October 2011

What We Hope to Hear from Tonight's Debate

The Republican presidential contenders will be at it again tonight in yet another debate, but for those who are already suffering from debate fatigue, this evening's affair at Dartmouth University in the first primary state of New Hampshire promises to be different. First of all, the questions will focus on the economy, meaning that voters should hear more from the candidates on the two intertwined issues that polls indicate matter most to them - the economy/jobs and deficits/national debt. Secondly, the candidates will be sitting together around a table as opposed to standing apart at separate podiums. Hopefully, this will lead to more substantive discussion rather than attacks and sound bites.

The campaign season offers an excellent opportunity to initiate a much-needed public discourse on America's economic future and the optimal fiscal policies to aid the recovery in the short-term and advance U.S. growth and competitiveness in the longer-run. The debt crisis in Europe and the recent debt limit drama in the U.S. underscore how fiscal issues can impact the economy. It is imperative that candidates provide concrete economic proposals that include how they will finance their priorities. They must also demonstrate a sound understanding of our fiscal challenges and offer detailed solutions. In order to draw out and clarify the candidate's positions, CRFB suggests several questions for them to answer.

  • How would you balance aiding the economic recovery in the short-term and addressing the unsustainable national debt trajectory in the medium and long-term?
  • What are your priorities for the nation and how do you plan to pay for them?
  • What is your plan for the extension or expiration of the 2001/2003/2010 tax cuts, and how would you go about comprehensive tax reform?
  • How would you recommend the special joint committee reach its goal of $1.5 trillion in savings?
  • How would you craft a plan to reach at least $4 trillion in deficit reduction in order to stabilize the debt and put our country on a stronger financial footing?
  • How would you address unsustainable cost growth in Medicare and Medicaid?
  • How would you look to fix Social Security's financing gap?
  • How would you meet and build upon the savings enacted in the recently passed discretionary caps?
  • How would you reform the budget process to better promote effective and responsible budgeting?

With Congress having just passed another stopgap measure to fund the federal government, and with the Super Committee still trying to come up with at least $1.2 trillion in deficit savings (and hopefully more), the candidates should clearly articulate what they hope to see from the Super Committee and how to fix our broken budget and appropriations process (click here to read what we hope to see from the Super Committee). Furthermore, with jobs on the minds of so many voters, candidates should detail how they plan to pay for any jobs package they propose, tax cuts they offer, or any other proposal that impacts the federal budget.

This debate will be sponsored by Bloomberg Television and The Washington Post, with additional sponsorship from WBIN-TV and the Peter G. Peterson Foundation. It will be broadcast on Bloomberg TV and Bloomberg Radio and also can be viewed live online at http://www.bloomberg.com/presidential-election-2012?cmpid=ec01 and http://www.washingtonpost.com/politics.

 

CRFB President Maya MacGuineas and Board Member Douglas Holtz-Eakin Testify on the Economic Effects of the Deficit

In case you missed it last Wednesday, CRFB President Maya MacGuineas and CRFB board member Douglas Holtz-Eakin testified in front of the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy. Both of them made important points on the benefits of debt reduction and policy certainty for the economy.

Maya testified on the economic effects of our budget deficit. She noted that the economy may already be experiencing some negative economic effects due to the large debt load we currently carry, including diverting capital from private investment to government borrowing, higher interest payments due to higher debt levels, loss of fiscal flexibility, intergenerational inequality and a general lack of economic certainty. However, she said that the greatest problem lies in the potential of a fiscal crisis where interest rates could shoot up dramatically because bond markets and investors would no longer have confidence in the United State's fiscal policy or its ability to pay down its debt. While we are currently not in a fiscal crisis and do not know exactly when one would happen or what specific form it would take, the best course of action, according to MacGuineas, would be the enactment of a fiscal plan that puts our debt on a stable, then downward, path.

Doing so would have a number of positive economic effects. Among them:

  • Pro-growth tax reform that broadens the base, reduces tax rates and reduces the deficit would benefit the economy
  • Entitlement reform would allow the nation to better make use of its economic resources by spending less on consumption and more on investment
  • A fiscal plan would help free up fiscal space needed for short-term economic stimulus
  • Add much needed certainty about future tax and spending policies for businesses and individuals

At the same hearing, CRFB Board Member and former CBO Director Douglas Holtz-Eakin testified on the current problems that our nation faces fiscally. He argued that some have overstated the amount of economic negative effects that recent deficit reduction acts have done (Budget Control Act and the 2011 Budget Deal). Holtz-Eakin testified that there is no economic effect on a reduction of budget authority, only actual cash decreases that result in actual less spending, with more effect on consumption decreases. Additionally, on the role of tax policy, he contended that Keynesian economic models would say that increases in taxes have similar effects as decreases in spending, and testified that the United States faces a corporate rate that is too high for American business (he proposed going down to 25 percent) and that the United States should adopt a territorial system. Overall though, Holtz-Eakin noted that the lack of a fiscal plan and the inherent need for one brings in great uncertainty for the economy. Businesses see future deficits, he says, and also see implicit tax increases. A fiscal plan would remove this doubt and add much needed stability to our economy. 

