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Posted at 6:44 AM ET, 02/ 2/2011

Wonkbook: Simpson-Bowles making a comeback?

By Ezra Klein

Thumbnail image for simpbo.JPG

Read through Wonkbook today and you'll see four fairly difficult fiscal climbs beginning in Congress. Daniel Inouye, chairman of the Senate Appropriations Committee, is looking to enforce a ban against earmarks; Claire McCaskill and Bob Corker want to set a spending limit of about 20 percent of GDP; a handful of legislators are attempting to resurrect the fiscal commission's plan in Congress; and the Tea Parties are trying to steel their congressional allies' spines for a vote against the debt limit. None of these efforts will be easy.

But it's worth separating a real effort to balance the budget from posturing. Spending caps and attacks on raising the debt ceiling simply attack the concept of borrowing. Earmarks are hard for legislators, but of no import to the budget. That stuff is the easy part. It's all applause lines, at least for now. The hard part is saying what major categories of spending you'll cut -- or what large taxes you'll raise -- to get the numbers to add up. For all its flaws, that's what the fiscal commission's report was actually about, and it's evidence of how eager Congress really is to cut spending or raise taxes that the first thing they did after getting the commission's report was cut a deal on taxes that increased the deficit by $850 billion and the second thing they did was stop talking about the commission's report. The degree to which it makes a comeback will be a pretty good proxy of how interested Congress is in making tough choices on the budget.

Top Stories

Senate Minority Leader Mitch McConnell will force a vote on health care reform repeal, reports Elise Foley: "Senate Republicans will attempt to repeal last year's sweeping health care law via an amendment to a Federal Aviation Administration funding bill, Minority Leader Mitch McConnell (R-Ky.) said Tuesday. A vote on the amendment, which Democratic leaders said they plan to table immediately, could occur as early as Tuesday evening. 'We're going to get rid of their efforts to repeal the health care bill, and then hopefully we can move on,' Senate Majority Leader Harry Reid (D-Nev.) said. Democrats can make a motion to table the amendment -- that motion would need only majority support to succeed, meaning the GOP's symbolic effort would be certain to fail. The FAA reauthorization bill is an early test of new Senate rule agreements designed to allow more amendments to come to the floor."

Some of health care reform's early beneficiaries are nervous about court rulings, reports Reed Abelson: "With a court decision on Monday declaring the health care law unconstitutional and Republicans intent on repealing at least parts of it, thousands of Americans with major illnesses are facing the renewed prospect of losing their health insurance coverage. The legislation put an end to lifetime limits on coverage for the first time, erasing the financial burdens, including personal bankruptcy, that had affected many ailing Americans. For example, Hillary St. Pierre, a 28-year-old former registered nurse who has Hodgkin’s lymphoma, had expected to reach her insurance plan’s $2 million limit this year. Under the new law, the cap was eliminated when the policy she gets through her husband’s employer was renewed this year."

The debt panel's plan is making a comeback in Congress, reports David Rogers: "A bipartisan effort to resurrect the recommendations of last year’s presidential deficit-reduction commission gained steam Tuesday in the Senate, where nearly half the members turned out for early morning briefing on the debt crisis and old friends of House Speaker John Boehner are taking the lead alongside the Democratic chairman of the Senate Budget Committee. The path ahead remains extremely difficult, but the forces coming together represent the best shot this Congress has of finding the political mass needed to bring President Barack Obama and the new House Republican majority to the table. 'I think we will make it easier for him to jump in,' said Sen. Tom Coburn (R-Okla.) of the president."

Senate appropriations chair Daniel Inouye will enforce an earmark ban, reports Shailagh Murray: "After months of resistance, Senate Appropriations Committee Chairman Daniel K. Inouye (D-Hawaii) announced Tuesday that he will enforce a ban on earmarks in all Senate spending bills, ending a cherished practice by lawmakers that had become a symbol of wasteful excess. The Senate moratorium, which will remain in place for two years, follows a similar move by the GOP-led House and a veto threat by President Obama in his State of the Union address last week. It's the latest signal that Democrats are feeling political pressure on the issue of deficit reduction and are willing to consider measures that until recently they dismissed as posturing by their Republican adversaries."

