The Concord Coalition, a non-profit and non-partisan anti-deficit activist group, applauded the report and labeled it a "promising start."[29]

President Obama asked critics of the proposal from either side of the political spectrum to exercise caution, saying "[b]efore anybody starts shooting down proposals, I think we need to listen, we need to gather up all the facts."[30]

The Center on Budget and Policy Priorities evaluated the draft plan, praising that it "puts everything on the table" but criticizing that it "lacks an appropriate balance between program cuts and revenue increases."[31]

Final vote

A report was released on December 1, 2010, but failed a vote on December 3 with 11 of 18 votes in favor, with a supermajority of 14 votes needed to formally endorse the blueprint.[3] Voting for the report were Bowles, Coburn, Conrad, Crapo, Cote, Durbin, Fudge, Gregg, Rivlin, Simpson, and Spratt. Voting against were Baucus, Becerra, Camp, Hensarling, Ryan, Schakowsky and Stern.[32]

Criticism

The commission has been criticized as deliberating in secret and as being "stacked with people who want to target entitlement spending rather than any balanced proposal."[33] Because it could lead to cuts in benefits for Social Security and Medicare, many Democrats are calling this a 'cat food' commission,[34] on the grounds that it will allegedly eliminate key portions of the social safety net, forcing some people (particularly the elderly) into such extreme poverty that they will only be able to afford to eat cat food. Commission staffers working for external think tanks has also been an issue.[35]

Keynesian Economist James K. Galbraith submitted a statement to the NCFRR on behalf of Americans for Democratic Action. He argued that the current deficits were caused by the financial crisis; that cuts in Social Security and Medicare would be harmful and would not reduce the deficit; and that the Commission would do best "by advancing no proposals at all."[36]

Dean Baker of the Center for Economic and Policy Research in Washington criticizes the deficit report for omitting a tax on the financial industry, as was recommended by the International Monetary Fund. He also denounces co-chairs Alan K. Simpson and Erskine Bowles for claiming to have looked everywhere on ways to increase revenue, but not including the financial industry. Also, Baker said that a possible conflict of interest exists regarding Erskine Bowles for serving on the board of Morgan Stanley while being on the commission and asks for further investigation into the connection between Bowles' role as a director of Morgan Stanley and the omission of any financial taxes in the report.[37]

On 30 Sept 2012, Paul Krugman, Princeton Economist and columnist for the N Y Times, noted the following on his blog: "So, a public service reminder: Simpson-Bowles is terrible. It mucks around with taxes, but is obsessed with lowering marginal rates despite a complete absence of evidence that this is important. It offers nothing on Medicare that isn’t already in the Affordable Care Act. And it raises the Social Security retirement age because life expectancy has risen — completely ignoring the fact that life expectancy has only gone up for the well-off and well-educated, while stagnating or even declining among the people who need the program most." source http://krugman.blogs.nytimes.com/2012/09/30/a-public-service-reminder-simpson-bowles-is-terrible/

Continuing outreach

In November, 2011, Simpson and Bowles submitted written testimony to the "supercommittee" charged with making budget adjustments by Congress, urging the 12 supercommittee members to "go big" toward the $4 trillion in savings the NCFRR had recommended v. the $1.2 trillion deficit reduction most discussed by the committee of congresspeople and senators. Simpson and Bowles also warned that failure to reach some agreement "might result in another downgrade", though separately Moody’s said such failure alone would not result in a change in U.S. ratings, as the trigger would still result in $1.2 trillion in cuts. In that regard, Simpson and Bowles stated, "the only thing worse than failure by the committee to agree on savings would be removing the 'sequester' [or 'trigger'] mechanism for automatic cuts".[38] Bowles said in verbal testimony that "[c]ollectively, I'm worried you're going to fail".[39] NCFRR member Rivlin and former New Mexico Republican Sen. Pete Domenici, separately, "said there is still time for supercommittee members to craft a 'grand bargain' to save at least $4 trillion over 10 years.... Rivlin and Domenici chaired the Bipartisan Policy Center’s debt reduction task force", which also made its recommendations on the issue in 2010.[38]

