White House Mixes Up Some Numbers on Simpson-Bowles

As readers of The Bottom Line and our releases will know, CRFB strives to compare as many plans as possible on a similar basis so that policymakers, experts, and the public can truly see the differences between competing proposals. We do this because it's all too easy for people to get confused about various baselines and actual new savings from proposals.

With that in mind, the President made three claims yesterday about how his budget compares to the Simpson-Bowles recommendations, which warrant some additional clarification. Here's what the President said:

"[the Fiscal Commission] proposed about $600 billion more in revenue and about $600 billion more in defense cuts than I proposed in my own budget... By the beginning of the next decade, [my budget] achieves the same amount of annual health savings as the plan proposed by Simpson-Bowles -- the Simpson-Bowles commission, and it does so by making changes that people in my party haven’t always been comfortable with."

On revenues, the President is basically right. Although the Fiscal Commission called for about $1 trillion in new revenue from tax reform (and small amounts of revenue from other sources), it did so against a baseline that assumed the upper-income tax cuts were going to be allowed to expire at the end of 2010. Instead, the President and members of Congress extended those tax cuts, which means that going to the original Simpson-Bowles numbers would result in more than $600 billion of higher net revenue and $400 billion of higher gross revenue than the President through 2021.

On defense, on the other hand, the President's numbers are somewhat off the mark. The original Fiscal Commission report cut and grew security and non-security spending equally off of 2010 discretionary numbers, whereas subsequent discretionary reductions have focused primarily on non-security spending. As a result, going back to the Fiscal Commission's numbers would mean about $600 billion in security reductions relative to the BCA (through 2022, and extrapolating both out past when the "firewalls" expire). However, it is important to note that security is a much broader category than just defense; it includes homeland security, the State Department, Veterans Affairs, and certain programs within the Energy Department as well. If we assumed the security cuts were allocated equally between among the security agencies, defense cuts under the original Fiscal Commission numbers would be less than $450 billion through 2022, not $600 billion. And only $80 billion of that would come in years where "firewalls" mandated that policymakers find savings from both sides of the discretionary budget (through 2015).

On health care, lastly, the President claims his budget would save as much as the Fiscal Commission by the beginning of next decade. In reality, the health care savings in the Fiscal Commission are much more significant. Looking at 2020, the Fiscal Commission saves nearly $70 billion from health care, while the President saves less than $50 billion. To make their claim work, it appears that the President is including the costs of repealing the CLASS Act (though there is currently no cost, since the Administration has decided not to implement it) and excluding three policies which would not directly reduce Medicare or Medicaid spending, but rather indirectly save money in these programs while also reducing spending on federal civilian and military health benefits and the health system more broadly.

Those reforms include tort reform ($3 billion in 2020), TRICARE reforms ($6 billion in 2020), and FEHB reforms ($3 billion in 2020). Taking those savings out, while still charging the Commission for the CLASS Act costs, puts the President's own health care savings estimates of $50 billion ($3 billion more than CBO's estimates, FYI) in line with the Commission's. 

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The other week, CRFB released a comparison table of several prominent budget proposals. Since then, however, Rep. Paul Ryan has released his latest proposals, CBO has estimated the President's budget, and Representatives Jim Cooper (D-TN) and Steven LaTourette have put forward recommendations based off of the Fiscal Commission's framework. In short, it's time for an updated comparison.

^{Note: Numbers may not add due to significant rounding. Estimates calculated off of a current policy baseline, and through FY2021.
**Assumed to be roughly equal to the discretionary caps put in place in the Budget Control Act.
#Excludes $87 billion from CLASS Act repeal.
~Savings come from across the federal budget, including about $40 billion from revenues, $90 billion from Social Security, and $70 billion from other mandatory programs.}

Note: Estimates for President's Budget updated to reflect more recent figures in the Mid-Session Review.