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The Greenspan Commission Failed

20 Jan 2010
Posted by Stan Collender

What is most commonly known as The Greenspan Commission -- the group created by Ronald Reagan to deal with Social Security that was chaired by Alan Greenspan long before he became chairman of the Federal Reserve Board -- is generally thought to be the prototype for federal commissions because it supposedly succeeded in dealing with an otherwise politically intractable economic issue.

Except that it didn't. 

As this excellent story by Jackie Calmes in yesterday's New York Times points out, former Social Security Commissioner Robert Ball, one of the Greenspan Commission's most prominent Democrats, has written in a yet-to-be-published memoir that the commission wasn't able to agree to anything.  Instead, Reagan and House Speaker Tip O'Neill, neither of who were members of the commission, privately agreed to a deal.  The Greenspan Commission was pushed to take credit for it so that it looked more bipartisan-partisan and less of a backroom deal that was really the case.

There are several things about the Ball memoir and Calmes' story that are important.

First, as Bruce and I (here and here, for example) have been saying at least since the subject of a budget commission started to be discussed seriously this year, commissions not only are not the panacea many make them out to be, they typically just don't work.  No matter how much you might wish it to be otherwise, you can't take the politics out of a decision like reducing the deficit that is inherently, fundamentally, and genetically political.  As a result, as Calmes quotes Ball, "we should not allow ourselves to fall into the trap of expecting miracles from another Greenspan Commission -- by deluding ourselves into believing, mistakenly, that the first one was a great success."

Second, it was Reagan and O'Neill who agreed to something.  Today's politics are far more difficult, however, and it's not at all clear who would be able to agree to that type of deal today for the Republicans and Democrats and make it stick.

Third, the Greenspan Commission is the one that would be most analogous to a budget commission because it started with no prior consensus on what needed to be done. The only other commission that is typically cited as a success -- the Defense Base Closure and Realignment Commission -- deals with a very different type of issue because it starts with an agreement that bases and other DOD facilities should be cut.  The only question, therefore, is which ones.  The budget equivalent of that would be something like "We've decided to cut some agriculture programs and we need a commission to make recommendations on which should go.  That type of consensus doesn't exist, however.  In fact, there's no political consensus on the most fundamental question of cutting spending vs. raising revenue.

Finally, for all those who think that C-Span was providing a tremendous public service by demanding that it be allowed to televise the behind-the-scenes negotiations being held on health care reform, notice in the Calmes' story that the only way an agreement was reached on Social Security back in the Greenspan Commission days was with very private discussions.  Had C-Span aired those the strong likelihood is that nothing would have been achieved.

Finally, you have to love the picture above from the Calmes' story if for no other reason than we all get to remember what Greenspan looked like with hair.

It is invalid dichotomous

It is invalid dichotomous thinking to view the choice as between "expecting miracles from another Greenspan Commission" or foregoing a budget commission. A rational approach to deciding whether or not such a commission is worth establishing would consider the potential benefits and costs and their respective probabilities, and if the "expected value were positive" and the potential opportunity costs and explicit costs negligible, it would be worth doing. As I've explained previously, such is the case with a budget commission along the lines of the SAFE Commission proposals today, even the very imperfect "task force" proposed recently by Gregg and Conrad (unless the opportunity cost is the loss of a good chance at a stronger version of such a commission, which isn't the argument against the commission that I've see by Stan or Bruce).

As for the reading of the impact -- or supposed lack thereof -- of the Greenspan commission, one possibility that seems to be overlooked here is the possibility that, even if a side deal was necessary, it's possible that that deal would have been less likely to occur if there hadn't been that commission, perhaps because the key players in the deal knew that they and others would benefit from some political cover via the blessing of the commission and/or perhaps because such a deal became more likely once it became apparent that (even) a commission approach (alone) was unlikely to succeed in reaching a deal.

Today's (Thursday 1/21) WaPo

Today's (Thursday 1/21) WaPo editorial "The U.S. needs to create a commission to deal quickly with the budget crisis"

Only part I would quibble with is that even in this editorial advocating a commission, they say "The risk is that both Congress and the White House will use such a commission as a fig leaf for continued inaction." Actually, it's only a risk if "action" might otherwise occur, but would not occur because of the presence of a commission. There is no such risk.

Presidential v Conrad-Gregg budget reform commissions.

Keith Hennessey compares the details of two budget-reform commission proposals as reported so far, and then opines...

... In my experience, there are four reasons to create a commission:

1. You want to learn or investigate something: 9-11 Commission, Financial Crisis Inquiry Commission.

2. You want to create an external credible body of "wise men" to produce consensus recommendations to build broader political support for politically painful policy changes: 1982 Social Security Commission.

3. Elected officials want to give themselves political cover to implement painful policy changes, by delegating control of the details to someone else: Base Realignment Commission (BRAC).

4. You want to duck an issue for a while and you need an excuse.

The Conrad-Gregg task force bill is trying to delegate control to change the law. The rumored Administration proposal is trying to provide an excuse while they duck a hard policy issue in an election year.

A commission that is trying to actually make changes to law must be credibly balanced and it must have formal authority to bind policymakers. The Conrad-Gregg proposal has both. The rumored Administration proposal has neither.

I am torn on whether to support the Conrad-Gregg proposal. I instinctively don’t like it ...

I lean against Congress delegating their authority, and generally abide by the maxim that "the problem isn’t the process, the problem is the problem."

But I do feel comfortable saying that Conrad-Gregg is an intellectually honest and credible commission proposal, albeit one that might lead to a policy outcome that I would hate.

In contrast, the rumored Administration proposal is a joke.

[... list of reasons ...]

The President’s commission does have a political advantage. If the press treats it as credible, he may get away with substituting it for real short-term policy proposals in his budget, and with completely ducking the even more important long-run fiscal policy debate.

I am just guessing here, but if the upcoming President’s budget contains a large amount of deficit reduction and labels it "deficit reduction from bipartisan commission recommendations," then we will have confirmed the commission’s true purpose...

~~~[end quote] ~~~

the way an agreement was reached on Social Security back in the Greenspan Commission days was with very private discussions. Had C-Span aired those the strong likelihood is that nothing would have been achieved.

Well, as to the new commission(s), if no politician responsible for them decides to win votes by promising everyone that their negotiations will be on C-SPAN, the issue probably will never come up. But if he does...

Jim, Re:I lean against


Re:I lean against Congress delegating their authority

You probably already know this, but just in case (and for the benefit of any others who may be misled by some of the misleading rhetoric out there from opponents of a commission), no commission would have the power to enact anything. Only Congress and the president would have that power, just as before. The only differences are (1) that Congress must vote on the commission's recommendation (if the commission achieves one), and (2) under some versions of a commission, including the latest Conrad-Gregg version, Congress could not amend (I think under at least one other version of a SAFE commission Congress would be able to amend as long as amendments are neutral with regard to some deficits-related metric relevant to the objective of fiscal responsibility).

I agree that the presidential commission being discussed would be inferior. I lean toward supporting it anyway IF that's the only way any such commission can be formed for the time being, but if there's a decent chance of getting a better commission from resisting the presidential commission, it's a tougher call, and I'd lean toward holding out for at least several months.

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