The preliminary deficit reduction plan recently released by the co-chairmen of the National Commission on Fiscal Responsibility would kill four million jobs over the next three years, according to a recently published analysis by the Economic Policy Institute (EPI).
"Using the rule of thumb that a 1% increase in GDP increases payroll employment by 1 million jobs, we estimate that Co-Chairs’ Proposal would thus reduce payroll employment by roughly 723,000 jobs in 2012, 1.4 million jobs in 2013, and 1.9 million jobs in 2014," economists Josh Bivens and Andrew Fieldhouse said in their report, "Fiscal commissioners’ proposal would cost millions of jobs."
Bivens and Fieldhouse said in their report that the proposal drafted by former Sen. Alan Simpson (R-Wy.) and Erskine Bowles, President Bill Clinton’s former chief of staff, plays "lip service" to future economic conditions in America.
The EPI report said that because Simpson-Bowles proposal assumes the unemployment rate will remain roughly at the current level, or perhaps higher, austerity policies and slow economic growth would create "more job losses and less deficit reduction."
"We calculate that the savings path outlined in the Co-Chairs’ proposal would decrease GDP by $114.0 billion in 2012, $227.7 billion in 2013, and $345.0 billion in 2014," Bivens and Fieldhouse wrote.
The EPI economists added that the Simpson-Bowles plan would also "produce far less budgetary savings than they assume, as the cyclical effects of depressed economic activity on the budget will largely defray the savings from spending cuts and tax increases."
The draft report released by Simpson along with co-Chair Bowles proposed raising the retirement age to 69 by 2070. Additionally, 90 percent of Social Security income would be taxable, as opposed to 82.5 percent as is currently projected.
Simpson told Jeremy Pelzer at the Casper Star-Tribune that the public's reaction to the proposal was the worst he had seen in his life.
"Just vicious. People I've known, relatives [saying], 'You son of a bitch. How could you do this?'" Simpson recalled.
Critics of the proposal have dubbed the group the "catfood commission" because seniors who see their benefits cut would have to reduce their expenses or find additional sources of income.
"We had the greatest generation," Simpson said. "I think this is the greediest generation."
AFL-CIO President Richard Trumka has 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," Trumpka said.
Bivens and Fieldhouse suggested a better path that would involve creating jobs, ending the Bush-era tax cuts for the wealthy, and reforming health care more.
"In the present economic environment, the near-term austerity measures proposed by the co-chairs would be fiscally counterproductive and crippling to states, communities, and families, delaying a robust economic recovery for years." they wrote.
With reporting by David Edwards.