What you need to know about the new Simpson-Bowles plan

February 19, 2013

1) You can download it here.

2) The new plan intends to save $2.4 trillion — which would replace and double the savings of the sequester — beyond the $2.7 trillion in deficit reduction that's already been enacted. So that's $5.1 trillion in total deficit reduction.

3) The new plan includes about $600 billion in revenue through tax reform, which would mean total new revenue would be about $1.2 trillion after including the fiscal cliff deal. So-called "chained-CPI", which increases revenue as well as cutting Social Security benefits, would push that to about $1.3 trillion. That's around what President Obama proposed in his final offer during the fiscal cliff negotiations, but it's less than half the new revenue contained in the original Simpson-Bowles plan. So Simpson and Bowles have revised the tax ask way, way down.

A note on that graph: The numbers for Simpson-Bowles 1.0 come from the Center on Budget and Policy Priorities, and they cover 2013-2022 while the numbers for Simpson-Bowles 2.0 cover 2014-2023. Updated numbers for Simpson-Bowles 1.0 would show slightly more in taxes and slightly more in spending cuts. Both sets of numbers count interest savings under spending cuts, as that's how the original Simpson-Bowles plan counts it.

4) A more detailed comparison isn't yet possible. What we have so far is an outline, not a plan. We don't know the size of the discretionary cuts. We don't know the size of the mandatory cuts. We don't know any of the policies save for chained-CPI. All of that's forthcoming. "Right now, all they’ve released is a framework," says Marc Goldwein, policy director at the Center for a Responsible Federal Budget. "They want to spend a couple of weeks getting comments and input."

5) The exact numbers haven't been released yet, but total discretionary spending cuts will be lower than in the original Simpson-Bowles plan, Goldwein tells me.

6) This isn't meant to be an update to Simpson-Bowles 1.0. Rather, it's meant to be an outline for a new grand bargain. To that end, Simpson and Bowles began with Obama and Boehner's final offers from the fiscal cliff deal. That helps explain why their tax ask has fallen so far: Obama's final tax ask was far lower than what was in the original Simpson-Bowles plan, while Boehner's tilt towards spending cuts was far greater than what was in the original Simpson-Bowles.

7) That said, while this plan doesn't include more tax increases than Obama asked for, it does include significantly more than the $1 trillion in spending cuts than Boehner asked for — about $500 to $700 billion more, if I'm reading it right. In increasing the total deficit reduction, Simpson and Bowles have put the weight on the spending side of the budget.

8) In that way, this plan sacrifices the most useful element of the original Simpson-Bowles effort, which was that it created a model — not the only model, of course — for how you might go about reducing the deficit if you weren't bound by the various promises, interest groups and political constraints of the two parties. This plan, by contrast, is an effort to split the difference between the two parties while amping up the total deficit reduction.

Correction: The original graph didn't include interest savings for the original Simpson-Bowles plan. It's been updated.

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Neil Irwin · February 19, 2013