See also

References

  1. ^ "Executive Order – National Commission on Fiscal Responsibility and Reform" (Press release). White House Office of the Press Secretary. February 18, 2010. Retrieved November 11, 2010.
  2. ^ Lee, Jesse (April 27, 2010). "Getting to the Root Causes of Our Fiscal Challenges". The White House Blog. Retrieved November 11, 2010.
  3. ^ a b c Paletta, Damian (December 1, 2010). "Mortgage Tax Break in Crosshairs". Wall Street Journal.
  4. ^ a b McLaughlin, Seth (December 3, 2010). "Debt commission falls short on test vote". Washington Times.
  5. ^ Rushing, J. Taylor (February 3, 2010). "Gregg calls for re-vote on fiscal panel". The Hill. Retrieved November 11, 2010.
  6. ^ Lawrence, Jill (July 11, 2010). "Seven Things Republicans Were For, Before They Were Against Them". Politics Daily. Retrieved November 11, 2010.
  7. ^ "National Commission on Fiscal Responsibility and Reform". Commission Members. Retrieved August 17, 2011.
  8. ^ "Episode dated April 26, 2010". Your World with Neil Cavuto. April 26, 2010. Fox News Channel. {{cite episode}}: |access-date= requires |url= (help); External link in |transcripturl= (help); Unknown parameter |serieslink= ignored (|series-link= suggested) (help); Unknown parameter |transcripturl= ignored (|transcript-url= suggested) (help)
  9. ^ "Episode dated April 25, 2010". Fox News Sunday With Chris Wallace. April 25, 2010. Fox News Channel. {{cite episode}}: |access-date= requires |url= (help); External link in |transcripturl= (help); Unknown parameter |serieslink= ignored (|series-link= suggested) (help); Unknown parameter |transcripturl= ignored (|transcript-url= suggested) (help)
  10. ^ Lieberman, Trudy (April 30, 2010). "More Words of Wisdom from Alan Simpson". Columbia Journalism Review. Retrieved November 11, 2010.
  11. ^ Ridgeway, James (May 6, 2010). "Deficit Commission's Alan Simpson Denounces Fat Cat Geezers". Unsilent Generation. Retrieved November 11, 2010.[self-published source?]
  12. ^ "Medicare Reimbursment Rates and Deficit Spending". Diane Rehm Show. June 15, 2010. NPR. WAMU. Retrieved November 11, 2010. {{cite episode}}: Unknown parameter |serieslink= ignored (|series-link= suggested) (help)
  13. ^ a b c d e f g h Montgomery, Lori (November 11, 2010). "Deficit panel leaders propose curbs on Social Security, major cuts in spending, tax breaks". The Washington Post. Retrieved November 11, 2010.
  14. ^ Davidson, Joe (November 10, 2010). "Federal workers' sacrifice would help U.S. debt, deficit panel says". The Washington Post. Retrieved November 11, 2010.
  15. ^ "Co-Chairs' Proposal" (PDF). National Commission on Fiscal Responsibility and Reform. November 10, 2010. Retrieved November 11, 2010.
  16. ^ Nicholas, Peter; Mascaro, Lisa (November 11, 2010). "Panel weighs deep federal budget cuts to trim deficit". Los Angeles Times. Retrieved November 11, 2010.
  17. ^ George Stephanopoulos (November 11, 2010) Sen. Conrad: Extend All Tax Cuts; Time to Get 'Serious' About Deficit ABC News
  18. ^ Paul Krugman (November 10, 2010 Conscience of a Liberal blog New York Times
  19. ^ Christopher Chantrill(April 18, 2012 United States Government Revenue
  20. ^ Bolton, Alexander (November 10, 2010). "Pelosi, political left rip proposal from debt commission chairmen". The Hill. Retrieved November 11, 2010.
  21. ^ a b Bivens, Josh (November 16, 2010). "Fiscal commissioners' proposal would cost millions of jobs". Economic Policy Institute. Retrieved November 26, 2010. {{cite web}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  22. ^ "Deficit Commission Panel Co-Chair Recommendations Could Undercut Defense" (Press release). Aerospace Industries Association. November 10, 2010. Retrieved November 11, 2010.
  23. ^ Cohen, Tom (November 11, 2010). "Draft deficit plan launches likely grueling political battle". CNN. Retrieved November 11, 2010.
  24. ^ Think Tank Backs Plan; Challenges Left and Right to “Put Up or Shut Up” Third Way.org November 10, 2010 Retrieved November 11, 2010
  25. ^ Dupree, Jamie (November 11, 2010). "Deficit Commission Draft". The Atlanta Journal-Constitution. Retrieved November 11, 2010.
  26. ^ "Wyden Statement on White House Fiscal Commission's Draft Report" (Press release). Ron Wyden. November 10, 2010. Retrieved November 11, 2010.
  27. ^ Andrew Sullivan (November 10, 2010 Drop Everything: The Simpson-Bowles Reax The Atlantic
  28. ^ Jordan Fabian (November 12, 2010) Rand Paul: Fiscal commission report doesn't go far enough The Hill
  29. ^ Concord Coalition Applauds Bowles-Simpson Deficit Reduction Framework Concord Coalition Press Release, November 11, 2010
  30. ^ David Jackson (November 11, 2010) Obama to Congress: Stop shooting down deficit proposals USA Today
  31. ^ CBPP-Bowles Simpson Plan Evaluation-November 16, 2010
  32. ^ Member Statements
  33. ^ Dayen, David (May 4, 2010). "Cat Food Commission Will Be Carried Out Partially In Secret". FireDogLake. Retrieved November 11, 2010.[self-published source?]
  34. ^ Cruickshank, Robert (December 8, 2009). "Dianne Feinstein and the 'Cat Food' Commission". Courage Campaign. Retrieved November 11, 2010.
  35. ^ Eggen, Dan (November 10, 2010). "Many deficit commission staffers paid by outside groups". The Washington Post. Retrieved November 11, 2010.
  36. ^ Galbraith, James K. (June 30, 2010). "Why the Fiscal Commission Does Not Serve the American People". Franklin and Eleanor Roosevelt Institute. Retrieved November 11, 2010.
  37. ^ Baker, Dean (November 11, 2010). "Erskine Bowles, Morgan Stanley, and the Deficit Commission". Center for Economic and Policy Research. Retrieved November 11, 2010.
  38. ^ a b Schroeder, Robert, "Fiscal experts sternly warn supercommittee", MarketWatch, Nov. 1, 2011, 3:12 pm EDT. Retrieved November 1, 2011.
  39. ^ Schroeder, Robert, "Bowles says he worries supercommittee will fail", MarketWatch, Nov. 1, 2011, 2:06 pm EDT. Retrieved November 1, 2011.
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