CAP Analysis: Lawmakers Could Completely Repeal Sequestration Starting in Fiscal Year 2016, and Spending Would Still Fall by $2.6 Trillion Below Levels Proposed by Bowles-Simpson for FY 2011 to FY 2020
Washington, D.C. — With Senate passage of the FY 2016 budget resolution, long-term deficit reduction continues to be a hot topic of discussion in Washington. But are policymakers ignoring the real issue at hand? A new column from the Center for American Progress finds that federal spending has fallen far below the levels proposed by the Bowles-Simpson plan, and based on how the budget outlook has changed relative to the Bowles-Simpson proposal, spending growth has become a smaller problem, while insufficient revenue has become a larger one.
While the Bowles-Simpson plan proposed $3 trillion in spending cuts over 10 years, spending has actually fallen $5.6 trillion over that same period, primarily due to discretionary spending cuts, lower-than-expected health care costs, and lower-than-expected interest rates on the national debt, CAP’s analysis finds. At the same time, revenue from FY 2011 to FY 2020 is now more than $4 trillion less than the Bowles-Simpson plan recommended. While about half of this revenue loss is due to downward revisions to the economic forecast, the other half of revenue loss has resulted from Congress’ action to set tax policy well below the levels recommended by Bowles-Simpson.
“Washington has been making excessive and unnecessary cuts to economic investments while ignoring the growing revenue problem our country faces,” said Harry Stein, Director for Fiscal Policy at CAP. “With spending currently well below the levels proposed by the Bowles-Simpson commission, Congress should consider reasonable approaches to raise revenue and invest in higher education, quality child care, and scientific research—middle-class investments that are sorely in need of new resources.”
As a result of these dramatically lower spending levels, lawmakers could completely repeal sequestration starting in FY 2016 and still cut discretionary spending by more than Bowles-Simpson recommended from FY 2011 to FY 2020. Bowles-Simpson recommended $1.7 trillion in discretionary spending cuts over 10 years, and Congress has already cut $1.8 trillion from discretionary spending over that same period, not counting future sequestration.
On top of these spending cuts, Congress also cut taxes below the Bowles-Simpson baseline. The Bowles-Simpson baseline assumed that the Bush tax cuts would expire for income above $200,000 for individuals and $250,000 for joint filers and then recommended more than $1 trillion of tax increases beyond that. Instead, Congress only allowed the Bush tax cuts to expire for income above $400,000 for individuals and $450,000 for joint filers.
CAP’s column finds that spending has already fallen more than enough to avoid any looming fiscal crisis and concludes that a balanced approach to reduce the long-term debt requires placing greater emphasis on reasonable policies to increase revenue, rather than continuing economically damaging and fiscally unnecessary sequestration cuts.
Click here to read “Does Washington Have a Spending Problem or a Revenue Problem?” by Harry Stein and Lauren Shapiro
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