Five Years on, Bowles-Simpson Impact on Fiscal Health Disputed

By Jonathan Nicholson

Dec. 4 — At the final meeting of the National Commission on Fiscal Responsibility and Reform Dec. 3, 2010, the mood was bittersweet.

Most of the opponents of the plan put together by co-chairmen Erksine Bowles and Alan Simpson didn't bother to show up at that Friday morning meeting at the Senate Budget Committee's hearing room. Supporters said they hoped some of the plan's ideas would at least make it into the budget debate expected in 2011.

Simpson, the gruff former Republican senator from Wyoming, compared the Bowles-Simpson plan to throwing a banana into a gorilla cage. “And the gorilla has picked it up , like they do. They peel it, mash it, play with it. But they will eat some,” he said. “Many pieces of this will be digested and nourish this country.”

Five years later, how much of that figurative banana has been digested and how much it has helped get the government's finances into better shape is subject to dispute (see related story in this issue). Bowles-Simpson in many ways remains a fiscal road not taken—a tantalizing example of the changes that could be made if there was only enough political courage or another piece of evidence that the political system deals better with bit-by-bit, incremental changes instead of sweeping plans.

The bipartisan Bowles-Simpson commission was created by President Barack Obama after pressure in 2010 from congressional Democrats who voted to raise the debt ceiling. Comprising appointees by majority and minority party leaders in Congress, as well as appointees by Obama, it was to report back with a plan after the mid-term election to balance the budget, aside from interest payments, by 2015 and improve the long-term budget outlook. If the plan had been approved by at least 14 of the 18 members, Congress would have been required to vote up on it under a fast-track process.

No ‘Namby-Pamby' Plan

Many of the issues that were dealt with in Bowles-Simpson still pervade Washington's budget debates. Then-Senate Finance Committee Chairman Max Baucus (D-Mont.) was working on a tax extenders deal in 2010, similar to what panel member Rep. Paul Ryan (R-Wis.), now the House speaker, is doing now. The Senate voted 52-47, along mostly party lines, Dec. 3 to roll back the Affordable Care Act, an option rejected by Bowles and Simpson in favor changing the way doctors are paid under Medicare and restricting federal health-care spending to the pace of economic growth plus 1 percent.

“We thought we were doing the right thing,” Bowles, a former chief of staff in the Clinton White House, told Bloomberg BNA in a recent interview. “There were things in there that I didn't agree with, things Al didn't agree with. If we ended up just getting two votes, that was OK.”

“But we weren't going to just put out a bunch of namby-pamby stuff that didn't really solve our nation's long-term fiscal problem,” he said. “We took a risk.”

Simpson said that while the plan did not get the supermajority it needed to force a vote in Congress—it was supported by 11 of the commission's 18 members, but needed 14 to move forward—he thought the breadth of support would make it more viable.

“When you have a range between [Sen.] Dick Durbin [D-Ill.] and [former Sen.] Tom Coburn [(R-Okla.)], we figured that was an ideological span that was quite startling,” Simpson said. “And some good people, both sides of the aisle, signed up. We just figured it would be listened to and heard.”

“Everybody just walked away, he said. “The president, the leadership of both parties, because we hit everybody.”

‘Easy Stuff' Done, Bowles Says

Instead, what ensued was series of budget standoffs, as Republicans and Democrats continued to fight over spending and taxes. After a failed effort at behind-the-scenes negotiations in 2011 between the White House and then-House Speaker John Boehner (R-Ohio) in 2011, the inch-by-inch approach yielded the Budget Control Act in 2011 (Pub. L. No. 112-25) (149 DER A-15, 8/3/11), the follow-on deficit “supercommittee,” the 2012 “fiscal cliff” deal(248 DER EE-3, 12/28/12), the 2013 sequester replacement deal negotiated by Ryan and Sen. Patty Murray (D-Wash.) (238 DER A-37, 12/11/13) and the latest pact, another sequester replacement deal to ease appropriations bills in 2016 (See previous story, 11/03/15).

The biggest impacts of those laws have been the statutory caps on annual discretionary spending put in place in 2011 and a tax increase on high-income households enacted after the 2012 presidential election. But both Simpson and Bowles said much more remains to be done.

“When I think about it, I say, look we've done the easy stuff. We've put caps on discretionary spending and we raised taxes on people that make more than $400,000. So we've done the easy stuff. And we've done, in my opinion, stupid stuff. I don't think it gets any stupider than the sequester,” Bowles said.

