Senior Advisor for Federal Fiscal Policy
I blogged yesterday about the Cooper-LaTourette budget plan and its proponents’ 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. I offered one explanation of why that’s not true. Here, let me offer another.
As I wrote yesterday, Bowles-Simpson does indeed have 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).
The Cooper-LaTourette budget purports to have the same ratio of spending cuts and tax increases as Bowles-Simpson, but it relies on a different baseline to get there — and that makes all the difference in the world.
What happens, however, if you apply Cooper-LaTourette to the baseline that Bowles-Simpson uses? The ratio of spending cuts to tax increases becomes roughly 7:1. So, as I wrote yesterday, the Cooper-LaTourette plan is far more tilted toward spending cuts, and far less toward tax increases, than Bowles-Simpson.