The Tea Party is pledging opposition to raising the debt ceiling, reports Simmi Aujla: "The House Tea Party Caucus is already digging into the most difficult vote facing Republicans so far this year: raising the debt ceiling. The group's first meeting, on Feb. 17, will give some of the most conservative members of House GOP a chance to voice their opposition to raising the debt ceiling, putting pressure on GOP leaders who need broad Republican support to pass the measure. 'It is my hope that the Tea Party Caucus will serve as a venue for Members of Congress and Tea Party activists to share ideas and determine the best way to get America on a sound fiscal path that adheres to the Constitutional principles on which she was founded,' Tea Party Caucus chair Rep. Michele Bachmann (R-Minn.) said in the invitation to the group's roughly 50 members."

Road trip interlude: Sleigh Bells' music video for "Rill Rill".

Got tips, additions, or comments? E-mail me.

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Still to come: Two senators are proposing a federal spending cap; state officials disagree on what Monday's health care reform ruling means for the law's implementation; the White House is pushing harder to confirm judicial nominees; the House energy chair has introduced legislation blocking EPA action on the climate; and a sad koala eats an apple.

Economy

Two Senators are proposing a federal spending cap, reports Andrew Taylor: "Social Security, Medicare and virtually every other federal program would face the budget ax under legislation unveiled Tuesday aimed at forcing Congress to dramatically cut spending over the coming decade. The bill, co-sponsored by Sens. Claire McCaskill, D-Mo., and Bob Corker, R-Tenn., would phase in a federal spending cap of just more than 20 percent of the size of the economy, which they said would wring almost $8 trillion from the budget over the coming 10 years. Cuts of that magnitude would have to fall heavily on Social Security and Medicare, the retirement programs whose costs are being driven sky-high by the retirement of the baby boom generation."

Britain's experiment with austerity is failing, writes Dean Baker: http://bit.ly/dOEZyJ

Much of America's recent growth was a mirage, writes Steven Pearlstein: "Tyler Cowen, an engaging and peripatetic economist at George Mason University, has just published a short but important new e-book, 'The Great Stagnation,' that attempts to explain the slow growth and the rising inequality that characterize the U.S. economy over the past 35 years... The more intriguing argument in 'The Great Stagnation' is that much of our recent growth may, in fact, have been a mirage. It is no coincidence, he writes, that during the recent decades of slow growth in incomes and productivity, three of the fastest-growing sectors of the economy have been education, financial services and health care. And while government statistics show productivity in those sectors growing at the same pace as the rest of the economy, other data suggest otherwise."

America's corporate taxes are very high, and not raising enough revenue, writes David Leonhardt: "Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate -- both federal and otherwise -- of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent. Arguably, the United States now has a corporate tax code that’s the worst of all worlds. The official rate is higher than in almost any other country, which forces companies to devote enormous time and effort to finding loopholes. Yet the government raises less money in corporate taxes than it once did, because of all the loopholes that have been added in recent decades."

Adorable animals with unusual dietary choices interlude: A sad koala eats an apple.

Health Care

An interview with the creator of the individual mandate: http://wapo.st/fFOjzW

State officials disagree on how to deal with Monday's health care reform ruling, report Amy Goldstein and N.C. Aizenman: "A day after a federal judge struck down the government's plan to overhaul the health-care system, Wisconsin Attorney General J.B. Van Hollen issued a stern statement: 'This means that, for Wisconsin, the federal health care law is dead,' and that his state 'was relieved of any obligations or duties' to carry out the statute...Officials in Idaho and Florida, the state that initiated the lawsuit last March, said the ruling gives them the freedom to stop the work they have begun to put the law into effect...Meanwhile, the governors of Georgia, Iowa and Mississippi said through spokesmen that they did not think the court decision gave them license to stop work on the law, in part because the ruling is destined to be appealed to higher courts.

Steve Larsen will be in charge of implementing health care reform at HHS: http://politi.co/dQSU89

Many are receiving waivers for health care reform implementation, reports Janet Adamy: "Hundreds of employers have received federal waivers from a new requirement in the health-care overhaul law. Government figures show that 733 applicants, mainly employers and union-affiliated insurers, received an exemption from a requirement that puts their plans on the hook for up to $750,000 in eligible medical bills for each covered worker this year. Most of those plans now have reimbursement limits that are a fraction of that amount. The concern is that without such waivers, employers could raise premiums so high it would be unaffordable for workers, or they would simply drop coverage altogether. The Department of Health and Human Services said more than 500 of the waivers were issued in December."

