Republican former Senator Alan Simpson and Erskine Bowles, former Clinton White House Chief of Staff, are back with another deficit reduction framework that aims to build on the spending cuts and revenue raisers that Congress has already enacted. While the plan’s political prospects in its current form are poor, it may serve as an important reference in future negotiations, as the duo’s first plan did.

A couple of things to note: First, the original Simpson-Bowles plan was billed as promoting about three dollars in spending cuts for every dollar of increased revenues. Even though many of its ostensible supporters ultimately abandoned it, Congress nevertheless did pass substantial deficit reduction measures in roughly those proportions.

Specifically, between the Budget Control Act of 2011 (the debt ceiling agreement) and the American Taxpayer Relief Act (the 2013 fiscal cliff compromise), Congress has enacted about $2.35 trillion worth of deficit reduction measures, consisting of

• 10-year spending cuts of $1.47 trillion
• Revenue increases of $563 billion
• Projected interest savings of $317 billion

Simpson-Bowles II, like its predecessor, appears to favor a roughly 3-to-1 ratio of cuts to revenues, targeting total spending cuts (including those already enacted) of $3.8 trillion over the next decade– replacing and enlarging the imminent sequester’s cut–while raising about $1.3 trillion in new revenue. In total, the new plan envisions a $5.1 trillion reduction in deficits over the next 10 years.

The second thing I’d note is that the measures that have already passed, while significant, unfortunately do not target the single biggest long-term fiscal threat we face: a massive projected surge in healthcare spending, increasingly government-sponsored or subsidized care, as a share of GDP. Simpson-Bowles II—offered merely as a possible starting point for bipartisan negotiation—is very thin on detail, but it clearly specifies that entitlement reforms should be a key goal in the next round of deficit reduction measures, whenever they may arrive.

So what? However enervating the process has been, investors should not conclude that the U.S. economy is doomed because we’ve made no progress on stabilizing our medium-term fiscal problem. But however much progress we’ve (surprisingly) made, we shouldn’t conclude that government services, business, and our own standard of living, will be unaffected by spending cuts and tax increases yet to come.

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