Senior Advisor for Federal Fiscal Policy
We praised the original proposal that the co-chairs of the President’s fiscal commission issued on November 10 for putting all parts of the budget on the table and outlining an array of hard choices. But we concluded that the plan doesn’t represent a balanced approach to bringing deficits under control, and we listed six improvements that were particularly needed. Now that co-chairs Erskine Bowles and Alan Simpson have issued a revised, final proposal, here’s a brief look at the degree to which it addresses those six needed improvements:
Most importantly, however, the new plan retains the original proposal to limit the growth of total federal health spending (Medicare, Medicaid, and other programs) to GDP growth plus one percentage point. That global limit falls well short of rising health care costs and doesn’t account for increases in the number of beneficiaries or changes in their demographic mix. As a result, it would likely lead to cuts in federal health programs that could become severe over time, possibly including replacing Medicaid with a block grant and Medicare with a system of vouchers.
In fact, on five of these six issues, the Rivlin-Domenici report is distinctly superior. It realistically envisions both expenditures and revenues ultimately rising above 21 percent of GDP, contains roughly equal contributions from budget cuts and revenues (both for the package as a whole and for Social Security), has discretionary cuts that — while very substantial — are more than one-third smaller than the deep cuts in the Bowles-Simpson plan, and as noted, provides a much larger immediate boost to the economy. The Rivlin-Domenici plan achieves these improvements on a bipartisan basis.
As we concluded in Wednesday’s statement on the new Bowles-Simpson plan:
Bowles and Simpson have performed a valuable service in educating policymakers and the public about the need for tough medicine to tackle [the long-term deficit] problem, and for putting specific proposals on the table rather than empty rhetoric (and rather than hiding behind budget process changes instead of offering specific spending and tax changes). Unfortunately, their product remains seriously flawed.