Health companies are moving ahead on implementing reform: http://on.wsj.com/fFdd6P

Domestic Policy

The White House is pushing the Senate to ease up on judicial appointees, reports Ryan Reilly: "The Obama administration will try to forge a new path forward to get their judicial nominees through the Senate confirmation process, White House Counsel Bob Bauer said Tuesday. That plan would supposedly solve what Bauer termed a long-running 'cold war' between Democrats and Republicans on judicial nominees. 'We will do what it take to try to break through gridlock over some of these nominations,' Bauer said at an American Constitution Society panel. He said the judicial crisis creates 'egregious delays for Americans seeking their day in court around the country.' Bauer said there has been a disturbing lack of urgency in the political class about the crisis in the judicial system, but said he didn't want to get into the typical finger-pointing about who is responsible for the crisis."

New dietary guidelines indicate lobbyist influence: http://politi.co/eAVtSo

There was no change in illegal immigration rates last year, reports Julia Preston: "About 11.2 million illegal immigrants were living in the United States in 2010, a number essentially unchanged from the previous year, according to a report published Tuesday by the Pew Hispanic Center, a nonpartisan research organization in Washington. Despite continuing high unemployment among American workers, record deportations by the Obama administration and expanding efforts by states to crack down, the number of unauthorized immigrants in the work force -- about eight million -- was also unchanged, the Pew report found. Those workers were about 5 percent of the American work force. The population of illegal immigrants leveled off after peaking in 2007 at 12 million, then dropping sharply over two years to 11.1 million in 2009."

Supercut interlude: Google CEO Eric Schmidt really likes the word "literally".

Energy

House energy chair Fred Upton is introducing a bill to block EPA climate regulations, reports Tennille Tracy: "The head of the U.S. House of Representatives' energy committee is weighing in on the debate over greenhouse gas rules and plans to introduce a draft bill Wednesday that blocks the administration from regulating the emissions under the Clean Air Act, an aide says. Rep. Fred Upton (R. Mich.), chair of the House Energy & Commerce Committee, will introduce a bill that is 'narrowly drawn' and 'prevents the Clean Air Act from being transformed into a regulatory vehicle to impose a cap-and-trade energy tax,' a Republican aide on the committee said Tuesday night. Sen. James Inhofe (R., Okla.), the ranking Republican on the U.S. Senate Environment & Public Works Committee, plans to introduce the same bill in that chamber, the aide said."

Obama and Senator Jeff Bingaman are having a one-on-one meeting on a clean energy standard today: http://politi.co/hMc6dQ

The Chamber of Commerce expressed opposition to a clean energy standard, reports Robin Bravender: "Despite President Barack Obama’s recent attempts to win over the business community, the U.S. Chamber of Commerce on Tuesday signaled the president’s new energy plans are going nowhere fast. Top energy officials for the Chamber say White House’s target of getting 80 percent of the nation’s electricity from 'clean' sources by 2035 is unrealistic, and declined to say whether they would support a different target because the political prospects for a clean energy standard (CES) are remote. 'It’s ridiculously premature to even have a CES conversation,' said Christopher Guith, vice president for policy at the Chamber’s Institute for 21st Century Energy, when asked whether the Chamber could support specific targets."

The US will likely not reach its electric car goal, reports Peter Whoriskey: "President Obama's goal of putting 1 million plug-in electric cars on the road within four years is unlikely to be met because automakers are not planning to make enough cars due to uncertain consumer demand, auto industry leaders concluded in a report being released Wednesday. The finding is based on the manufacturers' announced production numbers and an analysis of consumer demand. The first two plug-in cars from major manufacturers, the Nissan Leaf and the Chevrolet Volt, went on sale recently, garnering widespread attention for the energy-efficient vehicles. But the panel of industry experts who authored the report concluded that expanding sales within four years to meet the milllion-car goal is improbable."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Photo credit: Mark Wilson/Getty Images.

By Ezra Klein  | February 2, 2011; 6:44 AM ET
Categories:  Wonkbook  
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Next: The reality of our health-care debate

Comments

From the ersatz Pearlstein piece: "[T]he Internet has generated far less income and far fewer jobs than earlier innovations - think of the automobile - and the benefits it has yielded have been confined largely to the upper end of the income scale."

If that isn't a rotten muddle, I don't know what one is. Is he holding up "the Internet" as some sort of equivalent euphemism for the computer revolution? If he's using "the Internet" in the way written, he's ignoring the far greater mass of benefit derived from new technologies. If he means something other than what he's written, he's not only a poor writer, but is most likely incorrect, to boot. The Internet is a small slice of the world changing computer revolution.

But such incoherence is par for the course at the paper where Klein works.

