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Simpson-Bowles, the Sequel: Lawmakers Get Lowdown on New Deficit Reduction Plan

Something for each side to loathe: $740 billion in increased revenue over the next decade and a higher eligibility age for Medicare.

by
Rodrigo Sermeño

Bio

April 25, 2013 - 12:34 am
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Bowles told Newsweek on Friday morning that he had hoped for a “magic moment” in December 2012 – at a time when politicians were dueling over the “fiscal cliff” deal – that would have avoided sequestration. Now, he thinks, Congress has one last chance to get a deal done before Aug. 1 – the time when the government is expected to reach its debt limit.

“We’re trying to push both of the political parties out of their comfort zone and try to get them to make some of the tough decisions we have to make in order for America to have the kind of balance sheet we need to prosper in the future,” said Bowles.

Bowles also warned that excessive debt posed an “enormous risk factor” for governments and defended the case for aggressive deficit reduction, despite an influential paper making the same argument being labeled the product of sloppy statistical analysis last week.

In 2010, Harvard University economists Carmen Reinhart and Kenneth Rogoff published research that argued that high government debt is associated with slow economic growth and that growth is particularly weak when gross government debt exceeds 90 percent of GDP. Last Tuesday, three economists at the University of Massachusetts published a paper arguing that research by the Harvard University duo was subject to “coding errors, selective exclusion of available data, and unconventional weighting of summary statistics that inaccurately represent the relationship between public debt and GDP growth.”

Reinhart and Rogoff’s research was widely cited by supporters of fiscal austerity measures. Simpson and Bowles asked Reinhart to testify before their deficit reduction commission in 2010. Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee and former vice-presidential candidate, pointed to the work by Reinhart and Rogoff in his 2013 budget.

“I know [Rogoff-Reinhart] had a worksheet error in the report – my understanding is that it does make a difference,” said Bowles. “But what it doesn’t change is the common sense and my own personal experience – in both the public and private sector – that when any organization has too much debt, that that is an enormous risk factor. If your risk goes up, people who are lending you money will want more money for their money.”

A highly polarized Congress has made reaching a budget deal a nearly impossible undertaking, which makes the chances of the new Simpson-Bowles plan gaining any traction even more unlikely. In March, the House of Representatives rejected an earlier version of the plan in a 382-38 vote.

At the event, Bowles and Simpson criticized the budget plans proposed by the House and Senate, saying those proposals were primarily “political documents” intended to score partisan points.

“The plan we are putting forward is our effort to demonstrate what needs to be done to bring our debt under control and what can be done if both sides are willing to go beyond their comfort zones to reach a bipartisan agreement,” said Bowles.

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Rodrigo is a freelance writer living in Washington, D.C.

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All Comments   (6)
All Comments   (6)
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How about rainng the interest rates and stop the printing presses. We have a lot of redundant beurocracies. We could abolish the Department of (no)Education. We could close military bases around the world, stop foreign aid, abolish the Davis-Bacon Act and all prevailing wage laws. Plus, lot more.
1 year ago
1 year ago Link To Comment
What is always baffling to me is the fact that most Americans know SSI and Medicare, food stamps, welfare and sundry tax loopholes are going to have to be cut. The politicians think we are married to them when most are not.
The rub comes when we as a people do not want to give up what we have paid into because we (inherently) know the government will not do the right thing with the money. Pay down debt and deficits - they will spend it on new useless programs.
So why should I give up my slice, if you are just going to piss away all the rest?
It is a weird little dance we do...then we re-elect the f*ck He*ds!!!
1 year ago
1 year ago Link To Comment
Once more, these two display their irrelevance in that they fail to advocate the one thing that can get The Leviathan, and it's negative influence upon the economy, under control:

REDUCE THE SIZE AND SCOPE OF GOVERNMENT, AND RETURN TO ITS ENUMERATED ROLE UNDER THE CONSTITUTION!
1 year ago
1 year ago Link To Comment
Simpson-Bowles may be the best we can hope for, but that is a sad commentary on the accountability of the federal Government. In the past such deals which trade new revenues for spending cuts are always one-sided in implementation. Taxes are raised immediately and pocked by the government, but the cuts never come.

And there is another caution. Much as I like and admire old Alan Simpson, he got rolled on the 1986 Simpson-Mazoli immigration in law the same way. He trusted the Democrats to deliver on border security and they didn't. They simply took their 3 million or so new voters and walked away. Same trick: give me what I want now and I'll repay you on Tuesday.
1 year ago
1 year ago Link To Comment
That is why ANY "comprehensive" reform bill is scam. These things should be done one step at time, and the next step not taken until the first is completed to the satisfaction of the American People.
First step in "immigration reform" should be "Secure the Borders."
1 year ago
1 year ago Link To Comment
"...He trusted the Democrats..."

Well, there's where the experiment failed...
1 year ago
1 year ago Link To Comment
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