What is the Simpson-Bowles Commission? (and why does it still matter?)

November 27, 2012

President Obama speaks with former Republican senator Alan Simpson (Wyo.) as he walks out of the Oval office to deliver remarks in the Rose Garden. (Yuri Gripas — Reuters)

(An earlier version of this post incorrectly described some of the commission’s proposals. It did not propose lowering income tax rates for capital gains and dividends; it called for treating them as ordinary income. And the panel proposed scaling back, not eliminating, tax deductions for home mortgage interest. This version has been updated.)

After most bipartisan commissions make recommendations on a pressing issue of the day, presidents and lawmakers have a tendency to ignore them.

But this time could be different. The recommendations of the National Commission on Fiscal Responsibility and Reform, which completed its work two years ago, are getting a second look as President Obama and Congress seek to avert a forthcoming “fiscal cliff” of automatic spending cuts and tax increases.

Faced with a sagging economy and growing concerns about the nation’s mounting debt, Obama tapped former White House chief of staff Erskine Bowles and former Republican senator Alan K. Simpson in February 2010 to co-chair the bipartisan panel. Bowles served in the White House during the Clinton administration and was one of the chief negotiators of the last bipartisan budget agreement in 1997. Simpson retired from the Senate in 1996, but maintained wide respect among members of both parties, and Obama hoped his involvement would spur Republican support.

Bowles and Simpson were joined on the panel by six House lawmakers and six senators evenly divided among the parties, as well as two business executives, a labor union president and former White House budget director Alice Rivlin. After months of negotiations, they unveiled a series of proposed spending cuts and tax increases so controversial that the panel itself failed to reach agreement on a plan.

The panel’s final report called for roughly $3 in spending cuts for every $1 in new revenue and called for a series of politically risky ideas, including sharp cuts in military spending, setting the retirement age on a course to rise to 69 by 2075 and reforms that would ultimately cost the average taxpayer roughly $1,700 more per year.

The group recommended raising taxes by nearly $1 trillion by 2020, primarily by eliminating popular deductions for home mortgage interest and employer-paid health insurance, and a 15-cent hike in the federal gas tax. But the commission also called for treating lower income tax rates as ordinary income. It also called for scaling back tax deductions for home mortgage interest.

The report called for reducing government spending through changes to Social Security, Medicare and Medicaid, freezing the salaries of federal employees and cutting about 200,000 federal jobs over the next decade through attrition.

The commission voted on the proposal in December 2010, but failed to approve the plan. Had it passed, the measure would have moved to Congress for a vote.

Obama never fully embraced the commission’s plans, and it earned mixed reviews on Capitol Hill, where Republicans supported the proposed entitlement reforms, and Democrats favored the increased taxes for higher-income earners. Regardless, Simpson and Bowles continue to push for big reforms.

But since Election Day, several lawmakers of both parties have suggested that at least some parts of the plan Congress previously dismissed should be part of the ongoing negotiations. Observers believe that many of the commission’s plans to cut federal spending could be included in a final deal.

So will the Simpson-Bowles blueprint guide the nation back to fiscal health or will it wither away along with other bipartisan proposals of recent years? Time will tell.

Share your thoughts in the comments section below.

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Ed O’Keefe is a congressional reporter with The Washington Post and covered the 2008 and 2012 presidential and congressional elections.
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