The Real Budget Battle Is Coming

Conservatives have always used misguided public fear about the size of the national deficit as an excuse to target government programs they hate -- and score political points. That's certainly true in the current Congress and was on full display during the Senate Budget Committee hearing yesterday. "We are hurtling toward the financial cliff," said Sen. Kent Conrad of North Dakota.

But while Washington and much of the media are still focused on the squabble over funding the federal government for the rest of the year -- and hyping up the possibility of a government shutdown -- in the end, this fight doesn't amount to a momentous shift in priorities. Whether we end up cutting $10 billion from the federal budget, as Democrats suggest, or $61 billion, as Republicans want, the slash to discretionary spending will hardly be felt by most Americans (though the most vulnerable -- students, children, and the poor -- will feel it the most).

No, the real budget battle will be the one waged immediately after the current skirmish. House Speaker John Boehner has set his sights on Social Security and Medicare and plans to cut funding to those programs when he offers his proposal for next year's budget this spring. These are cuts that will hurt millions of Americans and torpedo the country's growth and prosperity.

Though Boehner didn't specify the size or form of the cuts to the country's two most popular programs, he has likely taken direction from Erskine Bowles and Alan Simpson, former co-chairs of the president's National Commission on Fiscal Responsibility and Reform. The pair testified in front of the Senate Budget Committee yesterday, painting a picture of a country on the brink of chaos lest senators adopt the proposals in the report they released in November. "If we wait, we're not going to have to wait long. The crisis is coming," Bowles said.

The Simpson-Bowles recommendations would severely undercut the well-being of millions of older Americans and cost the nation millions of jobs while doing little to reduce the deficit. For those of us who have already forgotten the co-chairs' proposal, here's a recap: Simpson and Bowles claim their plan will reduce the deficit by more than $3.8 trillion by 2020. Over three-quarters of this reduction comes from spending cuts. Over a third of the cuts are to the already small portion of the budget that funds national parks, the Smithsonian Institute, arts organizations, workplace safety enforcement, and efforts to keep our rivers and waters free of pollution -- all services Americans value and would vastly prefer to keep intact .

Another fifth of the total savings comes from an artificial cap on the growth in federal health-care spending at 1 percent more of GDP growth. Since Bowles and Simpson don't do enough to contain health-care costs as a whole, the cap is in effect a veiled attack on Medicare that would have to come from reducing coverage, jeopardizing the health of millions of older Americans who rely on the program.

To make matters worse, the commission's proposal also includes massive changes to Social Security, even though Social Security does not directly add to the budget deficit given that it is self-funded through the payroll tax. Starting with year-2050 retirees, their plan would cut benefits for middle-income Americans -- workers earning an average of $43,000 a year over their careers -- by 13 percent. The plan would also raise the normal retirement age to 69 and early retirement age to 64, which amounts to another benefit cut. The commission claims longer life expectancies justify this increase but fails to take into account lower-income workers, whose life expectancies have barely budged in the past 30 years.

Though Simpson and Bowles' plan does include some good recommendations -- including reductions in defense spending and reductions in inefficient tax breaks and loopholes -- as a whole the plan would be a disaster for the country. In a fragile economy, where the private sector is unable to create jobs, each dollar the government pumps in is vital to maintaining current levels of economic output. An analysis by the Economic Policy Institute estimates that the plan would reduce GDP by 0.7 percent in 2012 and 1.9 percent in 2014, cost the country nearly 4 million jobs, and in fact, due to those losses, reduce the deficit by less than half of the amount it claims.

So, as the current budget skirmish is resolved and the real battle is joined, don't be surprised to see the GOP resurrect the Bowles-Simpson recommendations when they offer their budget in the spring. And if they do, we should be just as wary of them as we were the first time around.

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