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Black Smoke Rises From Bowles-Simpson

16 Nov 2010
Posted by Stan Collender

My column from today's Roll Call explains how the multiple ways the co-chairs of the deficit reduction commission failed.

Black Smoke Rises From Deficit Reduction Panel

Nov. 16, 2010, Midnight

Based on the overreaction to the draft proposal released last week by deficit reduction commission Co-chairmen Erskine Bowles and Alan Simpson, it’s hard not to conclude that they weren’t prepared for — or thought it was beyond their responsibility to deal with — the absolutely predictable, instantaneously negative response and that the commission is in deep trouble.

The story was that Bowles and Simpson were worried that members of the National Commission on Fiscal Responsibility and Reform would leak parts of the draft and severely hurt the chances of writing a plan the majority on the panel could support. Rather than allow that to happen, the co-chairmen decided to reveal the whole plan in a hastily arranged news conference.

We now know, of course, that the move was anything but successful. Indeed, the harsh criticism that the proposal immediately received was significantly magnified because it was formally released at a news conference, which generated more media coverage than it otherwise would have received. Websites and blogs specializing in niche reporting tore apart the plan, compounding the extra attention the news conference attracted from the mainstream media, and each outlet focused on the elements that it found most troublesome. The plan was doomed to be condemned from the start.

The better strategy for Bowles and Simpson would have been to provide the plan in advance to a particular publication or outlet that was more likely to focus on the big picture. They also should have alerted at least some commission members to the strategy and gotten them to agree in advance to hold off on major criticism and to generally support the effort so that the process could move forward with some positive momentum. Under this strategy, the initial coverage would have been more neutral and possibly even favorable.

The very negative response to the Bowles-Simpson plan demonstrates quite clearly that, regardless of whether the commission is ultimately able to agree on anything, the panel is in deep trouble and has already failed in many ways.
The co-chairmen’s fear of a leak is an obvious sign that the commission members haven’t bonded and clearly aren’t working toward a common purpose. They continue to identify themselves as representing and protecting particular interests in the deficit reduction debate, rather than as members of a group with overall deficit-reduction responsibilities. Getting the 14 of 18 votes required to formally propose a comprehensive deficit reduction plan is going to be at least as difficult now as it was when the commission began its work.

The fact that Bowles and Simpson couldn’t (or couldn’t effectively) ask the other members to wait to publicly comment on their plan, an almost standard request on Capitol Hill, shows what little power and influence the co-chairmen have, and it reveals a flaw in using a commission to deal with a tough issue like the deficit. A House or Senate committee chairman commands compliance because he or she typically has the ability to reward or punish a Member in some way; Bowles and Simpson have no such power or, therefore, influence.

In addition, Bowles and Simpson haven’t become public advocates for dealing with the deficit, and they haven’t done the necessary outreach to voters to keep lawmakers from dismissing the commission’s recommendations out of hand. Doing so would have given their plan increased legitimacy and made it harder for commission members to distance themselves from what they proposed.

If anything, the attitude today toward a comprehensive deficit reduction effort is even worse than it was when the commission began. One reason is that the deficit became an election issue and, as the rhetoric got more heated, the politics of the measures that would actually reduce the deficit has gotten more difficult. Another is that public statements by Simpson have made the commission and its recommendations vulnerable to criticism. Add in the fact that the co-chairmen have done nothing to move the needle on public attitudes toward deficit reduction, and the magnitude of the problem becomes obvious.

What this shows is that Bowles and Simpson defined success for the commission as doing the minimum: coming up with a plan that, mathematically at least, could reduce the deficit and national debt as required. What they didn’t consider (or maybe rejected) was the possibility of devising a plan that didn’t get blown out of the water instantly, that changed public opinion and that actually had a chance of being taken seriously.

Unfortunately, last week’s reaction to the plan that Bowles and Simpson want to use as the basis for the commission’s deliberations indicates that they failed at creating both a mathematically plausible and publicly acceptable plan.

It was absolutely ill-advised

It was absolutely ill-advised and foolish to name Alan Simpson to a commission like this, just for starters. The man is a known bomb-thrower and loose cannon - oh, excuse me, "colorful" ex-politician -- with no particular expertise on budget matters or economic issues. The man has a long, long history of reveling in controversy with vulgar, off-the-wall bromides masquerading as "down-home wisdom."

The first mistake, and one you could see at the time would doom the entire effort, was inviting politicians and not economists to sit on the commission. A lower profile commission, seating people with actual expertise in the subject matter, might have had a chance at success. As it was, you just knew it would end up as a huge embarrassment to the administration. And so it came to pass.

Amen, brothers. I would,

Amen, brothers.

I would, however, like to stand up for some of the small-bore critics of the plan, some of whom weren't actually all that small-bore. Bowles and Simpson had no mandate for "growth" beyond avoiding the drag on growth from a deficit so large that it increased interest rates. They had no mandate to lower rates, but put it at the top of their presentation. They had no mandate to redistribute income, but any effort they may have made to avoid redistribution is not apparent from where I sit. They did not, as I believe our host pointed out, offer a vision of what the role of government should be, as a prerequisite to knowing how much government would need to spend and where.

Doing things that they had no mandate to do suggests politics encroaching on deficit reduction - not a new problem, but one that the commission was created to get around. Not creating a framework avoids explicit criticism for making political choices, while political choices were being made - not as "brave" as the chairmen have been credit with being by "serious people".

We have another deficit cutting proposal out today. It didn't have a presidential mandate, so cannot be accused of having stepped beyond its mandate. Shared membership means that ideas from the B/S commission were probably imported directly. Even so, there is a direct address of Medicare spending, there is a clear effort to undo some of the income distributing effects of the overall plan through some of the details. There is no "vision" of what government should do, and there are artificial freezes and caps in a number of categories that make the Rivlin effort looks mighty fragile, but even so, it seems better policy than B/S offered. Maybe no better politics, but if both are doomed, the politics will be irrelevant.

A progressive tax increase as a progressive tax increase

Bowles and Simpson had no mandate for "growth" beyond avoiding the drag on growth from a deficit so large that it increased interest rates. They had no mandate to lower rates, but put it at the top of their presentation. They had no mandate to redistribute income, but any effort they may have made to avoid redistribution is not apparent from where I sit... .

"Paul Krugman & friends can rest easy. The Bowles-Simpson proposal is indeed an across-the-board tax increase -- and a fairly progressive one at that...

"In 2015, the lowest earners would face an average cut in their after-tax income of 3.4 percent or about $400.

"Middle-income households (those earning an average of about $60,000) would see their after-tax incomes fall by 4 percent ...

"the top one percent of earners (who earn an average of about $2 million) would lose about 5.3 percent...

"the top 0.1 percent would see their after-tax incomes cut by nearly 8 percent, or close to $500,000."

Possibly one can understand S-B exceeding their mandate by lowering marginal rates to offset the increased drag on the economy of much higher taxes.

But you are exactly right when you say "They had no mandate to redistribute income", and the plainly progressive skew of these tax hikes is unforgivable!

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