“This revenue, even if you take it together with the revenue from January, it’s still less revenue than the revenue that was embedded in the bipartisan Simpson-Bowles plan.”
— Rep. Chris Van Hollen (D-Md.), ranking member on the House Budget Committee, during an appearance on MSNBC’s “Morning Joe,” March 13, 2013
The 2010 Simpson-Bowles deficit-reduction plan remains the lodestone in Washington for serious efforts to overhaul the nation’s tax and spending priorities, with members of both parties often comparing their efforts to the goals set by the commission headed by former senator Alan Simpson and former White House chief of staff Erskine Bowles.
A few months ago, Van Hollen earned Two Pinocchios for asserting that the president’s budget contained “more health-care savings than the bipartisan Simpson-Bowles Commission.” That turned out to be incorrect, at least when looking at the first 10 years after enactment.
Now, van Hollen is arguing that the budget plan unveiled by Senate Democrats has fewer tax cuts contained — or, as he put it, “embedded” — than in Simpson-Bowles. Let’s take a closer look at this claim.
First of all, this is a question of numbers, not specific policies. Senate Democrats call for $975 billion in new taxes with vague language — “by eliminating loopholes and cutting wasteful spending in the tax code that benefits those who need it least.” (Who could argue with that?) The Simpson-Bowles Commission, by contrast, called for an extensive overhaul of the tax code, including cutting tax rates while eliminating loopholes.
Second, as we have noted before, the Simpson-Bowles plan was for the years 2012-2020, so adjustments in the numbers need to be made in order to compare it with any current budget plan. These plans cover a different budget window — the years 2014 to 2023.
We consulted with Ed Lorezen, senior adviser for the Committee for a Responsible Budget and a former staff member of what is more properly known as the National Commission on Fiscal Responsibility and Reform. He recalculated the numbers so that we would have an apples-to-apples comparison, though he cautioned that an exact estimate about Simpson-Bowles is “extremely complicated” because projected tax revenues are affected by factors such as underlying economic projections.
Still, he believed that the $995 billion in additional revenue called for in the 2010 report — of which $785 billon came from a tax overhaul — would translate into about $1.3 trillion to $1.6 trillion in the current 2014-2023 budget window.
But there is another wrinkle, which is why van Hollen used the curious phrase “embedded.”
The Simpson-Bowles report had assumed that the Bush-era tax cuts for individuals making more than $200,000 and couples making more than $250,000 would expire, as well as certain estate tax provisions, and thus had included that revenue as part of its revenue baseline. That revenue thus was not part of its actual proposal, since it assumed the tax cuts would disappear. It didn’t quite work out that way.
“That would represent roughly an additional $1 trillion in revenues embedded in the baseline from 2014-2023,” Lorenzen said. (There’s that word again.)
That adds up to at least $2.3 trillion in new tax revenues in Simpson-Bowles. (The commission report implicitly accepted Obama’s health care law, which also included new taxes.)
By contrast, the “fiscal cliff” negotiations yielded about $700 billion in this time period, as the tax increase mainly hit individuals earning more than $400,000 per year and couples earning more than $450,000. (Small wonder that some Democrats think President Obama negotiated a poor bargain.)
Meanwhile, the Senate Democratic proposal would add just under $1 trillion to that amount. That brings us to a total of about $1.7 trillion over 10 years.
Do the math: $2.3 trillion in new revenue for Simpson-Bowles versus $1.7 trillion for the Democrats.
The Pinocchio Test
Van Hollen said that Senate Democrats are proposing fewer taxes than the Simpson-Bowles Commission sought in its deficit-reduction proposal. He carefully used the word “embedded,” meaning including revenue assumed by the commission, if not actually detailed in its budget proposal.
Looking strictly at the numbers, as opposed to details of the policies, he’s correct. The Democrats’ plan would yield at least $500 billion less revenue over the next decade than the commission proposal — which, to be fair, was never formally adopted because it received 11 of 18 votes, short of of the 14-vote supermajority required to approve the report. One person on the panel who voted against the report was Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee--as did two other Republicans and three Democrats serving either in the House or Senate.
Van Hollen earns a rare Geppetto Checkmark.
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