President Barack Obama’s proposed fiscal 2013 budget — combining deficit cuts, tax increases, and spending to fuel the economic recovery — is an approach right out of the Simpson-Bowles playbook. Whether or not it’s the right approach depends on whom you ask.
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Dylan Morris of the Senate Budget Committee stacks copies of President Obama's budget for 2012 in the Committee's hearing room in Dirksen Building.
The Obama budget introduced Monday is “just what we said in our [2010] report, if everybody in America would read the 67-page report. It’s written in English,” said Alan Simpson, the Republican former U.S. senator from Wyoming. “It uses words like ‘going broke’ [and] ‘shared sacrifice.’ ”
The budget cuts the deficit by $4 trillion over 10 years, which is one of the recommendations on cutting entitlements, reforming the tax code, and some spending increases made by the panel, formally called the National Commission on Fiscal Responsibility and Reform, Simpson co-chaired with Democrat Erskine Bowles.
Those recommendationswere largely ignored by the Obama administration after their 2010 release and the deficit has only worsened since then.
The deficit is “like a stink bomb in a garden party. It won’t go away,” Simpson told CNBC Tuesday. “How does anyone believe it’s going to go away when you spend a buck and borrow 42 cents? … Wake up. Good grief, this is absurd.”
He called the Obama budget “a start.”
“If we don’t deal with this stuff right now, don’t forget who will pull the trigger. The markets will pull the trigger,” Simpson said, “and they don’t give a whit about Democrats or Republicans, or Obama or [Mitt] Romney, or anybody. They care about money.“
When that happens, he continued, “it’s going to create inflation , it’s going to create interest [rate] increases, and the guy that gets hurt the worse is the little guy that everybody always babbles about.”
Simpson said the U.S. economy’s trajectory of debt, deficit, and interest rates are exactly the same as the economies of Portugal, Italy, Ireland, Greece, and Spain.
In a separate interview, Maryland Democrat Sen. Ben Cardin, a member of the Finance Committee, called the proposed budget is “a balanced approach” that “allows us to invest so that we can be competitive in job growth. It helps the middle-income families. That’s where we need to be.”
At the same time, the budget also “puts us on a glidepath to continue to reduce our deficit as a percentage of our economy,” he said. “So I think when you take a look at it, it’s a balanced approach, it’s a credible approach.”
The Simpson-Bowles recommendations were aimed at reducing $4 trillion in spending over a decade. “This budget does that,” Cardin said. “The [panel’s] work was extremely valuable” and “America is coalescing around that general approach.”
Others disputed the idea of the budget taking a balanced approach toward addressing the ballooning deficit.
Sen. John Thune, a Republican from South Dakota and member of the Budget Committee, told CNBC in a separate interview that the proposed budget “completely fails” to address shortfalls in long-term entitlement programs.
“It is a fantasy budget, and frankly the leadership we’re getting out of the White House right now is fantasy leadership,” Thune said. “We’re not seeing the type of leaning into the problems that face this country and taking them on and, granted, it is an election year, but we don’t have a year to waste. The clock is ticking.”
He said the proposed budget “does not take on the spending side of the equation,” including health-care costs, while seeking $1.9 trillion in tax increases “at a time when we got an economy that’s struggling to get back on its feet. So it’s not a serious document.”
David Stockman, a former adviser to President Ronald Reagan, told CNBC in a separate interview the president should’ve incorporated the Simpson-Bowles recommendations into his budget a year ago “when he had the bipartisan framework.” Stockman said the political process is "so broken now that you can’t even raise word 'tax'" at a time when the U.S. desperately needs more tax revenue.
As was the case in Greece, “if you bury your head in the sand for 30 years, you’re going to run into a hard place someday and it’s not going to be pleasant to deal with, and that’s what we’re doing," Stockman said.
“That’s what this budget is. ... It simply isn’t a budget,” he said. “It’s an equivalent of punting on first down, and that puts the White House in the same camp as the Republican fakerswho have been screaming about deficits for who knows how long, and yesterday they threw in the towel and said let’s extend the payroll tax (holiday) for $100 billion and not pay for it.”
Both parties “are leading us to the big bang in December,” when a number of laws expire, including the Bush tax cuts, Stockman said. “There is no light at the end of the fiscal tunnel.”