A Simpson-Bowles explainer

Two years after it was released, the Simpson-Bowles plan to solve the debt crisis is hotter than ever. So what is it?

Here’s how Business Insider sums it up:

  1. $200 billion reduction per year in discretionary spending. The highlights of the cuts include a 15% reduction in defense procurement, closing one third of overseas bases, cutting the federal workforce by 10% and eliminating earmarks.
  2. $100 billion in increased tax revenues. Proposed avenues of this tax include a 15 cent per gallon gasoline tax and the cancelation of tax deductions like the home mortgage interest deduction.
  3. Maintain the Obamacare Medicare cost controls and consider the public option for health care reform.
  4. Reduce entitlements like farm subsidies, student loan subsidies, and federal pensions (both military and civilian)
  5. Raise the retirement age for Social Security and raise the payroll tax.

Are you willing, as a taxpayer, to accept higher income taxes and billions in spending cuts for programs you might support? Tell us how you would fix the debt.

We’ll be discussing the plan at 10:20.

  • Bruce

    “Simpson-Bowles”. Thank you for having this segment, every time I heard those names my mind went elsewhere.

    Hopefully I’ll get the gist.

  • Tracy

    YES. Simpson-Bowles is an excellent outline.

    Cap tax deductions; adjust Social Security and Medicare/Medicaid as noted; add modest carbon tax; reduce federal spending as noted (reduce workforce through attrition so as not to spike unemployment and to allow agencies to figure out most efficient use of their reduced workforce) and institute a ‘stepped’ increase over time in federal employee contributions to their pensions (my husband is a federally employeed scientist, so this would definitely bite us specifically, but them’s the breaks; if it’s a stepped increase over time, we can budget for it). Stop subsidizing nonrenewable fuels.

  • Alex Christensen

    It’s really misguided to raise taxes and cut spending when the economy is still so stagnated. That kind of reform is a task for good times. When the economy is struggling, reigning in spending and raising taxes is a recipe for disaster – it’s basic Keynesian economics. The austerity in countries like Greece, Spain, and Portugal has devastated their economies.

    If we try to cut the debt right now, the middle class is going to keep struggling. Incomes will stay low, and then the debt problem will get worse because income taxes will stay low, too.

  • Tracy

    Great point, Alex. I would submit that all these changes should be pegged to certain targeted goals of economic recovery.

  • Mark

    Simpson-Bowles is far too complex.

    95% of our debt has been created since Ronald Reagan came into office.

    Almost all of this debt has been created by fiscally irresponsible tax cuts, giving money away that we needed to pay our bills.

    A very simple approach that will balance the budget is to simply make tax cuts illegal unless the budget is balanced. This will prevent fiscally irresponsible tax cuts that Republicans seem to love.

    It would be a long long time until our next tax cut.

  • Stephanie Curtis

    Alex,

    Just read your comment. Kerri will ask our guests about it after the news break…

  • mary m beckman

    I have never been able to understand why there is a limit on income taxed by the social security tax. Many who have lower incomes pay the tax with every paycheck. Those who are high earners pay for only a few months. In the era of worries about social security, why not tax everybody’s pay all year long. ?

  • Jefferson

    I hope people realize that the ratio of cuts to spending vs revenue increases is closer to 80% cuts vs 20% revenue increases. Many people seem to think that the ratio of cuts to revenue is going to be 50-50. The funny thing is the only part of the equation we seem to be talking about are the revenue increases…that’s a very small portion of the total picture…it’s time to discuss real spending cuts…yes even the Democrats have to come forward with some cuts that should happen in the near future (not 10 years away)

  • Alex Christensen

    Thanks Tracy.

    I agree. Senator-Elect Angus King from Maine (he’s an independent) had a good idea about the fiscal cliff: push off these deficit reduction policies until unemployment is under 5%.

    It’s just off the wall that so much focus is on the debt and deficit right now. The focus needs to be on job creating and GDP raising stimulus: rebuild our infrastructure, invest in renewable and homegrown energy, etc.

    It’s kind of like worrying about where the port is when your ship just hit an iceberg.

  • Alex Christensen

    Thanks Stephanie. I’m excited to hear their answers!

  • John Theissen

    The first question one should ask is: what unneccessary spending can we get rid of. The US squanders large amounts on subsidies to the oil companies, the sugar industry, millionaire cotton and peanut plantation owners, and military spending.

    It’s difficult to take pundits seriously when they talk about cutting Medicare, Medicaid, etc., when they don’t mention the collosal spending on corporate subsidies and military spending.

  • Jefferson

    mary m beckman – [I have never been able to understand why there is a limit on income taxed by the social security tax. ] *** It’s because the SS system was set up as a quasi-savings system for older people…it was not supposed to be a welfare system where the rich pay in everything and get almost nothing from SS. To ask for no cap would mean you’d be paying the rich even more (is that necessary?) on every dollar they put into SS otherwise it becomes a welfare program. What you’ll probably see is an increase on the cap…the rich already get screwed on the SS system while the poorer people get much more than they put into the system. I looked at the numbers with my dad who just took SS…he will take out more than he put into SS within 6 years…before he turns 70. That’s why SS is going broke.

  • John

    Thank you for the segment and the written summary. It’s obvious that the debt will take some sacrifice.

    Question: what is the timeline here? How long will this take us to be debt-free (or at least get thing sunder control)?

    Thank you,

    John

  • Mark

    Any politician who demeans Social Security and Medicare by calling them “entitlement programs” should be voted out of office.