Posted by: msoja | February 2, 2011 9:13 AM | Report abuse

Oh great! Social Security cuts are popular in the Senate! And here I thought Democrats were in control there.

Posted by: stonedone | February 2, 2011 9:21 AM | Report abuse

Ezra,

Is there a reason you don't cover state budget issues? I realize that you've got a lot to cover and somehow something's always going to get the short shrift but this is a major issue out there. Christie of NJ got a lot of flack from liberal circles for what he did and now Cuomo is proposing many things that are PAST what Christie did.

http://www.nytimes.com/2011/02/02/nyregion/02budget.html?_r=1&hpw


Also there's a lot going on in California with Governor Brown's approach to balance their budget.


http://articles.latimes.com/2011/jan/11/local/la-me-0111-budget-effects-20110111

Posted by: visionbrkr | February 2, 2011 9:38 AM | Report abuse

I'm still looking forward to John Kerry bringing his cupful of compromise to the Senate: his recent speech before a local lobby firm left me with that special Massachusetts Democrat feeling inside. Sort of like the feeling one might have after trying the recipe at http://www.amateurgourmet.com/2005/06/all_that_work_a.html

Posted by: rmgregory | February 2, 2011 9:45 AM | Report abuse

"If that isn't a rotten muddle, I don't know what one is."

Absolutely.

Pearlstein writes this as if it were a bad thing:

"[T]he Internet has generated far less income and far fewer jobs than earlier innovations - think of the automobile"

Consider the invention of a machine able to spontaneously build a car. It would clearly destroy all automaking jobs and there wouldn't be any revenue associated with auto sales - but it would be a huge improvement over the current manufacturing process, wouldn't it?

That many benefits of the internet are cheap or free is a blessing, not a curse. The internet may not generate a lot of income, but it does generate a lot of consumer surplus.

Of course, as already noted, the internet is only a subset of the computer revolution.

"It is no coincidence, he writes, that during the recent decades of slow growth in incomes and productivity"

The productivity claim isn't even true.

Business sector productivity from 1950Q3-1975Q3 grew at a 2.83% annual pace.

From 1995Q3-2010Q3? 2.75% annually. Technically slower, but more or less the same pace.

Sure, there was a big slowdown from 1975-1995 - business productivity only grew at a 1.47% annual pace - but that slowdown occurred prior to the widespread use of the internet.

"Once Americans became rich enough to satisfy ourselves with the basic necessities of life, it was only natural that we would decide to spend our additional income - our marginal dollars - on health care, education and financial services. We now discover, however, that each of those marginal dollars has generated less than a dollar of real value."

But hey, let's use the force of government to get Americans to double down on these losing "investments" in health care and education - this time, surely, we'll get our money's worth!

Posted by: justin84 | February 2, 2011 10:02 AM | Report abuse

More from Pearlstein, on alleged "productivity", or lack thereof:
//cite
Although the United States spends at least twice as much on health care, per person, as other industrial countries do, Americans do not live any longer and often have measurably worse health.

Although spending on education has doubled in recent decades, average scores on standardized math and reading tests have remained about the same.
//end cite

Has it occurred to Klein or Pearlstein that the items singled out are largely government programs. Half of health care expenditures are funneled through government, and virtually all educations dollars are pawed by grubby bureaucrats. I dunno, but maybe those two brainiacs could put their heads together and wonder what impact all their schemes for spending other people's money are really amounting to.

Posted by: msoja | February 2, 2011 10:14 AM | Report abuse

Instead of bringing back the deeply flawed Simpson/Bowles plan, adopt the Jan Schakowsky plan as the rough blueprint. It begins with key investments and replaces the "individual mandate" in the ACA. Congress then can make the plan more conservative by adding budget cuts and subtracting tax hikes, staying on-target along the way.

Posted by: pjro | February 2, 2011 10:56 AM | Report abuse

"The US will likely not reach its electric car goal, reports Peter Whoriskey"

Of course not. It wouldn't make economic sense.

Electric cars will sell like hotakes if and when:

- are competitively priced vis-a-vis gasoline powered models
- have a range which is reasonably comparable to gasoline models
- can be recharged relatively quickly

For the near future, electric cars will be novelties. Cool, but not practical.

Posted by: justin84 | February 2, 2011 11:42 AM | Report abuse

'We're going to get rid of their efforts to repeal the health care bill, and then hopefully we can move on,' Senate Majority Leader Harry Reid (D-Nev.) said."

