The best and worst of Simpson-Bowles

By Ezra Klein
Washington Post Staff Writer
Friday, December 3, 2010; 10:39 PM

There are a few ways to look at the final vote on the Simpson-Bowles plan. One is that the 11 votes they got is fewer than the 14 votes they needed to recommend the plan to Congress. Another is that the 11 votes they got is not only more than a majority, but more than 60 percent, so if this had been the Senate, the plan would've just beat a filibuster. A third is that the 11 votes they got were not 11 votes for the plan; rather, there were some votes for the plan and some votes for the plan as a starting point for debate.

But with a liberal like Richard Durbin and a conservative like Tom Coburn both endorsing the plan as a good start, it's got enough credibility for Congress or the president to take it on - and that's really all it could ever have done. Now it's up to the relevant politicians, as, in the end, it always was. As for the policy they were voting on? Here's the best and the worst of it:

The best

A payroll tax holiday in 2011: Alan Simpson and Erskine Bowles say Congress should consider the panel's proposal for a payroll-tax holiday in 2011, a measure aimed at stimulating the economy. A nod toward the need for policies speeding recovery is better than ignoring that need altogether.

Process, process, process: The panel's chairmen correctly identify congressional inertia as the central impediment to deficit reduction and seeks to address it. To enforce discretionary spending cuts, they make spending that busts budgetary caps ineligible for the reconciliation process, demand that Congress take a separate vote and instruct the Office of Management and Budget to cut appropriations across the board by the amount that Congress has overspent. Inertia, in this case, favors the deficit hawks.

On the health-care side, they strengthen the Independent Payment Advisory Board by applying it to all health-care providers sooner. They also push tax reform through a "fail safe" that automatically increases taxes if Congress doesn't rework the system by 2013.

Defense spending and tax expenditures: The commission's most positive impact has been to move two formerly sacrosanct categories of spending onto the table. There's a lot of money in defense, but when Washington talks about cutting spending, it usually talks about "non-defense discretionary spending." The plan cuts equally from defense and non-defense spending. Tax expenditures like the mortgage-interest deduction also typically get a pass, but here they come under the knife.

A two-sided deal on Social Security:I don't particularly like the Social Security recommendations, but I like this vision of a deal that's more than just cuts and taxes. The proposal sharply increases Social Security's minimum benefit, making it a better deal for poor retirees. It also increases benefits for very old retirees, who may have outlived their savings.

The worst

The tax section: In an odd bid to win Republican support, Simpson-Bowles recommends capping tax revenue at 21 percent of gross domestic product. That's higher than it is now or than it has been historically. But we're also a larger, older country with more social spending to support. The commission's mandate was to balance the budget, not decide the size of government.

The 2012 start date: Simpson and Bowles would start their cuts in 2012, as they assume the economy will have recovered by then. But what if it hasn't? A better approach would've been using an economic indicator as a trigger. For instance, we could've continued stimulative measures like unemployment insurance and a payroll-tax cut until the unemployment rate dipped to 6.5 percent and then, when that milestone was hit, moved to austerity.

Raising the retirement age: If we want to cut Social Security benefits, we should cut Social Security benefits. Raising both early and full retirement ages mainly penalizes those who hate their jobs or can no longer physically fulfill them. That's not the right way to reform Social Security.

Hobbling government: Among the plan's worst ideas is to cut congressional budgets by 15 percent. Given the complexity of modern life, members of Congress are probably understaffed now. Taking away staff just means lawmakers will be more ignorant about bills and more reliant on lobbyists and outside players.

The same goes for the plan's other aggressive cuts to government. "Washington needs to learn to do more with less, using fewer resources to accomplish existing goals," the report says. But that's magical thinking. Companies and governments typically do less with less, and while having less saves money on the front-end, too few banking regulators with too low pay, for instance, might cost us a lot more later on.

Health-care cowardice: The plan's health-care savings largely consist of hoping the new health-care law's cost controls work and expanding their power and reach. In the event that more savings are needed, Simpson-Bowles throws out a grab bag of liberal and conservative policies, ranging from a public option and government purchasing to Medicare privatization, but the plan doesn't really put its weight behind any of them. Given that health-care costs are the single biggest driver of our budget problem, the decision to hide from big questions here is disappointing.

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