    I am one of the generation that has paid for both Social Security and Medicare all of my working life, since I was 16 years old. Those who fail to respect these programs should not be serving the people.

  • Jefferson

    Can you ask about Bowles-Simpson and the ratio of spending cuts vs revenue increase? That hasn’t been discussed and every Democrat I’ve ever heard talk about fixing the debt seems to believe the ratio should be 50-50…which is not correct. I’d like if you could clear up this misconception on the show.

  • Alex Christensen

    In response to the guest referring to long-term vs. short-term reforms, and this recession vs. long-term entitlement reform.

    I totally agree that reforms wouldn’t affect the macro environment right now.

    The issue is political capital and time. If we are spending our time right now on long run reforms, we aren’t focusing on stimulating the economy and jobs market.

    Then the economy will continue middling with recovery but not actually recovering – and all the budgetary projections will be off because revenues will stay too low.

  • Kathy McNulty

    If we want to save

    Social Security why not eliminate the $106,000 ceiling for contributions.

  • Kim

    In a word, Yes. The government could start with letting ALL Bush-era tax cuts expire. I agree with implementing 1-3 above, possibly considering either means testing or a cap on home values eligible for the mortgage tax deduction. Farm subsidies to corporate farms and big oil, etc. should definitely go, but support for small family farmers should still be considered. I am concerned about the future effects of cutting student aid on the country. I also feel that most citizens who rely on federal pensions actually earned those and are entitled to them, especially workers who are deemed ineligible for Social Security because of their federal pension. Lastly, the income cap for the Social Security tax should be raised in some way.

  • Henry

    Two of the most important things that can be done to solve the debt? End the Prohibition of the world’s most utilitarian plant, Cannabis/hemp, and end the failed War on Drugs (¡¿how dare we keep these oppressive programs in place?!).

    The increased revenue, health, liberty and inspiration will prosper the people and the planet (not to mention the United States of America).

  • Patrick Zimmerman

    Does the Boles-Simpson plan include, or should it include, a balanced budget amendment?

  • Jefferson

    Kathy McNulty – [If we want to save Social Security why not eliminate the $106,000 ceiling for contributions.] *** Then lets call it the Social Security Welfare program instead of Social Security. The real fix to SS is increase the cap to around $150k+ and then change the calculation of inflation to use the consumer price index instead of the salary index and increase the age of eligibility over time (something like 1 year per decade for the next 2 decades). SS isn’t a big deal to fix, something similar to what Reagan did will solve it for 75 years…it’s Medicare where we have issues…does anyone have a good fix for Medicare? I haven’t heard a single plan from the left…I’d love to hear a plan or even an idea.

  • Paul – Duluth, MN

    YES! I would definitely pay more in taxes if I were assured that it is spent well. I want a personalized statement which itemizes exactly where each and every cent of my tax payment is being used.

    BIG FIX: No more “loopholes”! If there is a way for a person or a company to “cheat” on taxes, they will abuse it. Get rid of deductions and income tax return. Calculate the correct amount from the beginning. Everyone pays the same percentage. Collecting taxes should be automatic. How much money would it save if there were no tax forms or paperwork, audits, investigations, or refunds for “overpayment”? The entire system needs to be overhauled and streamlined with no way for anyone to misuse it.

  • Luke Weinhagen

    Austerity in the European is not an attempt to prevent insolvency, it is a result of insolvency.

    If investors no longer believe your tax base can provide a return on the bonds they hold, they stop investing in those bonds. It doesn’t matter if you advocate Keynesian economic models, Austrian economic models or Martian economic models, if investors do not believe they will make money investing in your country, they stop investing.

    When your economy is debt based, and lenders stop lending, you are forced into “Austerity”. Austerity simply means living within your means, even if those means are next to nothing.

    The government forcing us to spend, by taking our money in the form of taxes and spending it, does nothing to increase the means available in our economy. How many credit rating decreases and deficit increases do you think we have before outside investors stop dumping money into our economy? This is the gamble we are making now.

    We can embrace “austerity” now, while we still have the option to borrow if needed, or we can wait for it to be forced on us when we can no longer borrow any new value into the economy.

  • Paul Segal

    Stop Spending. Less Government intervention. Show me a problem with our free market system and I’ll show you governmenty intervention. Stop Foreign aid for tecnology research that we have already researched and developed in this country. Why would we give billions of our money to Brasil to study deep water drilling?. They are a wealthy county with a reasonably strong economy. Stop spending cuts on defense or intelligence. Stop Pork spending to buy votes on bills that create more Government spending your taxes, Stimulus, healthcare reform??? Pay our Congressional members an average American’s Salary. limit Presidential vacations, campaigning and spending for photo opportunities. Encourage all business to grow, provide jobs, services and products by tax incentives nor by more taxation. The role of Government is to unite the states in Trade, Defense, protect our Constitution and the pursuit of happiness. Our Govenment cannot manage a simple basic program such as Social Security, they need to stay ourt of business altogether. The Government is over reaching and create our problems. Then we look at them for solutions. The peole need to get and understanding…Get involved. talk to one another. Thanks, Paul, Psegal01@ yahoo.com

  • Paul Segal

    Simpson Bowles is too embedded in politics. We need real solutions. If the government creates the problems, Why look to them for the solutions. Get them out of business. Economy is our problem to solve and we cannot due it via politics. We need political parties out of it. We can come up with more realistic solutions… Now lets get to work!