The Delta Grassroots Caucus (DGC) is a broad coalition of grassroots leaders in the eight-state Delta region. DGC is also a founding partner of the Economic Equality Caucus,
which advocates for economic equality across the USA.

Opposition to Gravely Flawed Bowles-Simpson Plan--Avoid Fiscal Cliff--November, 2012

Posted on November 27, 2012 at 05:47 PM

The Delta Grassroots Caucus opposes recent misguided efforts to resurrect the Bowles-Simpson deficit reduction plan. Most of our partners opposed this deeply flawed plan when it was originally published and welcomed the decision by President Obama and many Congressional leaders to reject it.

Bowles-Simpson is a flawed plan that slashes vital safety net programs in a way that many economists believe would ignite another recession. This plan does not provide a strong revenue increase program. It gashes vital safety net programs as well as unwisely recommending the abolition of many small, vital programs such as the Delta Regional Authority, Appalachian Regional Commission and others that help create jobs and have such small budgets that the savings would be virtually meaningless as far as reducing the deficits.

We will explain some of the flaws in Simpson-Bowles below. We must look elsewhere for a competent compromise that will get the nation’s fiscal house in order while promoting economic recovery.

First, let us state the consensus of most of our partners based on extensive feedback over the past six months. Even Lee Powell, Mark McElroy and other key Caucus members do not agree with everything in this compromise.

Nonetheless, there is a wide range of opinion but most would agree with most of the following summary in a nutshell:

Economic and deficit plan in a nutshell: Most of the Delta Caucus partners would support revenue increases including asking the wealthiest Americans to pay somewhat more in taxes; thoughtful spending cuts including savings anywhere they can be found without harming working families and above all by reducing the excessive spending on exorbitant weapons systems and foreign military interventions as the Iraq and Afghanistan wars are winding down; and promoting job creation as essential to putting people back to work and increasing revenue.

Spending cuts for vital programs like the USDA federal nutrition programs and rural development, Small Business Administration and other small business job creation initiatives, middle to lower-income Social Security and Medicare benefits, and other essential safety net programs should be avoided.

Democrats and Republicans alike need to compromise. Democrats ought not to see benefits for high income Social Security and Medicare beneficiaries as “off the table.” They should ask themselves, “Do Bill Clinton and Warren Buffett need a fat Social Security check on top of all their fabulous wealth?” The answer is no.

This is not “class warfare,” because the primary advocates for having the wealthiest benefit less are quite wealthy themselves. On the tax front, two thirds of the wealthiest Americans by opinion polls are fine with paying a little more to help our country in its hour of fiscal need.

Let us be clear: middle class and lower income people should keep every penny of their Social Security and Medicare and should not have their retirement age changed. It is only the high-income recipients who can afford to take a little less, just as they can afford to pay a little more in taxes.

Democrats who have a knee-jerk resistance to even the most reasonable savings on Social Security and Medicare need to compromise, as do Republicans who take the hard-line Nordquist approach even for the wealthiest Americans. Both sides need to compromise.

Below are some explanations in detail on some of these issues. Most people may want to just read certain sections or the summary stated above. The detail is below and also on the website at www.mdgc.us for those who are interested in more specifics.

Unwise effort to resurrect Simpson-Bowles: Lately there has been misguided speculation about reviving Simpson-Bowles, in many cases by those who are only discussing it in general terms as opposed to actually studying what their flawed recommendations were, without enough thoughtful scrutiny of the specific recommendations of the plan. Alan Simpson and Erskine Bowles are fine men who have rendered good service in many other areas, but in this case they simply failed, despite what we’re sure were their good intentions.

Among the ludicrous commentary floating around Washington, DC lately was a front-page article in the Washington Post by a reporter named Lori Montgomery purporting to be a news article but it was written like an editorial. Ms. Montgomery praised Simpson-Bowles in generalized, adulatory and ridiculously erroneous comments such as noting that lawmakers originally rejected the plan, “But their plan has since been heralded by both parties as a model of clear-eyed sacrifice, and policymakers say the moment has come to live up to its promise.”

It is hard to know where to begin in pointing out how utterly erroneous this statement is. First of all, the statement does not say who all these leaders from both parties are who are allegedly so eager to resurrect the previously rejected plan. We know many leaders in both parties who are strongly critical of Simpson-Bowles, so the blanket statement that it “has since been heralded by both parties as a model of clear-eyed sacrifice” (?????) is factually erroneous, to put it mildly.

