2012 Budget Mostly Ignores Bowles-Simpson Recommendations

“Like the fiscal commission never happened.” That was Ezra Klein’s take on how much attention the budget gives to the commission’s recommendations for reforming entitlements and comprehensive tax reform. You know, the things that are actually going to be necessary to balance the budget. Not that anyone should be surprised by this – the President admitted during his State of the Union address that he didn’t agree “with all their proposals” (translation: I’m going to ignore every politically unpalatable suggestion they made).

The predictability of passing over the commission’s report doesn’t make it any less galling. As Klein says, the fiscal commission’s audacity in going after the budget’s sacred cows “opened up the field on the budget,” in a way that stimulated healthy debate among and between both sides of the aisle. To see the discussion of tax and entitlement reform passed over by the Administration isa slap in the face to those who are serious about fixing the budget.

Still, it might be unfair to say that the budget completely ignores the deficit commission’s report. Let’s take a quick run through and see how the two compare.

DISCRETIONARY SPENDING: The fiscal commission called for an 8 year freeze on discretionary spending and annual cuts of 2 percent, the White House will ask for a 5 year freeze: OK, the Administration gets some credit here for following up on a good idea, even if it’s not as long as was recommended. The problem is that the fiscal commission’s discretionary spending freeze was accompanied by more or less substantive ideas for dealing with mandatory spending as well, whereas the Administration’s budget lamost completely ignores that point. Even where discretionary spending is concerned, the budget ignores the commission’s recommendation of cutting 2 percent from the discretionary budget each year (over and above the spending freeze).

REFORMING GOVERNMENT: The commission report called for a plethora of compensation reforms for federal employees, the budget offers only a 2 year pay freeze. To be fair, the commission only wanted a 3 year pay freeze. But it also suggested reducing the size of the federal workforce, and reducing travel, printing and vehicle budgets. Kudos to the Administration, however, for following up on the commission’s recommendations to sell (and inventory!) excess federal property and curtail congressional earmarks.

TAX REFORM: A complete whiff by the White House. No substantive proposals were offered except a tax hike on the wealthy and businesses. While the fiscal commission’s report offers an actual proposal for cutting taxes and streamlining the system to spur economic growth, the Administration seems satisfied with letting the Bush tax cuts expire for the wealthy, and cutting some tax deductions for higher-income taxpayers and oil/gas companies. The President’s budget also promises to pay for three years of Alternative Minimum Tax relief (the conversation needs to be about eliminating entirely) and to “begin the process” of corporate tax reform. The story here is a big opportunity to reform our broken tax system has been squandered.

HEALTH CARE: The budget would extend the “doc fix” and continue to implement Obamacare, but otherwise offers no new proposals. Granted, the fiscal commission’s report is not strong on this either. People are still not talking about meaningful reform to reduce long-term Medicare costs. Part of the reason this doesn’t figure more prominently in the budget is that the White House assumes extensive savings are already coming as a result of Obamacare. Good luck with that.

SOCIAL SECURITY: No meaningful proposals in the budget. The fiscal commission’s report, which should have been addressed, essentially suggests raising the payroll tax and cutting benefits for the rich. The second paragraph of the budget’s recommendations on Social Security begins thus: “The President believes that we should come together now, in bipartisan fashion, to strengthen
Social Security for the future.” That pretty much sets the tone for the rest of the section – no substance whatsoever.

While the Administration seemed willing to cherry pick some relatively innocuous recommendations from the fiscal commission’s proposal, it ignored all the painful, pressing reform we’ll need to see in the tax system and entitlement spending.