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Give the Fiscal Commission a Chance

July 29, 2010

If recent polls are to be believed, American voters are ready to party like it is 1992. While Ross Perot isn’t on TV with his trademarked budget graph charts, Americans seem to share his fervor for deficit reduction, with majorities favoring cutting the deficits over additional stimulus or spending cuts. Giving his last public speech as OMB Director on July 28th, Peter Orszag acknowledged this reality by touting how the Affordable Care Act is projected to cut the 75-year deficit by 25%-37.5%, according to the CBO. While health care reform remains controversial, Orszag mentioned one initiative with bipartisan support: the President’s Commission on Fiscal Responsibility and Reform.

The rationale for a bipartisan commission to reduce the deficit states that the normal legislative process is ill-equipped to address our structural budgetary shortfall. A recent Hart Research poll shows that popular belief in the ability of government to solve problems is at its lowest point in decades. This view isn’t misplaced in an environment with the highest level of political polarization in 120 years.

While some blue-ribbon commissions conclude with voluminous reports that serve as book case fodder, others such as BRAC, which oversees the closure of unnecessary military bases, have effectively separated parochial politics from spending decisions. This commission is tasked with an even more sensitive issue than base closures. Former Clinton Administration Chief of Staff Erskine Bowles, the stolid, technocratic co-chairman of the President’s Commission on Fiscal Responsibility and Reform, recently outlined the stakes, saying that currently, our “debt is like a cancer.”

Bowles is joined by co-chairman former Senator Alan Simpson (R-WY), a lanky, famously blunt conservative, whose willingness to compromise has earned the ire of both the far left and the far right. While some fiscal liberals argue that only the rich should pay to reduce the deficit, the non-partisan Tax Policy Center found that to reduce the deficit to 3% of GDP, the “top two income tax rates would have to more than double, with the top rate hitting almost 77 percent.” Similarly, “no new tax” conservatives who support reducing the deficit by slashing social insurance programs, ignore the political peril of cutting these popular programs.

The debt will continue to grow in either case.

Co-chairman Bowles dismisses the false choice between raising taxes and cutting spending, which is an encouraging sign for fiscal pragmatists. “We can’t tax our way out. . . .We’ve got to cut spending or increase revenues or do some combination of that.”  Bowles is supported by retiring Republican Senator Judd Gregg who told The Hill, “Get spending down and revenues up. … That would be very close to a stable situation.” If comments by Bowles and Gregg are any indication of the commission’s eventual decision, one can expect a balanced package of spending cuts and revenue increases.

Once the Commission makes its recommendations in December, the President and Congress will have a chance to show their actual commitment to fiscal discipline. With reauthorization of the 2001 Bush tax cuts soon approaching, Congress has a prime opportunity to distance itself from past profligate policies. If members opt to eliminate the tax cuts for only the top 2% of income earners, Congress can reduce the 10-year deficit picture by $675 billion.

In addition to tax increases, Congress can reduce the deficits by thoroughly auditing federal spending. Director Orszag mentioned that last year the federal government made $110 billion in improper benefit payments. Finding obvious inefficiencies like this to cut will help in the short-term, but to reduce the medium and long-term deficits, President Obama and leaders in Congress must be willing to make hard choices. The first such choice is to carefully consider the upcoming recommendations of the Commission on Fiscal Responsibility and Reform.

-Myles Bugbee

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