Fiscal Future Daily: The Moment of Truth, but For Whom?Dec 01, 2010
The plan facing a vote by the presidential deficit commission this week is titled The Moment of Truth, and the commission itself is certainly at that point. If the plan doesn’t get 14 votes among the commission members, it may not even be considered by Congress. But is the “moment of truth” for the commission the same as the moment of truth for the nation? Congress still has to decide whether to adopt the report, which is unlikely to happen this year. So getting a deal that Congress will pass and President Obama will sign will provide plenty of moments of truth in the next few months.
Even more importantly, the public has to start considering what they’re willing to do about this problem. Are Americans ready to accept spending cuts and tax increases to get the country on a fiscally responsible course? And if they’re not willing to accept the deficit commission’s idea of what that mix should be, will they accept something else? Because doing nothing isn’t a good option.
So the real moment of truth here may be as millions of Americans look at the news reports on this plan, and think, “Is this what it takes?”
What’s Actually In The Plan
The plan crafted by deficit commission co-chairmen, Erskine Bowles and Alan Simpson, will be voted on by the full commission on Friday, and was released to the public today. In many ways it’s similar to the original Bowles-Simpson plan put out earlier this month, reducing the deficit by about $4 trillion over the next decade and raising revenue by about $1 trillion.
But the plan does make some additional changes, adding deeper cuts in spending and pulling back on caps for medical malpractice awards. The new plan also includes an idea from another deficit plan put out earlier this month by the Bipartisan Policy Center, namely, a “payroll tax holiday” to stimulate the economy.
You can read the “Moment of Truth” document here
We’ve collected a few links for you to some good basic summaries of this report: from the Associated Press, the New York Times, and the Washington Post. Also worth a read: Derek Thompson at The Atlantic Wire does an outstanding job of summing up the proposal (with commentary): The Plan to Balance the Budget: The Fiscal Commission’s Final Report
A Quick Tour Through Early Reaction
Ezra Klein at the Washington Post lists four things he likes and five he dislikes:
The best and the worst of the fiscal commission’s final report
Esquire magazine, which has its own deficit plan, says the commission was “doomed from the start” because no active politician is going to make these kinds of decisions. “These guys live and breathe for public approval, and if the president thought they were going to set aside party loyalties and make the tough, unpopular decisions this crisis requires, he really hasn’t spent enough time in Washington.”
Where Obama’s Debt Panel Went Wrong
The Atlantic wraps up some early reaction with this equally cheery headline:
Is Obama’s Debt Panel a Political Death Panel?
Fox’s Jim Angle brings to center stage a key quote from Bowles about the commission’s accomplishments to date: “It’s basically been to start an adult conversation here in Washington about the dangers of this debt and the deficits we’re running. It is the exact same conversation that every single family, every single business, every state and every municipality has been having for the last several years.”
Deficit Reduction Proposal Version 2.0
Matt Yglesias at Think Progress points out that over the next 10 years, the plan would increase the national debt compared to current law (but after that would do better). “Wouldn’t it be easier politically to stick with current law than to do Simpson-Bowles’ huge series of unpopular changes?” he asked.
Berkeley economist Brad DeLong says “This is worse than I had thought, even though I thought this was going to be very bad.”
The Concord Coalition comes out in favor of the plan, saying “If everyone holds out for their own version of perfection, we will never be able to get beyond partisan gridlock:”
Concord Coalition Praises Bowles-Simpson Plan
The progressive Our Fiscal Security coalition, which has its own plan, is opposed, and says: “The Commission’s recommendations would guarantee that America’s greatest days are behind us:”
Fiscal Commission “Ignores Real Needs of American Families; Would Ensure Our Greatest Days Are Behind Us”
There’s More Budget News. Really.
The Congressional Budget Office reports that the much-maligned Wall Street bailout, also known as TARP, will end up costing the government only $25 billion (as opposed to the authorized $700 billion):
TARP expected to cost U.S. only $25 billion, CBO says.
And Gallup reports that most Americans want the Bush tax cuts extended in some form, although there isn’t a majority for any specific strategy. The survey also found that more Americans would make the cuts temporary than permanent.
Vast Majority Wants Some Aspect of Bush Tax Cuts Extended.
Chart of the Day
This chart from the Fiscal Commission report sets out the different possibilities. The boilerplate from the report is below, but basically the “alternative fiscal scenario” line is the most likely scenario for what’s going to happen, since it assumes the government keeps doing what it’s doing now. The “baseline fiscal scenario” is what happens if Congress follows the law as written today, which includes letting the Bush tax cuts expire and the estate tax makes a comeback; and then there’s the commission’s proposal:
The Extended-Baseline Scenario generally assumes continuation of current law. The Alternative Fiscal Scenario incorporates several changes to current law considered likely to happen, including the renewal of the 2001/2003 tax cuts on income below $250,000 per year, continued Alternative Minimum Tax (AMT) patches, the continuation of the estate tax at 2009 levels, and continued Medicare “Doc Fixes.” The Alternative Fiscal Scenario also assumes discretionary spending grows with Gross Domestic Product (GDP) rather than to inflation over the next decade, that revenue does not increase as a percent of GDP after 2020, and that certain cost-reducing measures in the health reform legislation are unsuccessful in slowing cost growth after 2020.
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Fiscal Future Daily is produced by Public Agenda for Choosing Our Fiscal Future, in partnership with the National Academy of Public Administration and with support by the John D. and Catherine T. MacArthur Foundation. The editor in chief is Scott Bittle, with contributors Francie Grace, David White, Jen Vento, Hart Hooton and Tom Watson.