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Sullivan Likes Our Take on Bowles-Simpson

October 23, 2012 at 10:45 AM

10-2-12bud.JPGIn the latest Tax Notes, Martin Sullivan has some kind words for our recent report, “What Was Actually in Bowles-Simpson?”  He notes that the “much-touted Bowles-Simpson deficit reduction plan is widely characterized as reducing the deficit by $4 trillion and having a 2-1 ratio of spending cuts to tax increases.”  But, Sullivan writes, an “eye-opening study by Richard Kogan of the Center on Budget and Policy Priorities blows this myth out of the water” by showing that it understates both the amount of deficit reduction in Bowles-Simpson and the share coming from revenue increases.

Sullivan explains that the “misunderstanding is because of inconsistent use of baselines.  Back in 2010, the Bowles-Simpson plan computed savings over an eight-year period and used a baseline that assumed the Bush tax cuts would not be extended for the wealthy.”

Our paper shows that, relative to an updated baseline that covers the coming ten years and assumes that policymakers extend the upper-income tax cuts (as well as other expiring policies), the Bowles-Simpson plan outlined in 2010 would raise revenues by $2.6 trillion and cut spending by $2.9 trillion.  (Policymakers have since enacted $1.5 trillion of those spending cuts.)  Together with the resulting interest savings, the plan would reduce the deficit by $6.3 trillion.


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