Last week Fix the Debt co-founders, Alan Simpson and Erskine Bowles, released their latest fiscal plan. It would reduce the deficit by $2.5 trillion over a decade. The plan adds great detail to the framework the duo announced earlier this year. While Fix the Debt has not endorsed any specific proposals, the approach put forward by Simpson and Bowles presents a path toward a bipartisan agreement on a deficit-reduction plan that meets the principles and goals set out by the Campaign.
The purpose of the proposal is not to replace the plan that they produced as co-chairs of the President’s National Commission on Fiscal Responsibility and Reform, but to illustrate a comprehensive, bipartisan approach that leverages areas where common ground can be found. As Simpson and Bowles say in the preamble to the new report:
The plan we have put forward here is not our ideal plan, it is not the perfect plan, and it is certainly not the only plan. It is an effort to show both sides that a deal is possible; a deal where neither side compromises their principles but instead relies on principled compromise. Such a deal would invigorate our economy and demonstrate to the public that Washington can solve problems, and leave a better future for our grandchildren.
The plan is a balanced, comprehensive approach that addresses all parts of the budget. In addition to the $2.7 trillion in deficit reduction already enacted, not including sequestration, the new Simpson-Bowles plan would produce a total of $5.2 trillion in deficit reduction, enough to bring the debt down to about 69% of GDP in 2023 and putting it on a clear downward path as a share of the economy.
There are five key components to the plan:
- Tighten and Strengthen Discretionary Caps to demand additional efficiency from Washington in place of abrupt across-the-board cuts by restoring 70 percent of the sequestration cuts in 2013 and limiting the defense and non-defense spending growth to inflation through 2025.
- Reform Federal Health Spending to reduce subsidies for better-off beneficiaries, reform and reduce provider payments, reduce fraud, abuse, and overpayments at all levels of the health care system, modernize cost-sharing rules with new cost protections, gradually increase the Medicare age with a buy-in at age 65, and re-orient incentives for doctors, hospitals, lawyers, and beneficiaries to improve the delivery of health care and truly "bend the cost curve."
- Identify Additional Spending Cuts to reduce various government subsidies, modernize the military and civilian health and retirement systems, improve the financial state of the PBGC, postal service, and Pell Grant program, cut low-priority spending, and impose various user fees.
- Enact Comprehensive Tax Reform which uses a "zero plan" model as a starting point to dramatically reduce the size and number of tax expenditures in the code, sharply reduce rates, improve overall simplicity and move toward a territorial system to promote growth and generate revenue. Tax Reform should be written by the Committees but enforced with an across-the-board tax expenditure limitation.
- Implement Government-Wide Reforms to reduce waste, fraud, and abuse and more accurately measure inflation within the budget and tax code while providing new protections for low-income individuals and the oldest beneficiaries.
The plan also calls for reforms on a separate track to the Social Security and transportation trust funds to make them sustainably solvent as well as to restrain the growth of federal health care costs. It seeks to reduce long-term deficits in a way that promotes economic growth and protects the most vulnerable.