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Simpson-Bowles cutting again

By Jennie L. Phipps · Bankrate.com
Wednesday, February 20, 2013
Posted: 9 am ET

Bowles-Simpson are back with more painful proposals as the March 1 date for automatic budget cuts, known as the sequester, gets closer.

The ideas released on Tuesday by Erskine Bowles, a Democrat who served as former President Bill Clinton's chief of staff, and former Republican Sen. Alan Simpson build on those they offered in 2010 when the men were co-chairs of the deficit reduction committee created by President Barack Obama.

The new proposals are more onerous in some ways than the old ones, which have been mostly ignored by Congress and Obama. "We learned the hard way with our commission, the harder we made (the proposal), the more support we got. It's either go big or go home. This is pathetic," Alan Simpson told CNBC's "Squawk on the Street" on Tuesday morning.

Here are portions of the new proposal, dubbed Bowles-Simpson (rather than Simpson-Bowles), that most affect people who are concerned about retirement planning. I'm sure we'll hear more, but this early line comes from a summary of the plan, released on the Bowles-Simpson website, and a joint analysis offered by both the Urban Institute and the Brookings Institution.

  • Limit contributions to tax-advantaged retirement saving plans, including employer-sponsored salary reduction plans and individual retirement accounts, capping them at 43 percent of their current limits.
  • Tax income accrued within defined contribution accounts such as 401(k)s. Interest, dividends and realized capital gains in excess of $6,330 per year would be taxable.
  • Income accrued within defined benefit plans -- old-fashioned pensions -- in excess of $177,000 per year would be taxable to the individual beneficiary.
  • Increase the Social Security wage base by 2 percent per year more than the growth in the average wage (making the FICA cap $140,100 in 2015).
  • Adopt the chained consumer price index, and apply it to cost-of-living increases government-wide with protections for low-income beneficiaries.

These proposals sound like they would make saving for retirement a lot more difficult, especially since the plan also calls for $600 billion in cuts over 10 years to Medicare and Medicaid. That's significantly more than the $400 billion the Obama administration has said it would accept.

The plan also would cut tax deductions for employer-paid health care, which could encourage employers to pay higher wages, and that would raise the amount of money employers pay into the Social Security system. Some analysts have applauded this suggestion as good for ordinary workers.

As we've seen in some of the European nations such as Greece and Spain, failure to control government spending can have horrendous consequences, but contemplating some of these changes in the current U.S. system is pretty horrific as well.

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82 Comments
a.rocha
February 20, 2013 at 7:08 pm

It is so sad that we (retirees) received so little when
some countries that receive our help(aid) get almost Doble
pension.I can mentions 06 contries that the retiress get
twice that i get form their social security.

Mike
February 20, 2013 at 6:58 pm

Elected officials should have to live on the same retirement that the people who elected them. Max retirement benifits should not exceed what we give to our military retirees. No golden blanket retirement benifits. Cut the amount of Senators and Representitives and there staffs. Put term limits on them and
make it mandatory that any city, county, state or federal item purchased has to be made in the USA with materials from the USA and Labor from the USA. That goes for paper clips to Airplanes. If they are going to spend my tax dollors I want my taxes spent here on our soil. Personaly I think that our federal government is so greedy and corrupt I dont trust them to do anything for the people.

Joe
February 20, 2013 at 6:13 pm

Can someone say Revolution . Think about it .Is this the real
reason they want to remove all our guns What usually happens
when a countries population gets opressed to the breaking point
Could it happen? Will it happen? Who knows.Guard our 2nd
ammendment at all cost people and NOT for hunting

Donna Fisette
February 20, 2013 at 5:39 pm

I too believe that all government officials should have to live on what they have earned and saved during their lifetime or try to live on SS and Medicare. They would not be so ready to decrease it. I believe that the government does not care about the senior citizens of this country, those of us who were around when the SS program was started and have conributed all our lives. I also believe that we should stop ALL foreign aid. I don't like to see small children suffer, but we have an abundance of those children, here in the United States. Let us feed our own first.

Happydayze
February 20, 2013 at 5:14 pm

No cuts to retirement benefits! I already paid taxes on it, when I worked! Bring home American jobs, so all can work, and pay their fair share of taxes. Overseas workers/corporations don't pay any taxes. But our congress pays subsidies to overseas governments so that our corporations can do monkey business; building counterfeit domestic goods, and then sell them here. That means; they pay workers $2.00 a day. but charge us full value, so... they make more money! Look at your appliances, cars trucks, and computers, American brands, made in overseas corporations. Less work for us, means more debt for our government.

Elaine Hebert
February 20, 2013 at 4:05 pm

I totally agree with Debi. Very well said....get rid of the fat.
I am retired and struggling to keep my head above water.
To all the young people out there working, I hope you have the means to put money aside for your retirement, if you are ever able to retire.

shelly
February 20, 2013 at 3:48 pm

Congress should also have to use the same health insurance we do...i.e. medicare and not receive supplemental health insurance from the government that we tax payers are supporting...ludicrous

Ever wonder why the share of politicians were educated as lawyers? think about it

Debi
February 20, 2013 at 3:38 pm

If Government's too big,lets cut it down to 1 congressman & 1 senator per state. It's no secret, they ALL get $$ from groups that want their own agenda's promoted. Since all they do is waste time arguing amongst themselves & dreaming up more ways to raise their pay. They shouldn't be allowed to set their own payrates anyways! Who does that? When was the last time YOU had a job where YOU voted yourself pay raises & better perks? If all men are created equal, why should one group representing avg Americans make more money & have better benefits? Make it a vollentary deal since they do nothing, pay them nothing. See how many want to run against each other then. Give them the BONUS of having the same benefits as your avg retiree. As 'public servents' since they work for Americans, they should answer to us. Audit ALL of their incomes & publish them in the newspapers. Like they do police & fireman. Since we are all equal, all should pay taxes at the same rate. They didn't get to be millionaires by 'donating' 28% of their income. Let's also stop ALL the double & triple government jobs. We currently have some jobs done at the Federal, State, city, county or municipality level. Doing the same type of work, for what? Please, can somebody tell me why it was decided to bail out the banking industry, sending millions of dollars to some banks THAT NEVER EVEN APPLIED FOR IT? When was the last time the government sent you millions, that you never applied for? Lastly, until every citizen in America is above the poverty level ~~No More Money to other countries. They hate us anyways, have no respect for Americans & don't appreciate it. Why should US citizens be paying for things like the rebuilding/infrastructure of countries like Iraq, when they won't even pay for it themselves? Especially while our own bridges & roads have been declared unsafe, dangerous & even hazardous? Respectfully, D

GARY
February 20, 2013 at 3:36 pm

Wake up sheeple the US GOVERNMENT DOES NOT REPRESENT ALL THE PEOPLE JUST THE TOP 2% and just want us to foot the bill for their own selfish gain. It's a truely sad day for america!!

Bob
February 20, 2013 at 3:34 pm

I agree with Lee & we need to get rid of some of our Government people also.