Yet Another Budget Commission?
How to make this one work.
Bruce Bartlett, 11.06.09
One of these days, Congress needs to raise the federal debt limit. As of Nov. 3, the debt subject to limit was $11,978 billion--and the limit is $12,104 billion. With the Treasury needing to borrow $26 billion per week to finance this fiscal year's deficit, time is clearly running out.
Raising the debt limit is always contentious. Members of the party opposite the president always demagogue the issue--and just as predictably switch gears when a president of their party is in the White House. For example, Sen. Barack Obama, D-Ill., had these choice words about an increase in the debt limit in 2006, when a Republican was president:
"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. ... Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren."
Obama even voted against raising the debt limit that day. But in a few weeks, he will be begging his former colleagues to pretty please vote for a debt limit increase lest the government run out of cash and grind to a halt.
To make the medicine go down a little more easily, some congressmen and senators are hoping to attach an amendment to the debt limit legislation that would establish yet another commission to study the deficit and make recommendations for reducing it. We've had a number of such things in the past. Here are a few off the top of my head:
Commission on Organization of the Executive Branch of the Government (Hoover Commission), 1947-1949; President's Commission on Budget Concepts, 1967; National Commission on Social Security Reform (Greenspan Commission), 1981-1983; President's Private Sector Survey on Cost Control (Grace Commission), 1982-1984; President's Commission on Privatization, 1987-1988; National Economic Commission, 1987-1989; Bipartisan Commission on Entitlement and Tax Reform (Kerrey-Danforth Commission), 1993-1995; President's Commission to Study Capital Budgeting, 1997-1999; U.S. Trade Deficit Review Commission, 1998-2000; President's Commission to Strengthen Social Security, 2001; President's Advisory Panel on Federal Tax Reform, 2005.
In addition, there have been any number of ad hoc working groups in the administration and on Capitol Hill, plus innumerable studies by the Congressional Budget Office, Government Accountability Office and other governmental bodies on the problems of debt/deficits/entitlements/taxes that would fill a small library. For decades the CBO has regularly published a convenient list of options for reducing deficits that have been ignored just as regularly.
Although some commissions had a modest impact, for the most part they were forgotten the day after their report was issued. The exceptions were those that involved recommendations the administration could implement without legislative action or those where there was a clear consensus for action that just required a bit of cover and direction. The Greenspan Commission on Social Security, for example, was up against a hard deadline for fixing a specific problem that forced legislative action.
Those proposing another commission are hopeful that this one will be different by making it similar to the various Base Realignment and Closure Commissions that recommended closure of military bases that were no longer needed. Their key feature was that the president had to approve or disapprove the recommendations as a package and they were implemented automatically unless both houses of Congress passed a resolution of disapproval.
The new budget commission's recommendations would not be implemented automatically, but would be guaranteed an up-or-down vote on the package as a whole. This is important because budget deals necessarily involve trade-offs. If the commission members don't believe any deals they make will be honored they have no incentive to do anything except posture.
For this reason, I also think Congress should avoid even allowing deficit-neutral amendments to the package. First, it's too easy to pay for real spending increases with phony-baloney savings. Second, if amendments are allowed it will be harder for the commission to make trade-offs if those deals are potentially expendable. And third, it could easily lead extraneous issues to be raised that are potential deal-breakers.
I think the commission could be strengthened in a number of ways. The biggest problem is that it would largely be composed of members of Congress. In theory, this gives members a stake in the outcome. But in fact, their presence virtually ensures failure.
First of all, members of Congress don't have the time to devote to a budget commission on top of their day jobs. Second, it is unrealistic to believe that they are ever going to support actions that harm their primary constituency. For example, no farm state representative is ever going to support sharp cuts in agricultural subsidies.
In my opinion, the commission should have no members of Congress at all among its members. Former politicians with no further political ambitions would be far better suited to the task. They can speak the truth in a way no sitting member can about things like putting higher taxes on the table as part of a deficit reduction package.
The chairs of such a commission are absolutely critical to its success. (Bipartisan co-chairs are probably unavoidable.) As a practical matter, they are going to be its public face and its driving force. Weak chairs or those not absolutely committed to a successful outcome--which doesn't mean just issuing a report, but seeing the package enacted into law--will doom the venture out of the box. I think former presidents Bill Clinton and George H.W. Bush would be ideal since they both enacted meaningful deficit reduction legislation.
Having a good quality staff is also critical. Too often these commissions try to operate on the cheap with detailed staff from federal departments. Congress needs to appropriate adequate funds to hire good quality staff and consultants and give them access to all the resources they need to do their jobs. I would suggest hiring a former Congressional Budget Office director to be the chief of staff. They know the issues and the political problems inherent of crafting proposals for congressional consumption.
One thing to be avoided, in my opinion, is public hearings. They are just a waste of time. The idea that average people have worthwhile ideas about cutting the deficit that no one has thought of before or rise above the level of cutting foreign aid and pork is a myth. However, I think the commission might usefully invest in a good pollster to gauge the political toxicity of some ideas before putting them forward.
One idea the commission might get some mileage out of is allowing the discounted present value of some entitlement program changes to be counted toward deficit reduction now. For example, an increase in the retirement age would need to be phased in over a period of decades and will save real money, but not for a long time in cash-flow terms. This tends to put such an idea off the agenda when deficit reduction is discussed because there is always a premium on near-term savings. If some portion of out-year savings can be counted immediately then it will make programmatic changes in entitlements much easier to enact.
Finally, I think Congress needs a substantial debate on the scope and necessity of significant deficit reduction in advance of creating a commission. In this respect, I think the enabling legislation needs to spell out, in a broad way, what the deficit reduction package should contain. It's not enough to just say that all options are on the table.
I believe that a deficit reduction target should be specified--$X trillion over 10 years with, say, a third coming from higher revenues, a third from entitlements and a third from discretionary spending. In particular, unless Congress commits itself in advance to raising taxes then I think the whole exercise will be for naught because that will be the toughest nut to crack.
It's unrealistic to think that a budget commission is going to find some painless way of reducing benefits and raising taxes--taking real dollars out of people's pockets. If Congress acknowledges this fact up front then I think there is a much better chance that the commission will be able to come up with the best ways of doing so.
For all the hand-wringing about the deficit, especially among Republicans who didn't give a damn when they were in power, I don't think Congress is yet to the point where it is ready to grapple seriously with it. That will only happen when the American people are suffering from problems that can plausibly be traced directly to the deficit. At that point, deficit reduction will have mass support because whatever pain it involves will be seen as less than that caused by inflation and high interest rates.
We may not be that far from the point at which those factors begin to have political importance. It's a certainty that both inflation and interest rates will rise from where they are now--just getting back to historical rates will involve a significant increase from current levels. By the time the budget commission finishes its work in a year or so the political climate may be quite different than it is today.