For many of us who have read the normally responsible coverage in the Post (despite a tendency in the last few years to editorialize in news stories on occasion), this was the most incompetent article we have ever seen published in a major newspaper. They have recently and wisely changed editors so hopefully this kind of irresponsible article will not appear in the future.

Far from being a “clear-eyed model of sacrifice,” many knowledgeable economic analysts have stressed that Simpson-Bowles reduces the deficit so sharply that it would ignite another recession. As Federal Reserve Chairman Ben Bernanke and others have warned repeatedly, reducing the budget deficit by too much, too fast, puts the recovery at risk.

Ms. Montgomery may be a good reporter who just had a bad day and made a mistake, but her article is just light years away from the truth. Bowles-Simpson needs to stay in the “Reject” file to which it was earlier so wisely placed.

A much more effective and thoughtful budget plan would generate a stimulus for the economy over the next year or two while establishing a deficit reduction plan that brings about the essential and realistic medium-term goal of stabilizing the debt-to-Gross Domestic Product ratio.

The commission received quite reasonable criticism for deliberating in secret and being clearly over-represented by individuals whose main concern was to target entitlement spending rather than a balanced, statesmanlike approach. Because it would lead to cuts in benefits for Social Security and Medicare, it will eliminate key portions of the social safety net, with devastating consequences for many of the most vulnerable poor and elderly populations.

Progressive and seniors’ organizations have criticized the inclusion of several staffers who were paid by private groups, such as the Peter G. Peterson Foundation and Committee for a Responsible Federal Budget, who have previously advocated sharp cuts to entitlement programs.

To be fair, there were also some staffers paid by progressive groups like the Economic Policy Institute. The bottom line is still that the bias toward slashing safety net programs and insufficient action on revenue were serious flaws.

Keynesian Economist James K. Galbraith submitted a statement to the commission led by Simpson and Bowles on behalf of Americans for Democratic Action. He argued that the current deficits were caused by the financial crisis and that cuts in Social Security and Medicare would be harmful and would not reduce the deficit. We don’t agree with all of Mr. Galbraith’s comments, but most of it rings true.

We should emphasize that Keynesian economics is a technical analytical tool for economic growth and is neither “liberal” nor “conservative.” Recall that President Reagan’s economic policies were among the most noted examples of Keynesian economics.

Again to be fair, not everything in Simpson-Bowles is bad; for example they called for much needed sharp cuts in military spending. But it has to be judged as a total package, and in its totality it is a failure.

Dean Baker of the Center for Economic and Policy Research in Washington criticizes Simpson-Bowles for not including a tax on the financial industry, as was recommended by the International Monetary Fund.

Baker was also sharply critical of Simpson and Bowles for claiming to have examined all possible ways to expand revenue, but not including the financial industry. We would not want to make any accusations of a conflict of interest because we are sure these gentlemen worked with the best of intentions, but it is relevant to note that Erskine Bowles served on the board of Morgan Stanley while being on the commission–it is not surprising that financial taxes were omitted in the report.

Bowles probably sincerely believed that what is good for Morgan Stanley is good for the country, but the point to focus on is that all reasonable sources for revenue ought to be included, and financial taxes should be included in a reasonable compromise.

Columnist Paul Krugman wrote, “Simpson-Bowles is terrible. It mucks around with taxes, but is obsessed with lowering marginal rates despite a complete absence of evidence that this is important. It offers nothing on Medicare that isn’t already in the Affordable Care Act. And it raises the Social Security retirement age because life expectancy has risen — completely ignoring the fact that life expectancy has only gone up for the well-off and well-educated, while stagnating or even declining among the people who need the program most.”

On a smaller but no less erroneous scale, Bowles-Simpson recommended the abolition of regional commissions. We have defeated these misguided efforts many times before and will do so again if demagogues want to try to revive this nonsense. We will warn them that we will defeat them again if they waste everybody’s time with another charade in which they pose as the great champions of fiscal responsibility who are going to destroy these supposedly awful commissions.

The last effort earlier this year failed by a 2-to-1 margin even in the more conservative US House of Representatives.

The most impoverished regions in the country like the Greater Mississippi Delta, Appalachia, the Southwest Border, the Denali area of Alaska, deserve special supplementary aid. These commissions have very small budgets and elimination of every penny of their budgets would not have any meaningful impact on the deficits, but would harm the poorest of the poor in America.

