Here's how the Bowles-Simpson, Obama, and Republican fiscal cliff plans match up
If you're reading this, it's probably too late to save yourself. We're already over the fiscal cliff plan cliff. That's a lot of cliffs, but it's not nearly as many cliffs as there are plans. From Domenici-Rivlin to Bowles-Simpson to just Bowles, there's a dizzying array of blueprints. It's bad enough that 25 percent of respondents told PPP polls they had an opinion about the Panetta-Burns plan
. There is no Panetta-Burns plan. (At least not yet.)
It's not hard to imagine what Panetta-Burns would look like, if it actually existed. Like all the other debt plans, it would include the $1 trillion in discretionary spending savings
from the Budget Control Act (BCA), aka the debt ceiling deal, and the $800 billion in savings from not fighting the wars anymore.
But you know what they say: the first $2 trillion is the easiest. It's the next $2 trillion or so where things get tricky. That's where the "plan" part of the plan comes in. The Center for American Progress
have both offered good blueprints, but let's focus on Bowles-Simpson as a model, because of its totemic status inside the Beltway. The chart below, courtesy of the Center on Budget and Policy Priorities
, looks at the savings from Bowles-Simpson over the next decade that haven't already been enacted -- in other words, excluding the BCA. (Note: All amounts are in billions
That's a lot of new taxes. Bowles and Simpson get their $2.6 trillion in new revenues by first assuming the Bush tax cuts for the rich expire -- that adds $800 billion or so to their baseline -- and only then
embarking on the "fundamental tax reform" of lowering rates and broadening the base. And boy, do they broaden the base. Bowles-Simpson would turn the mortgage interest and charitable giving deductions into 12% nonrefundable credits, phase out the employer healthcare exclusion by 2038, tax municipal bonds, cap tax-preferred retirement contributions to $20,000 or 20 percent of income and eliminate all other tax expenditures
. Oh, and they would tax capital gains and dividends as ordinary income. Even with a top marginal rate of 28 percent, that's a lot more money coming into the IRS -- especially compared to President Obama's plan.
As you can see in the chart below, which is scaled to the Bowles-Simpson chart, Obama raises just over 60 percent as much revenue as those centrist, Gangnam-style dancing deficit cutters
. Shariah socialism ain't what it used to be.
Obama would actually raise $1.6 trillion in new revenue, but that nets to $1.4 trillion after you include the $200 billion or so of additional stimulus he wants -- everything from extending unemployment insurance and the payroll tax cut to new infrastructure projects and mass refinancings. The $1.6 trillion in new taxes
would come exclusively from high earners, and it would come in two steps. First, it would let the Bush tax cuts for the rich expire, and then it would limit the size of deductions they can take. This is about as much money as Bowles-Simpson would raise from the rich, with their plan getting $1.25 trillion from the top 1 percent and $220 billion from the rest of the top 5 percent. On the cuts side, most of Obama's cuts come in healthcare spending, and most of those come from letting Medicare negotiate better drug prices and limiting payments to facilities like nursing homes, as Sarah Kliff
of the Washington Post
The Republican plan is about the same size as Obama's plan, but tilted more towards spending cuts -- and vagueness. The chart below, also scaled to the Bowles-Simpson one, breaks down Boehner's counteroffer.
This looks like a real plan, but it's more like a facsimile of a sketch of a real plan. Republicans say they're willing to increase revenues by $800 but they aren't willing to say how exactly. A $50,000 deduction cap
like Romney proposed during the campaign would get them most of the way there, if they kept rates where they are now. But Republicans don't want to keep rates where they are now. They want to cut rates. That likely takes their tax plan into the realm of mathematical impossibility, as Greg Sargent
of the Washington Post
points out. There's not much more specificity on the spending side. Republicans wants $600 billion in healthcare cuts, but they've only identified $100 billion or so of them -- that's how much money the Congressional Budget Office
estimates raising the Medicare age to 67 would save over the next decade.
The chart below puts all of this together into one chart to rule them all, breaking down each of these three plans side-by-side. Let's see if we can make out the glimmer of a grand bargain.
There are three big questions, or stumbling blocks if you prefer, here.
1. How much revenue? Taxes will go back to their Clinton-era levels for everybody if January 1 comes and there is no deal. (Actually, they'll be a bit higher for high earners thanks to the 3.9 percent Obamacare surtax on capital gains). Will the Republicans really block a bill that extends the Bush tax cuts for 98 percent of households? And if not, will they sign off on cutting deductions for top earners?
2. Any more discretionary cuts? Republicans want more discretionary cuts. Obama thinks the BCA had all the discretionary cuts we need.
3. Which inflation?
Republicans want to use smaller, chained CPI to calculate, among other things, Social Security benefits. In other words, cuts. The left-leaning Center on Budget and Policy Priorities
has tentatively endorsed this as part of a broader debt deal, so it's possible Obama might sign off on this.
It's not too hard to see the outlines of a grand bargain. A deal that raises $1.2 trillion in revenue -- halfway between Obama and Republicans, cuts $400-500 from Medicare between lower drug prices and means-testing, and adopts chained CPI for budget and benefit calculations -- without cutting discretionary spending anymore -- could get the job done.
Call it Panetta-Burns.
Bonus chart time! Here's the quick side-by-side of the Bowles-Simpson, Obama and Republican plans, scaled, of course.