But there won't be any moving on apparently for the next two years as this battle is fought in the courts and legislatures. That's why prudent people need to consider whether victory is certain before the SCOTUS. If not, then repeal it now, and get on with life.

Posted by: johnmarshall5446 | February 2, 2011 11:51 AM | Report abuse

"The bill, co-sponsored by Sens. Claire McCaskill, D-Mo., and Bob Corker, R-Tenn., would phase in a federal spending cap of just more than 20 percent of the size of the economy, which they said would wring almost $8 trillion from the budget over the coming 10 years."

Corker's a smart guy. Don't be surprised if he's raising his profile for consideration of the VP slot in 2012.

Posted by: johnmarshall5446 | February 2, 2011 11:54 AM | Report abuse

Hee, hee, hee, Dean Baker. Oh I'm sorry, were you serious?

"This means that the predictable result of austerity is slower growth and higher unemployment. The UK has volunteered to be our guinea pig and test this proposition. For now, it looks like things are going just as standard economic theory predicts: the economy is slowing and unemployment is likely to rise."

What Baker fails to disclose is the difference between their economy and ours. The leading British industry today, if you want to call it that, is financial services and insurance. These are what the British government was trying to save by austerity. It was NOT so stupid as to believe that it would change employment.

The British are now relegated back to the small island with no particular advantages from nature. To have any pretense of world leadership they need to maintain their high profile financial sector where indeed they are still among the best.

Thanks again for knocking down that straw man Dean. Make sure you have a COLA in your contract at whatever school you're not teaching at now.

Posted by: johnmarshall5446 | February 2, 2011 12:02 PM | Report abuse

"There was no change in illegal immigration rates last year, reports Julia Preston: "About 11.2 million illegal immigrants were living in the United States in 2010, a number essentially unchanged from the previous year, according to a report published Tuesday by the Pew Hispanic Center, a nonpartisan research organization in Washington."

The Pew is a respected institution, but also a bit self-inflated. This is a akin to counting the number of homeless, a number that has huge margins of error.

Posted by: johnmarshall5446 | February 2, 2011 12:07 PM | Report abuse

Ezra, there are waaay more than 11 million illegal aliens in the country. And no, they don't contribute to the economy.

Posted by: wmpowellfan | February 2, 2011 12:08 PM | Report abuse

The last two post show why the president should just shut up about clean energy. Not only are his publicly stated goals beyond the technical ability of the industries involved, but the would be capital costs at a time of budget retrenchment make him look exceptionally foolish.

Posted by: johnmarshall5446 | February 2, 2011 12:09 PM | Report abuse

msoja wrote:

"Although the United States spends at least twice as much on health care, per person, as other industrial countries do, Americans do not live any longer and often have measurably worse health."

Thanks for pointing out what an untalented hack Pearlstein is.

Americans actually DO live longer than anybody else. In fact the vast majority of super centenarians in the world are either Japanese or American. The oldest living person an American just died yesterday and was replaced by yet another American.

Also the statistics on longevity and health are skewed by such nations at the top as Andorra and the Isle of Man (no seriously they count as nations!) Among the major industrialized nations of the world, the US compares favorably to anybody.

Posted by: johnmarshall5446 | February 2, 2011 12:17 PM | Report abuse

The problem with the Simpson plan (and many similar right-center plans) is that it makes a fetish of reducing the number of brackets and their rates, and it does so on the back of the middle-uppermiddle class.

With an income of 110k for a young family, I'm not crying. I think my current federal tax of 10k is about right, when you add SS, state tax, etc. in. The S-B plan proposes either 14% no deductions (40% increase in fed tax paid by me) or 25% with a personal deduction (62% increase). Also, ending the mortgage deduction would harm the value of my house.

I agree with the idea of simplifying the tax code and focusing it on revenue, not policy. I'm ok with the idea that I might end up paying a bit more as a result. I can deal with a raise in taxes to fund necessary government services or pay off the debt.

But I think it is unconscionable to try and slip in a massive tax increase on working professionals in order to give millionaires a "simpler" (read lower) tax system. And it's doubly so to do so after a decade where the middle class were lucky to tread water (personally I'm down 3% after inflation) while the upper class did very well indeed (some might even say they looted the country).

If you want to reduce the deficit, do so. If you want to simplify the tax code, do so. Don't try to use both to hide a massive tax increase on the middle class to fund another massive tax cut for the wealthy.

Posted by: atworkforu | February 2, 2011 1:33 PM | Report abuse

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