The president's deficit commission
No cigar
Some useful ideas, but a worrying absence of political will
Dec 9th 2010 | WASHINGTON, DC | from PRINT EDITION
WHEN Barack Obama created his deficit commission one of its members, Kent Conrad, a Democratic senator, confided to his staff that he thought it had no better than a 10% chance of success. His prediction proved accurate. On December 3rd just 11 of its 18 members voted for the chairmen’s aggressive deficit-reduction proposal, well short of the 14 needed to take it forward to Congress for a vote.
Yet Mr Conrad, like many on the commission, claims that this apparent defeat was in fact a victory. After all, 11 is more than 60% of the members, and those voting for the plan included both conservative Republicans like Tom Coburn and liberal Democrats like Dick Durbin, senators from Oklahoma and Illinois respectively. The commission defied sceptics who thought its work would go unnoticed. “We’ve changed the issue from whether there should even be a fiscal plan to what is the best fiscal plan,” said Andy Stern, former president of the Service Employees International Union and another member (though he still voted against).
Yet for all the warmth and goodwill that flowed between the commission’s members over its seven months of work, the final vote exposed the depressing truth that finding a package of higher taxes and lower spending that can satisfy both Democrats and Republicans is extremely hard, if not impossible. Of the 11 yes votes, five came from appointees who do not hold elected office and two more from legislators who are about to retire at the end of the current session of Congress. Members who will actually have to face the electorate voted six-to-four against the proposal, and that included the two most powerful members, the chairmen of the Senate and House tax-writing committees, a Democrat and a Republican respectively. This does not bode well for the fate of any set of budget proposals based on the commission’s work that may eventually land on the floor of the House or the Senate.
But nor is it surprising. In their report Alan Simpson and Erskine Bowles, the two chairmen, proposed to cut $3.9 trillion from the next ten years’ worth of deficits (see chart), mostly through spending reductions but also through tax increases, and in the process to get the budget deficit, estimated at 8.3% of GDP this fiscal year, down to 1.2% by 2020 (instead of 6.6%, where it would be if existing policies continued). They proposed curbing Social Security (pensions) payments, raising petrol (gasoline) taxes, slashing military spending and eliminating most tax breaks, while lowering personal and corporate rates.
Many of the commission’s specific ideas (which also cropped up in competing proposals) will probably be incorporated into different legislative bills and proposals from Mr Obama in the coming year. Paul Ryan, the Republican who will chair the House budget committee in the new Congress that convenes on January 3rd, likes the idea of discretionary spending caps and tax reform that broadens the tax base while lowering rates, and may push for both in the coming year. Social Security (long ago dubbed the death-dealing “third rail” of American politics) could be selected for a separate overhaul, since its problems and solutions are now less controversial than those attached to health-care programmes. “There’s clearly a willingness to talk on that front,” says Mr Ryan. “There are no third rails any more.”
For its part, the administration has not yet decided what it will borrow from the commission for its own budget proposal, due next February. Like Mr Ryan, administration officials find both tax and Social Security reform appealing.
Yet by plucking only their preferred parts from the report, Democrats and Republicans are in effect nullifying its purpose, which was to achieve consensus by demanding sacrifice from everyone. In going their own ways, Republicans and Democrats will try to impose most of the sacrifice on the other side. Mr Ryan, for example, is unlikely to include any tax increases in his budget.
John Spratt, the current Democratic chairman of the house budget committee, who lost his seat in the mid-terms, put it best. Despite disliking much of the report he voted for it anyway, because it was less risky than the status quo. Then he added, “Thank God I’m not running again.”
Yet Mr Conrad, like many on the commission, claims that this apparent defeat was in fact a victory. After all, 11 is more than 60% of the members, and those voting for the plan included both conservative Republicans like Tom Coburn and liberal Democrats like Dick Durbin, senators from Oklahoma and Illinois respectively. The commission defied sceptics who thought its work would go unnoticed. “We’ve changed the issue from whether there should even be a fiscal plan to what is the best fiscal plan,” said Andy Stern, former president of the Service Employees International Union and another member (though he still voted against).
Yet for all the warmth and goodwill that flowed between the commission’s members over its seven months of work, the final vote exposed the depressing truth that finding a package of higher taxes and lower spending that can satisfy both Democrats and Republicans is extremely hard, if not impossible. Of the 11 yes votes, five came from appointees who do not hold elected office and two more from legislators who are about to retire at the end of the current session of Congress. Members who will actually have to face the electorate voted six-to-four against the proposal, and that included the two most powerful members, the chairmen of the Senate and House tax-writing committees, a Democrat and a Republican respectively. This does not bode well for the fate of any set of budget proposals based on the commission’s work that may eventually land on the floor of the House or the Senate.
But nor is it surprising. In their report Alan Simpson and Erskine Bowles, the two chairmen, proposed to cut $3.9 trillion from the next ten years’ worth of deficits (see chart), mostly through spending reductions but also through tax increases, and in the process to get the budget deficit, estimated at 8.3% of GDP this fiscal year, down to 1.2% by 2020 (instead of 6.6%, where it would be if existing policies continued). They proposed curbing Social Security (pensions) payments, raising petrol (gasoline) taxes, slashing military spending and eliminating most tax breaks, while lowering personal and corporate rates.
Many of the commission’s specific ideas (which also cropped up in competing proposals) will probably be incorporated into different legislative bills and proposals from Mr Obama in the coming year. Paul Ryan, the Republican who will chair the House budget committee in the new Congress that convenes on January 3rd, likes the idea of discretionary spending caps and tax reform that broadens the tax base while lowering rates, and may push for both in the coming year. Social Security (long ago dubbed the death-dealing “third rail” of American politics) could be selected for a separate overhaul, since its problems and solutions are now less controversial than those attached to health-care programmes. “There’s clearly a willingness to talk on that front,” says Mr Ryan. “There are no third rails any more.”
For its part, the administration has not yet decided what it will borrow from the commission for its own budget proposal, due next February. Like Mr Ryan, administration officials find both tax and Social Security reform appealing.
Yet by plucking only their preferred parts from the report, Democrats and Republicans are in effect nullifying its purpose, which was to achieve consensus by demanding sacrifice from everyone. In going their own ways, Republicans and Democrats will try to impose most of the sacrifice on the other side. Mr Ryan, for example, is unlikely to include any tax increases in his budget.
John Spratt, the current Democratic chairman of the house budget committee, who lost his seat in the mid-terms, put it best. Despite disliking much of the report he voted for it anyway, because it was less risky than the status quo. Then he added, “Thank God I’m not running again.”
0 comments:
Publicar un comentario