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Simpson-Bowles Is Back—With More Bad Ideas

You may have heard that Alan Simpson and Erskine Bowles, matinee idols of the Austerity Über Alles movement, have devised a new budget-slimming plan. That’s not quite right. They’ve produced a very rough outline that’s deliberately short on details because, Bowles says, they want to run the numbers by some think tanks.

Why didn’t they check the numbers before calling the press? To ask that question misses the harrumphing, fist-pounding spirit of Washington’s ongoing budget debate in general, and the Alan-and-Erskine show in particular. At a Politico-sponsored “Playbook” breakfast to introduce the new, um, outline, “Playbook” columnist Mike Allen said he found it “pretty remarkable” that neither Simpson nor Bowles had been granted an audience with President Obama since Election Day (never mind that they’ve met with Jack Lew, Gene Sperling, and others in the White House, and talked to Vice President Joe Biden). Who the hell does Obama think he is? It fell to Bowles humbly to explain that “these guys [have] got a lot on their plate. This is one of the things on their plate.”

The new Simpson-Bowles plan, such as it is, consists of four steps. The first two steps have already been taken. These are:

1. Ten-year reductions in discretionary spending legislated in 2010 and 2011, and caps on future discretionary spending, legislated in 2011. Total savings: $1.85 trillion. 

2. Expiration of the Bush tax cuts for income above $450,000 and “minor reductions in discretionary caps and Medicare provider payments,” legislated last month. Total savings: $850 billion.

In Step Two, “savings” means “savings relative to continuation of the status quo,” which is a bit misleading, since the status quo was never going to continue. The Bush tax cuts were set to expire for all incomes as of Jan. 1, 2013. A stricter reckoning would therefore say that the “fiscal cliff” deal (that’s what Step Two is) added about $4 trillion to the deficit relative to what would have happened had Congress done nothing. But Congress was never going to do nothing, if only because raising taxes on lower incomes might have tipped the economy back into recession. 

Between these opposite poles of never-going-to-happens stood Obama’s original tax proposal, which was to cancel the Bush tax cuts for incomes above $250,000. That would have shielded the recovery from harm and brought in twice as much revenue. Me, I’d have set the threshold at $100,000, but even the $250,000 threshold would have put deficit reduction within spitting distance of Congress and Obama’s 10-year goal to lower the deficit by $4 trillion (relative to that status quo that was never going to continue).

All this would lead you to think that Simpson and Bowles, nonpartisan truth-tellers that they’re purported to be, would make Step Three enactment of Obama’s $250,000 threshold (or, even better, my $100,000 threshold). I mean, they want to lower the deficit, right? But instead, Step Three is entitlement reforms (mostly Medicare and Medicaid) and … whaa? … lowering income-tax rates in exchange for eliminating or scaling back “most” tax expenditures. Step Four is to keep future spending in line. (Sure, whatever.)

Lowering income-tax rates while eliminating tax breaks would, Simpson and Bowles say, achieve some unspecified quantity of deficit savings. But if your aim is to reduce the deficit, why not get rid of as many tax expenditures as you can while leaving tax rates constant—or, better yet, raising them a bit? Simpson and Bowles would likely say they’re just being realistic about politics. Republicans won’t eliminate loopholes unless they can lower rates, too.

But as long as we’re being realistic, why not be realistic about the likelihood that a lower-rates-for-fewer-loopholes swap will reduce the deficit? Which is about zero. Simpson and Bowles’s insistence on clinging to the tax-reform fantasy demonstrates that their agenda is not limited to deficit reduction. They also want to lower tax rates. Why? They just want to, is all.