The DRA and other commissions stretch their meager budgets a long way. There is no “duplication” in these programs–they are over and above other activities, based on the reality that economic problems in these regions have been so severe for so long that extra efforts are needed. They have impressive leveraging ratios for their funding, they coordinate federal and state programs across many states, they provide thoughtful strategic plans on information technology, small business and entrepreneurialism, transportation and other infrastructure, health care and other key issues.

For those interested in the facts regarding economic development commissions, more data is below in this message.

We should emphasize that the Delta Caucus is completely separate from the DRA. The Delta Caucus is a grassroots, private sector advocacy organization. The DRA is a federal-state government agency. The Delta Caucus supports the DRA’s mission because we believe they are doing constructive and much needed work in our region.

The DRA is in no way responsible for any comments we make in this or any other message. Again, we are completely separate organizations with different purposes. We can engage in some activities that they cannot, and vice versa.

NEED FOR THOUGHTFUL COMPROMISE: In a nutshell, Simpson-Bowles is not really a compromise but is heavily skewed in favor of spending cuts to safety net programs and does not do anywhere near enough on the revenue front.

We do emphasize that compromise is needed, and as the one of the great authors of the famous Compromise of 1850, Henry Clay, once said, the essence of a compromise is that everybody goes away disappointed with some parts of the agreement. But they also go away pleased with most of the package as a whole.

We applaud financial news networks like CNBC and CNBC.com for launching a network-wide initiative to call attention to the fiscal crisis. The network’s campaign is called “RISE ABOVE”, and asks everybody to rise above partisanship to come up with a plan that deals with both the long and short term challenges to the American economy.

The generalizations presented by Bowles and Simpson are fine–the trouble is in the specifics, which do not add up to policies that will achieve their well-intentioned statement of goals. In November, 2011, Simpson and Bowles submitted written testimony to the supercommittee charged with making budget adjustments by Congress, urging the 12 supercommittee members to “go big” toward the $4 trillion in savings the NCFRR had recommended v. the $1.2 trillion deficit reduction most discussed by the committee, as the trigger would still result in $1.2 trillion in cuts.

The supercommittee of course failed, as we all know. The generalizations and eventual goals stated by Bowles and Simpson in themselves are fine, it’s the way they failed to reach the goals that presents the problem.

Massive government spending cuts as well as tax increases or a return to tax levels from previous year are the basic elements that make up the ‘fiscal cliff.’ The now infamous phrase was coined by Federal Reserve Chairman Ben Bernanke in February 2012, during one of his required appearances before Congress on the state of the U.S. economy. He described … “a massive fiscal cliff of large spending cuts and tax increases” on Jan. 1, 2013.

While our largest concerns about Simpson-Bowles are the cuts to fundamental national safety net programs and the inadequate approach to revenue, we would also like to mention that the plan repeated the worn-out, ludicrous idea of abolishing the ARC, DRA and other regional economic development commissions.

Bowles-Simpson recommended elimination of the DRA, ARC and all regional economic development commissions: Before addressing this subject, we need to place great emphasis upon the reality that the DRA is one small agency and there are many other departments that are vastly larger. USDA federal nutrition, rural development and other programs absolutely dward the DRA in scope, as do DOT, HHS and other of the biggest departments.

The DRA is a meritorious, if small, supplement to these efforts and its budget ought to be greatly increased over time from the relatively tiny amount of about $15 million today. That is a very small budget to combat economic problems in a region of 10 million people. As always, we reiterate that the Delta Caucus and the DRA are separate organizations and the DRA takes no responsibility whatsoever for anything we say.

This was one of the most pointless and unwise of their recommendations. WHY DO THESE REGIONS NEED SPECIAL EFFORTS TO PROMOTE THEIR ECONOMIC DEVELOPMENT? One good source of information on this point is the website of the DRA at dra.gov.

Let us summarize some of that information below:

The 252 counties and parishes served by the DRA constitute the most distressed area of the country. As the DRA rightly states, “The disparities between the Delta region and the nation as a whole are stark. As defined by the Economic Development Administration, virtually all the counties and parishes in the region are distressed.”

–Life expectancy for men and women in the Delta region, is years behind the national average.

–According to the Bureau of Labor Statistics, when unemployment soared across the nation in November 2010, the number of unemployed in rural counties was twice that of the national average.

–250 out of the 252 counties and parishes in the DRA area have per capita income levels at or below the national average.

–The poverty rate in the region is 55 percent higher than the national rate

–Compared with the national rates, deaths in the Delta from circulatory diseases are 21.2 percent higher, deaths from cancer are 12.7 percent higher and deaths from accidents are 42 percent higher.

