The New Republic: In Defense Of The Deficit Proposal

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President Barack Obama speaks with co-chairs of the Deficit Commission.

President Barack Obama speaks with co-chairs of the National Commission on Fiscal Responsibility and Reform Erskine Bowles (L) and Alan Simpson (R) at the White House. The proposal put forth by the Commission has been criticized on both sides of the aisle. Alex Wong/Getty Images hide caption

itoggle caption Alex Wong/Getty Images

The Editors

No one expected the deficit commission's report to get a warm welcome. But the reaction, particularly from liberal groups, to a draft version commission co-chairs Erskine Bowles and Alan Simpson released Wednesday was positively frigid. AFL-CIO President Richard Trumka said that it amounted to telling "working Americans to drop dead." House Speaker Nancy Pelosi labeled it "simply unacceptable."

There is plenty wrong with the proposal, but does it actually deserve the sneering, dismissive response it is receiving? Not even close. In fact, the report — which has spawned headlines suggesting seniors will be reduced to eating cat food — actually contains a number of good ideas.

For one thing, Bowles and Simpson have taken a smart line on tax deductions and the like. Currently, we are losing approximately $1.1 trillion to policies such as the mortgage-interest tax deduction. And that deduction, just like the deductibility of health-insurance, overwhelmingly favors the people who need it the least: the wealthy. Ending such preferences would be a fundamentally progressive move, not to mention a fair and effective way to reduce the deficit.

Bowles and Simpson also refused to treat the defense budget as sacrosanct — proposing tens of billions in cuts to unnecessary weapons programs and laying off many defense contractors. Maintaining America's military dominance should be a key priority for those on both the left and the right. But, as Gregg Easterbrook argues in the new issue of The New Republic, preserving our military strength need not be synonymous with squandering billions on wasteful, largely useless Pentagon programs. Bowles and Simpson seem to recognize this.

The report also largely endorses the cost-cutting mechanisms established by Obama's health care reform legislation — and, in fact, would strengthen them, going so far as to suggest implementing a robust public option. Bowles and Simpson also propose raising the gas tax and reducing farm subsidies by $3 billion — smart ideas that liberals should embrace.

Even some of the provisions that are causing apoplexy on the left are not, in reality, as offensive as they may appear at first glance. It's true that raising the Social Security retirement age disproportionately affects the poor, who have seen much smaller life-expectancy increases over the past few decades than high-earners have. But to make things fairer, Bowles and Simpson endorse several long-standing liberal priorities. They would provide extra benefits for people so old they have outlived their savings, create an early-retirement program for people unable to work strenuous jobs past age 62, and institute a minimum benefit to guarantee lifelong low-earners a retirement above the poverty line. All told, the lowest 20 percent of earners, according to commission projections, would actually see a benefit increase.

To be sure, the Bowles-Simpson approach to taxes is problematic. After eliminating over a trillion dollars in tax deductions and similar policies, the plan uses only $80 billion of it for deficit reduction. The rest gets plowed into lowering taxes. Some rate reduction would be necessary, both to win Republican support and because, in the absence of such cuts, the ending of tax deductions and other measures would effectively lead to a 50-percent tax hike. Still, the balance Bowles and Simpson have chosen doesn't make any sense. Why not split the trillion dollars evenly between the two priorities, rather than the 93-7 split they're pushing? Doing so would allow the government to minimize or avert cuts to programs like Social Security and the earned income tax credit.

The report also fails to meaningfully address the biggest sources of our future budget deficits, Medicare and Medicaid. And some of the commission's smaller proposals — such as requiring young people to pay interest on their federal student loans while attending college — are deeply problematic.

In short, as Jonathan Chait has explained, there are things for liberals to like here and things for liberals to take issue with. But in the long run, the deficit is a very real problem, one that will only grow more difficult to tackle as time passes. Once this downturn ends, Washington will need to get cutting. Democrats don't need to delude themselves with the naive belief that Republicans will treat this issue constructively. But that doesn't mean that good-faith efforts like Bowles-Simpson deserve to be ignored. Democrats can and should oppose specific provisions of the plan while still taking long-term deficit reduction seriously. At least for the time being, we'd like to see Democrats put away the effigies and open up their spreadsheets.

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