Click here to read Maya MacGuineas's and Douglas Holtz-Eakin's testimonies.

‘Line’ Items: New World Edition

Happy Columbus Day – Today we celebrate the man who introduced Europe to the riches of the New World. Nowadays, Europe could use such a discovery to alleviate its debt crisis, but what the EU is discovering instead is that the U.S. likely won’t be able to bail them out this time. The New World we find ourselves in now involves an economy that can’t seem to pick up and a debt trajectory that won’t head down without considerable action. Meanwhile, an intrepid band of 12 lawmakers is treading new ground in trying to forge agreement on concrete deficit reduction using a novel process. And the calls for the group to Go Big continue to grow. Will our new world produce prosperity or will it be an aimless search for a shortcut to fiscal sustainability?

Appropriations Still Off Course – Though we are more than a week into Fiscal Year 2012, there is no sign of land when it comes to agreement on a spending plan. The latest stopgap measure funding the federal government ends November 18, shortly before the Super Committee must agree upon its deficit reduction recommendations. Rolling the 12 annual spending bills into one big package, or a few smaller ones, is the best bet.

Senate Exploring How to Boost the Economy – The Senate on Tuesday is scheduled to vote on ending a filibuster on the American Jobs Act (S. 1660), President Obama's jobs plan with the 5.6 percent surtax on those earning over $1 million that more than offsets the cost of the bill. CBO estimates that the package would result in about $6 billion in deficit reduction over ten years.  

Lawmakers Discover Budget Process Reform – The inability of Congress in recent years to pass a budget resolution or enact appropriations measures in a timely fashion has spurred legislators to consider a long-overdue overhaul of the budget process. The Senate Budget Committee held a hearing on the topic last week, which included CRFB President Maya MacGuineas testifying on biennial budgeting and board member William Hoagland discussing the “vote-a-rama” process. The hearing was followed up with a meeting of Committee members where most expressed support for biennial budgeting and tweaking the “vote-a-rama” process. The Committee holds another hearing on budget reform Wednesday. Senate Budget Committee Ranking Member Jeff Sessions (R-AL) unveiled his own bill to improve the budget process along with Sen. Olympia Snowe (R-ME). The House has also been looking into budget reform lately, with House Budget Committee Chair Paul Ryan (R-WI) saying he plans to release a package of reforms by the end of the year. The Peterson-Pew Commission on Budget Reform put forth a detailed set of budget reform recommendations last year in Getting Back in the Black.

Can You Hear Me Now? – Just as Columbus returned to the Americas three times after his initial discovery, CRFB finds itself returning to Capitol Hill often to help lawmakers discover how to best address the country’s fiscal challenges. In addition to the budget reform hearing above, CRFB’s Maya MacGuineas briefed the Economic Policy Subcommittee of the Senate Banking, Housing, and Urban Affairs Committee last week on the economic effects of the budget deficit. She returns this week for testimony on Medicare reform before the Senate Special Committee on Aging along with board member Douglas Holtz-Eakin.

Key Deadline Looms for Congressional Committees – Committees seeking to influence the Super Committee must send recommendations to the panel by Friday. It will be interesting to see what committees chose to issue recommendations and what proposals make the cut. CRFB is tracking the submissions to the Super Committee. Meanwhile, the business leaders at the nonpartisan Committee for Economic Development became the latest group to urge the Super Committee to Go Big.

Presidential Contenders To Debate Economic and Fiscal Issues – The GOP candidates will debate once again on Tuesday, but this debate, sponsored by Bloomberg News, The Washington Post, and the Peter G. Peterson Foundation, will be different. The candidates will be sitting around a table and the questions will focus on economic and fiscal issues. CRFB has offered questions for the candidates before and this will be the ideal forum to ask them.

Still Searching for a Doc Fix – The Medicare Payment Advisory Commission (MEDPac) has recommended a permanent fix to the Sustainable Growth Rate (SGR), also known as the 'Doc fix,' that would freeze Medicare payments to primary care physicians and cut payments to non-primary care doctors by 5.9 percent over the next three years. The board also offered a list of offsets for the $200 billion cost of the fix.

Key Upcoming Dates (all times ET)

October 11

  • Federal budget for September released by the Treasury Department.
  • GOP presidential debate on economic and fiscal issues in New Hampshire at 8pm.

October 12

  • Senate Budget Committee hearing on "Improving the Congressional Budget Process" at 9:30 am.
  • Senate Finance Committee hearing on "Tax Reform Options: Capital Investment and Manufacturing" at 10 am.
  • Senate Special Committee on Aging hearing on "A Time for Solutions: Finding Consensus in the Medicare Reform Debate" at 2 pm.

October 14

  • Congressional committees must submit any recommendations to the Super Committee by this date.

October 18

  • GOP presidential debate in Nevada.

November 18

  • Continuing resolution (CR) currently funding federal government operations expires.

November 23

  • The Super Committee is required to vote on a report and legislative language recommending deficit reduction policies by this date.