–Bipartisan support led to creation of the DRA: Reflecting on such alarming data, in 2000 President Bill Clinton signed into law the legislation creating the DRA, with the support of a strong bipartisan consensus in Congress. We do not need any further reports or study groups to tell us how poor we are. People in our region are fed up with more study commissions. We need more action in many ways and the DRA is one institution, along with other new organizations and sustainable policies, that is providing action for change.

Since its establishment a little over a decade ago, the DRA has accomplished a lot with its relatively small budget. To cite a few of the major results:

–Targeted investments in the eight states created over 6,000 jobs and retained approximately another 6,000 jobs.

–The DRA has a remarkable leverage ratio of 23:1, leveraging $1.4 billion in private investment with DRA projects and helping 17,000 families gain access to clean water and sewer service.

–The DRA has provided a broad range of strategic plans to assist partners in information technology, small business and entrepreneurialism, health care, transportation and other key initiatives.

–The Delta Doctors program has placed over 150 doctors in underserved areas in the Delta without additional costs to taxpayers.

–There are other benefits from the DRA, which at a fundamental level promotes unity, direction and hope for the region.

We have defeated these misguided efforts to abolish the ARC and DRA and other regional commissions before and will continue to do so. Rather than posing as the “great champions of fiscal responsiblity” who are going to save the budget by killing these constructive commissions, we would advise those like Simpson and Bowles to not waste everybody’s time in these unwise efforts to destroy the commissions. They create jobs and help the poorest of the poor. It’s nonsense to kill them.

OUTLINE OF A COMPROMISE:

The Delta Caucus consists of Independents, Democrats and Republicans. We have a broad range of views among our partners. The following are some recommendations that are frequently heard among our colleagues. We have many thoughtful policy analysts in our region who have suggested a series of policy recommendations and we include some of them here.

It should be taken into consideration that the Delta is a very diverse region. About 35 to 40% of our partners are African Americans, we have many women in our coalition, and a small but growing number of Hispanics and other minorities. The region also is much more economically distressed than other regions, although the great majority of the people have a strong work ethic and are hard at work every day trying to improve the economic situation.

Any plan must have a combination of three fundamentals:

1) Spending cuts, looking at a wide variety of areas to reduce spending, especially in reducing exorbitant spending on foreign military interventions and massive weapons systems.

2) Revenue increases, including a return to the tax structure of 2000. It is a demonstrated fact that higher taxes for the wealthy help reduce the deficits and do not hinder job growth, because we had both at that time. This should not be considered partisan–both Republicans and Democrats of that era should be given credit for those accomplishments.

As President Truman said, you will be surprised at how much you can get accomplished if you don’t worry about who gets the credit for it.

3) Job creation to put people back to work and help both on the fiscal and economic fronts. This is absolutely essential.

I. SPENDING CUTS–MILITARY SPENDING: While we should cut spending in every reasonable way as long as it does not harm the safety net for the most vulnerable populations, the largest area for budget cuts lies in reducing expenditure on exorbitant weapons systems and foreign military interventions. The latter are especially important in light of the reality that the Iraq and Afghanistan wars are winding down.

At our recent conference in West Memphis, Congressman Mike Ross stated that the US defense budget is now larger than the next seven largest nations combined.

Military spending analysts have concluded that US military spending is either approximately equal or slightly greater than the entire military budgets of all other countries on this planet. This is grossly out of proportion.

From the 1940s to his death in the mid-1990s, the distinguished foreign policy leader, Sen. J. William Fulbright, warned against excessive spending on massive weapons systems and foreign military interventions. He opposed “the arrogance of power” that led many Americans to believe we have the power to police the world. The bloated defense budget simply has no justification and needs to be cut back substantially.

Our allies need to shoulder a larger share of the defense burden, but they will not do so as long as they can take a free ride on our massive military spending.

These words are as appropriate now as they were in 1966 when Fulbright, then Chairman of the Senate Foreign Relations Committee, wrote:

“America is now at that historical point at which a great nation is in danger of losing its perspective on what exactly is within the realm of its power and what is beyond it. Other great nations, reaching this critical juncture, have aspired to too much and by overextension of effort, have declined and then fallen. Gradually but unmistakably, America is showing signs of the arrogance of power which has afflicted, weakened and in some cases destroyed great nations in the past.”

