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Comparing 32 Deficit Reduction Plans While Trying To Lift The Gloom Over The Budget Talks

01 Jul 2011
Posted by Pete Davis

The Committee for A Responsible Federal Budget has just posted a very handy side-by-side comparison of 32 deficit reduction plans.  You can use this tool to compare any three at a time.  This is Budget Wonk Heaven.

Of course, our problem is not a lack of plans; it's finding one plan that can pass both houses of Congress and can get President Obama's signature by August 2, which Treasury just reaffirmed today.

At Cheri Reidy's retirement reception at the Senate Budget Committee Wednesday -- She has put in 29 years of top-notch service to our country, starting at the desk next to mine -- I heard staff and members from both parties talking down: President Obama; leaders of the other party; leaders of their own party; and the futile 3:30 p.m. sequester briefing that interfered with final arrangements for Cheri's party.  She was given a very warm and heartfelt sendoff in any event, but the gloom over the budget talks hung heavy.

I'm reminded of Churchill's quip: "You can always count on Americans to do the right thing -- after they've tried everything else."

I would note that most members of Congress equate election defeat with cutting spending or with raising taxes and reelection with staunchly siding with one or the other.  The trick will be for the voters to convince them in the next few weeks that they will be defeated if they don't do some of both.  Why should spending in the Tax Code be exempt?  Why should unrestrained entitlement spending be exempt?  There are plenty of loopholes that can be closed without hurting growth, and there are plenty of entitlement cuts that won't hurt the provision of health care or take benefits from the poor.

I can't find any reasons to be optimistic at this point, but I do believe a deal will be cut in mid-July to extend the debt limit through the end of this year with some discretionary spending caps, some entitlement cuts, some loophole closers, and some debt trigger or sequester to enforce future deficit reduction.  Then a larger deficit reduction and debt limit increase through 2012 will be enacted late this year or early next year.  

Keep those deficit reduction proposals coming.

Obama must explain why the debt ceiling must be raised

Obama should make it clear that if we don't raise the debt limit, we are risking severe repercussions. If he doesn't do that he isn't doing his job. He is the one person in a position to explain the meaning (and non-meaning) of the debt ceiling. The most important thing he can do it explain to the American people why the debt ceiling must be raised. All other budget issues, while important, are not connected to the debt ceiling. He must explain that to the American people.

Once he's done that he should then make it clear that it's up to Congress to act. He can't raise the debt ceiling. Congress must do it. He must get the American electorate to tell their representatives that the debt ceiling should be raised. Once he does that, it will happen.


Deficit reduction

Perhaps some of your readers are familiar with Clayton Christensen, a professor at the Harvard Business School. His recent work is to put it mildly relevant to the great ongoing debate on how we ought reduce the deficit.

I have not merely read but sweated over several of Clayton Christensen's books on innovation, beginning with The Innovator's Dilemma (1996), which earned him an enormous following not only in business schools but in industry. About a year ago I read The Innovator's Prescription--about how medical costs may be reduced (hence Medicare and Medicaid costs--and was stunned by the clarity of its analysis and direct relevance to debates about the Federal budget deficit.

To my knowledge, Christensen’s is the only proposal for reforming our healthcare system which specifically and credibly explains how 1) potentially dramatic savings in cost and 2) improvement in outcomes may be achieved.

I can discover no politician, Democratic or Republican, who is saying a word about Christensen's work (I have looked and looked: nothing on the first few pages of a Google search). Paul Ryan calls himself an advocate of free-market solutions. He says nothing about Christensen's work. I have written a number of influential people, including Paul Krugman, about this. The answer invariably is silence. In Krugman's case, I understand why. He is for a single-payer system (i.e. extending Medicare to everyone). Christensen argues in his usual level tone that a single-payer system would block "disruptive" (i.e. transformative) innovation in the healthcare industry, because incumbent institutions would find it possible to smother innovation or co-opt it into their business model—which is the source of the problem to begin with. (Christensen calls it “business-model malpractice.”)

I tell you, I fear for the United States.




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