StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Yet Another Budget Commission?

06 Nov 2009
Posted by Bruce Bartlett

Forbes.com

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.

Improving a Debt Commission

I agree strongly with the idea of keeping members of Congress off the commission and instead using elder statesmen like Clinton and H.W. Bush. They would make ideal co-chairs. The actual work should be done by thoughtful economists and serious policy wonks.

What I'd add - the results should be published in a mass market paperback like the 9-11 Commission and Iraq Study Group results were. Get the major conclusions out there for everyone to see directly vs. through the lens of politics and mainstream media. Make sure it is written in a way that is comprehensible to the general public.

We all know the rough shape of the answers: cut military spending, reform entitlements, increase taxes. We know that the political right will run against all three, and that both sides in Congress will dodge this issue as long as they can get away with it. There needs to be a genuine popular consensus built within the electorate that we can't just wait for the currency crisis to hit. This topic needs to be made accessible to the mass market or we will never cut through the noise to solve it.


I just cannot believe that

I just cannot believe that Congress would EVER set up a body that would interfere in any way with its control of the appropriations process.


Control Health Care costs

If we control health care costs and get unemployment back down to 4% and return tax levels to those of the Clinton era, the budget will be in balance. Another "peace dividend" would be nice because defense spending has skyrocketed over the last decade.

Bush tax cuts were NEVER affordable and should not have been attempted. Bush policies FAILED to stimulate job growth (other than the temporary construction boom due to the Greenspan housing bubble). Bush energy and anti-regulatory policy helped to wreck our economy. Record oil profits = record collapse of BigAuto. That has been clear since 1973.

We have big deficits now because so many people are out of work. As was proved under Clinton, when unemployment comes down to the 4% level, the budget shifts to surplus. The budget will NEVER improve until employment improves. Trying to deal with the budget deficit in a way that makes unemployment worse will make the budget deficit worse.

In the long run, nothing will balance the budget if we do not control health care costs.


Strongly endorse Bush-Clinton co-chairmanship

true. Congress would prolly balk. But the most ingenious idea so far is a co-chairmanship by H. W. Bush and Bill Clinton and the format should be that endorsed by the 9/11 commission. That signals seriousness of purpose. It virtually guarantees that the recommendations will be seen through as well.
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What i do disagree with is that congress should have at it even BEFORE the idea is incubated in the public's mind. I mean, if they can't solve it themselves, why would they have thoughtful, bluster-free consensus-building conversations about how to approach this? even if the recommendations for and up and down vote do include a 1% general increase in taxes, the fact that the effort was non-political but politically conscious (i mean clinton would be sensitive to democratic issues and bush would be sensible to repub ideas) and seen through by both men is enough to take the political blustery out of it.


God forbid that the people or

God forbid that the people or their elected representatives should have say in a representative democracy. No, let's have the unelected technocrats and Villagers of DC tell us what's good for us, with some bipartisan/ex-Presidential wrapping paper to make it shiny.

We've been sold this horse manure before- the Greenspan Commission enacted a regressive tax increase to pay for the Baby Boom, and in the end the surplus was used to finance tax cuts for billionaires in the Bush years. I have little doubt it happens again- the taxes will conveniently go up on everyone, while somehow Goldman Sachs executives come out much better in the end.




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