We are overextended and a big part of our massive deficits are due to excessive foreign military spending in Iraq and on tremendously expensive weapons systems. Fulbright emphasized the “inseparability of foreign and domestic policy,” because we will never have the resources to invest at home in America while we are making massive expenditures on the military.

Yes, we need to keep a strong defense. As did Senator Fulbright, we should also stress that we support full funding for all health, safety, and other expenditures to support our soldiers and veterans–those are NOT THE AREAS TO CUT. A top priority in spending should always be to take care of those who put themselves in harm’s way for our country.

Lee Riley Powell wrote an exhaustive, scholarly biography of Fulbright that was praised in academic circles. Powell knew and interviewed Fulbright over three decades. Powell can assure all that Fulbright would have condemned the war in Iraq (in its beginning on the grounds that there were no weapons of mass destruction and Iraq was not responsible for the 9/11 attacks) and current excessive military spending if he were alive today.

We should “go big” in spending cuts on huge weapons systems and foreign military interventions. Fulbright also emphasized that we will not have the resources to invest in our domestic economy while the defense budget is so exorbitant.

It goes without saying that if some crisis erupts where America’s vital interests are threatened, we will take whatever expenditures and other steps needed for our defense in the case of a real national emergency. But military force should be the last resort rather than one of the first.

II. Spending cuts–think big and be willing to compromise.

Just as Republicans need to compromise and agree to revenue increases, Democrats need to stop regarding ALL expenditures on social programs as sacred cows that can never be cut.

They should not be cut to harm the most vulnerable populations such as seniors and very low-income people, because this will cause health and other problems that will inevitably lead to further costs down the road. This is not bleeding heart sympathy but a simple question of math–We all pay for it when our neediest people suffer.

Nonetheless, let’s be flexible: in 2011, Social Security and Medicare cost $1.2 trillion and represented 36 percent of non-interest federal spending. The economist Robert Samuelson has pointed out that excluding them from any cuts would make any deal too small and too dependent on tax increases and spending cuts in other programs to be effective.

Therefore, benefits for wealthier retirees need to fall. This is the same principle as asking wealthier people to pay a little more in taxes–they will still be wealthy, and they need to contribute more. Wealthier people can also afford to retire later and thus make further savings.

Many Democrats have a knee-jerk opposition to any cuts in Social Security or Medicare, even for the wealthy. They also have an automatic opposition to means testing. Means testing would just be a way to make sure that people who really need the help receive it, and those who really could get by just fine with a little less must do so.

The retirement age must not be changed for lower-income groups. Their health would suffer and we would all wind up paying more in the long run.

III. JOB CREATION TO PUT PEOPLE BACK TO WORK AND INCREASE REVENUE: President Obama’s stimulus stopped the economic collapse and it did create more jobs, but it did not go far enough and some of the policies were not effective job creators. We are confident the administration will continue to improve and learn from their mistakes.

If we make sharp cuts in defense spending, limited cuts in Social Security and Medicare as noted above, and other reasonable cuts, increase revenues substantially by returning to the tax structure of 2000, cut health care costs, we will have funding to continue proven job creation investments.

Small business is the number one engine of job creation. Investments in the Small Business Administration and other small business and entrepreneurial initiatives must be continued and expanded.

One area that many leaders in both parties agree upon may be more traditional, but we need to think big and broadly: transportation and infrastructure investments to create jobs while repairing our dilapidated infrastructure. This includes roads, bridges, schools, housing, broadband and other infrastructure.

This is one among many job creation programs that should be conducted. Yes, we need to invest in sustainable growth, in broadband, health care, small business and other spending that is not the traditional “bricks and mortar.” On the other hand, the WPA was one of the parts of the New Dealt that was effective in both job creation and infrastructure improvements.

We recall that when Chris Matthews was discussing a WPA-like job creation program, a knee-jerk liberal Democrat started complaining that “We need new ideas.” Matthews quite righly replied that in cases where the old ideas worked well, “What’s wrong with the old ideas?” He was right on target.

Let’s have a combination of the best of the old ideas as well as new ideas.

Other parts of the stimulus that were proven job creators should be continued and expanded. Those that turned out poorly should be eliminated. Without continuing job creation we will never put enough people back to work to get the revenue stream flowing again.

We welcome further feedback on these issues. We would like to see a spirit of compromise.

We often say that if the most partisan people on both sides are mad at ideas the majority of the Delta Caucus partners recommend, then we know we probably were right. Thanks–Delta Caucus (202) 360-6347