Simpson said presidential candidates are promising expensive tax cuts, even as lawmakers are mulling extending existing tax breaks that have expired without offsetting their costs. “That just chips another big hole,” he said.

On the spending side, he said health care and Social Security spending still need to be looked at. “Without being addressed and being on automatic pilot, they're going to cut deeply into the things you love,” he said.

Action Still Far From Certain

Little action on the deficit is expected between now and 2017, which means it will probably be seven years after the Bowles-Simpson plan was issued before another attempt will be made at sweeping fiscal policy changes. And action then is still far from certain—continued divided government would likely extend the current standoff, and it is unclear whether a Republican Congress and a Republican White House will actually act on proposals that have received support in recent years. Lawmakers have often felt free to vote for those ideas knowing they would be unable to pass the Senate or would be vetoed by Obama.

Would the government be in better fiscal shape if Bowles-Simpson had been enacted? Opinions differ, but among panel veterans on Capitol Hill interviewed in recent weeks and months there is often a sense of deficit fatigue, that the willingness to deal with budget choices is far less now than it was in 2010 (see related story in this issue).

By the numbers, the answer is not crystal clear, either. The Bowles-Simpson commission had a two-fold mandate: to produce a plan to get to budget balance in 2015 apart from interests costs, and to produce ideas to put the budget on a stronger long-term track. To that end, its mix of a revenue-raising tax overhaul and spending cuts, including discretionary spending caps similar to what were enacted in 2011, was aimed at providing about $4 trillion in deficit reduction over 10 years, over what Bowles and Simpson described as a plausible baseline that included most of the 2001 and 2003 tax cuts. Once adjusted for that baseline, the plan's impact would have been significantly smaller, closer to about $1.1 trillion in deficit reduction.

2015 Deficit Figures Close to Plan

For 2015, the plan aimed for a deficit of $421 billion and a debt-to-gross domestic product ratio of 69.8 percent. An improving economy as well as the impact of the 2011 spending caps and the 2012 tax increase actually led to similar numbers being posted.

For fiscal year 2015, the government ran a $439 billion deficit, with a debt-to-GDP ratio of 73.8 percent. Revenue as a percentage of GDP was 18.3 percent, a percentage point below what the plan called for. Spending was 20.7 percent of GDP, actually lower than Bowles-Simpson's projected 21.6 percent.

But, according to the CBO, 2016 and 2017 are expected to be the “sweet spot” for deficits, which fell sharply as the economy recovered from the 2007-2009 recession and before they rise again in later years in response to a slowing economy held back by an aging work force.

By 2020, the last year of the original Bowles-Simpson plan, the deficit was projected to fall to $279 billion, as revenue and spending as shares of GDP stabilized at about 21 percent. Debt would fall to 65.5 percent and be headed downward. Instead, under current CBO projections, the 2020 deficit is projected at $687 billion, and the debt-to-GDP ratio is set to remain stubbornly high by historical standards, at 73.5 percent.

Proved It Can Be Done: Bowles

Simpson said lawmakers in both parties benefited from the plan's demise. Republicans, he said, did not have to worry about support for primary opponents from anti-tax activist Grover Norquist or the Club for Growth. Similarly, Democrats did not have to worry about unions backing primary opponents.

As for the plan's legacy, both men said they remained proud of their product, even as members of Congress and the White House have continued to shy away from it. In 2012, a version of the plan was put forward as a budget resolution by Rep. Jim Cooper (D-Tenn.), but received only 38 votes in the House. More recently, Rep. Scott Rigell (R-Va) put forward a similarly sweeping plan as alternative in the talks over the sequester replacement deal reached in October. That deal again eased the spending caps agreed to in 2011, while the Rigell plan failed to gain traction.

“What we laid out is a path,” Bowles said. “There are many ways to skin the cat, but what we proved is it can be done. What is yet to be determined is if we have the political will to actually do it.”

“Well, if you don't read Paul Krugman, it'll be a good legacy,” Simpson said, referring to the Nobel Prize-winning economist who dismissed the pair as deficit alarmists. “I'd rather have my name connected with something where people all over this county come up to you and say, ‘How come we all rejected it?' and they'll include themselves. And I'll say, ‘It's very simple. It hit everybody.' ”

“People will come up to Erksine and I and say, ‘We love what you did'—and they mean it—‘except'—and then they'll go and narrow their fingers—‘except for that one part,' ” Simpson said. “And that one part, they will die for. They will do anything in their power to prevent that one part from coming into law.”

To contact the reporter on this story: Jonathan Nicholson in Washington at

To contact the editor responsible for this story: Heather Rothman in Washington at