Senior Advisor for Federal Fiscal Policy
Proponents of the Cooper-LaTourette budget plan claim that it reduces deficits through a mixture of two-thirds spending cuts and one-third tax reform — the same ratio as the Bowles-Simpson plan. But that’s not true.
Yes, the Bowles-Simpson plan had roughly two dollars in spending cuts for every dollar in tax increases — if you use a baseline that assumes that President Bush’s tax cuts for upper-income taxpayers expire (and if you count the savings from lower interest payments as a spending cut). But, the Cooper-LaTourette budget relies on a different baseline — and that makes all the difference in the world.
Specifically, the stated revenue increases in the Cooper-LaTourette plan reflect a baseline that assumes those upper-income tax cuts are extended. If you calculate the Bowles-Simpson tax increase on the same basis as the Cooper-LaTourette plan, its tax savings are much larger, and the ratio of spending cuts to tax increases is close to 1:1. On the same baseline on which Bowles-Simpson is 1:1, the Cooper-LaTourette plan is 2:1 — that is, two dollars in spending cuts for every dollar in tax increases, or far more tilted toward spending cuts, and far less toward tax increases, than Bowles-Simpson.