A new study of the Simpson-Bowles proposal--the precursor to the deficit commission's recommendations, should the panel come to agreement--by the Economic Policy Institute shows a major flaw of this proposal in this economy.
The recommendations issued by co-chairs Alan Simpson and Erskine Bowles would cost 4 million jobs over three years and reduce economic growth by 0.7 percent in 2012, 1.4 percent in 2013 and 1.9 percent in 2014, according to an analysis by the Economic Policy Institute (EPI).
The Simpson-Bowles approach calls for job-killing budget austerity to begin in October 2011, even though most economic forecasters expect unemployment to remain as high as it is today or even increase by then....
AFL-CIO President Richard Trumka said Simpson and Bowles “just told working Americans to “Drop Dead.”
Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare. Some people are saying this plan is just a “starting point.” Let me be clear, it is not.
In the EPI report, economists Josh Bivens and Andrew Fieldhouse note that because the Simpson and Bowles recommendations would reduce economic growth, they would end up lowering the deficit far less than Simpson and Bowles claim.
Bivens and Fieldhouse say the co-chairs’ proposal “threatens to increase the already unacceptably high level of unemployment and increases the possibility of the economy falling back into outright recession.”
The answer to deficit reduction, the EPI analysts (and plenty of economists say) is investing in job creation and growth, "raising revenue from new sources over the medium-term to stem the hemmoraging caused by the Bush-era tax cuts for the very well-off, and reforming the health care provision to generate long-run budgetary savings." Reducing unemployment is a twofer--more direct revenue in income taxes and keeping the flow of payments into Social Security.
The limits of trickle down prosperity have been proven over and over and over again. More austerity for the people already living on the economic margins, and more tax cuts for everyone else hasn't worked yet, and won't. Seems like it might be time to try a different approach.