We all do things that we regret. President Obama must surely regret that he ever listened to the extreme deficit hawks back in early 2010, when he appointed the Bowles-Simpson Commission, the fiscal zombie that just won’t die.
The commission is long defunct. The recommendations of its majority report never became law (because that required a super-majority). But the dreams and schemes of B-S have become the gold standard of deflationists everywhere. The test of budgetary soundness is: does it meet the recommendations of Bowles and Simpson?
On Tuesday, the depressive duo were at it again, calling for additional deficit reductions of $2.4 trillion over a decade. This is almost a trillion dollars beyond what President Obama and Congress are considering.
This clarion call was issued under the aegis of the corporate group, “Fix the Debt,” a bunch of millionaires and billionaires urging regular people to tighten their belts for the greater good.
Quite apart from the impact of particular cuts (Social Security, Medicare, domestic discretionary spending), this is economic lunacy—because it sandbags an already depressed economy. The Congressional Budget Office has calculated that growth would be 3 percent this year, but will only be half that rate because of the effects of the sequester (or cuts of a similar magnitude)—and Bowles and Simpson are calling for annual cuts of twice the scale of the sequester, and over a whole decade.
President Obama has focused on heading off the sequester—$85 billion of mandatory cuts in the next ten months. But he has bought into the deeper mischief wrought by Bowles and Simpson, by embracing further cuts of $1.5 trillion over a decade.
As the latest pronouncement by the B-S boys shows, the cuts are never enough. If Obama accepts $1.5 trillion, they counter with $2.4 trillion.
They are more gentlemanly than Grover Norquist, but the ideological goal is the same—a government small enough to drown in a bathtub. Even worse, deflationary cuts slow growth, making the debt load larger in real terms, no matter how much we cut.
We’ve now had a real-time experiment, in countries as diverse as Greece, Spain, and Britain. Austerity only breeds more austerity.