Congress has "one last good chance" to reach a grand bargain on the deficit this summer, the former chairmen of President Obama’s fiscal commission said Friday.
Erskine Bowles and Alan Simpson on Friday released a new version of their fiscal plan and said the fight over an increase in the debt ceiling gives lawmakers a narrow window to act.
“The reason why we are bringing this forward … we have one last good chance to get something done,” Bowles said. “This chance is sometime between now and Aug. 1.”
Bowles said that while it would be catastrophic to risk the U.S. credit rating by not increasing the debt ceiling, spending hawks would use it to get changes they want.
“It is most likely the hostage,” said Bowles, a former chief of staff to President Clinton. “You do have to have an action-forcing event. We are even going to have to have a crisis.”
“I think it’s promising. I didn’t think so a year ago,” he said.
Bowles said he is hopeful because President Obama was willing to
include cuts to entitlements in his budget that many Democrats oppose.
“We thought he took a real step forward,” Bowles said.
Last year, legislation based on the original Bowles-Simpson deficit plan from 2010 got only 38 House votes when offered on the floor as a budget amendment.
The new Bowles-Simpson plan takes the spending cuts and tax reform ideas from Obama's 2014 budget and goes further. They said that Obama’s budget only briefly stabilizes the growth of the national debt, while their plan keeps it going down in later years.
Their plan includes $800 billion more in cuts, including interest savings, than Obama sought, mostly to healthcare. Both budgets assume $1.2 trillion in sequestration cuts will be turned off.
By comparison, the House-passed budget which keeps the sequester in place, has $4.3 trillion more in spending cuts than the new Bowles-Simpson plan.
The Bowles-Simpson plan avoids new stimulus spending and the some $300 billion in new taxes Obama used to pay for the spending in his budget, while keeping $585 billion from simplifying the tax code.
Bowles said that his plan could lead to a top individual rate of 23 percent and corporate tax rate of 26 percent.
House Republicans want tax reform that does not contribute to deficit reduction by increasing federal revenues.
In all, the new plan has $740 billion in total revenue, including from changing the way inflation is measured to the chained consumer price index.
Unlike the fiscal commission plan from 2010, the new Bowles-Simpson effort maginalizes Social Security reform. The plan suggests a combination of higher taxes and benefit cuts to keep the program solvent. Social Security is expected to be unable to pay full benefits after about 20 years.
The plan also calls for raising the retirement age.
After 2018, the plan calls for a cap on Medicare spending. If the cap fails to limit the exponential growth of healthcare spending, which Bowles and Simpson say will bankrupt the country, they would be open to considering the type of partial privatization that the House-passed budget includes. That plan allows seniors to buy private plans using limited premium support from the government.