December 2

  • The Super Committee report and legislative language must be transmitted to the President and Congressional leaders by this date.

December 9

  • Any Congressional committee that gets a referral of the Super Committee bill must report the bill out with any recommendation, but no amendments, by this date.

December 23

  • Congress must vote on the bill recommended by the Super Committee by this date. No amendments are allowed.

More Plans, More Ideas

CRFB has updated its table of submissions to the Super Committee with four new plans from September.

The first plan is from the Center for American Progress, which includes both general recommendations for the Committee and specific policy items. It's recommendations cover a wide range of budget options including cuts to defense, agricultural subsidies, and health programs, saving$1.5 trillion over ten years net of extending unemployment benefits and the payroll tax cut for a year.

The second comes from Third Way, a politically moderate think tank. Their plan enlists a number of policy changes, including switching to the chained CPI, reducing agriculture and defense spending, and reforming the mortgage interest deduction. Overall, the plan contains about $1.7 trillion in savings.

Next up is a submission from the Taxpayers for Common Sense, which would also save $1.7 trillion over ten years. Again, this plan addresses a number of areas of the budget, including agricultural and energy subsidies, defense spending, and a number of tax expenditures.

The final plan is from the Center for Science in the Public Interest. They go the Pigouvian tax route and call for an excise tax on sugary beverages. In addition, they suggest increasing the tax on alcohol or indexing the current rate to inflation. Using estimates from the Domenici-Rivlin plan (which includes a soda tax and an increase in the alcohol tax), CSPI claims that these two measures could raise $200 billion by 2020.

The list of submissions to the Super Committee is growing rapidly. Be sure to check back frequently for newer submissions.

Committee/Organization/Individual Date Ten-Year Savings
Center for American Progress 9/6 $1.5 trillion

Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Minority) (CRFB Overview)

9/15 $1.4 trillion

U.S. PIRG/National Taxpayers Union (CRFB Overview)

9/15 $1 trillion
Third Way 9/15 $1.7 trillion
Taxpayers for Common Sense 9/16 $1.7 trillion

President Obama (CRFB Overview)

9/19 $1.9 trillion
Sens. McCain, Carper, Coats, and Udall 9/20 N/A
Sen. Coburn  9/21 $300 billion
Rep. Coffman (CRFB Overview) 9/23 $103 billion
Center for Science in the Public Interest 9/27 $200 billion

Sens. Coburn and Lieberman (CRFB Overview)

9/28 >$500 billion

78 House Democrats (CRFB Overview)

10/5 $156 billion

 

JP Morgan on the Financial Perspective of Fiscal Policy

In a recent report, JP Morgan summed up a number of reasons, from a financial perspective, on why it is important for the Joint Select Committee on Deficit Reduction (or Super Committee) to "Go Big" and exceed their savings mandate of $1.5 trillion.  The report warns that markets will be closely watching the committee's work, as fears that stagnant economic growth may persist are mounting in the face of inaction on the nation's debt.

First, the report notes that while the Budget Control Act (BCA) made progress on the debt, it is not enough to stabilize it, assuming a current policy baseline. If the tax cuts are extended, physician payments are frozen instead of cut by 30 percent, and the AMT is indexed for inflation, the report says that an additional $3.5 trillion on top of the initial BCA savings is needed. It stresses the importance to both markets and businesses of having government debt on a downward path, seeing this magnitude of savings as the only way to do so. (On a related note, the report states that financial markets would not consider the war drawdown to be legitimate savings, going back to a point we made in our paper about what we hope to see from the Super Committee that using savings from policies already in place should not count as new deficit reduction.)

Second, the report makes a point that is often made but sometimes overlooked in the budget world: growth matters. It claims that financial markets are focused on deficits and debt as an issue related to growth, and the reverse in that slower growth can worsen the debt to GDP ratio:

While we are hopeful that the US economy recovers more quickly, if the [Super Committee] doesn’t reach $1.5 trillion in deficit reduction with the promise of more to come, there would be no room for error, and a chance of another round of downgrades. 

They also point out the Reinhart-Rogoff findings of 90 percent gross debt-to-GDP as the point where debt can really drag on growth.

Also, JP Morgan stresses the importance for markets of addressing entitlement reform, observing that markets are becoming increasingly worried about the growth of entitlement spending relative to other spending. It notes that entitlements have been taking up an increasing share of the budget (especially due to health care spending) and that high debt levels can lead to a "crowding out" of investment-oriented spending, such as for education, infrastructure, and technology.

Among other concerns, the report warns that the failure to account for long-term entitlement spending obligations contributes to the uncertainty of the country's economic future.  Financial markets are keeping their eyes on the Super Committee, as debt reduction is critical to future growth and market stability.

Click here to read the full report.

Two Letters to the Super Committee on Defense and Medicare

Two more submissions have recently been made to the Super Committee, adding to what is becoming an interesting list of ideas for them to draw inspiration from.

The first is from Rep. Mike Coffman (R-CO), who sent a letter containing two specific recommendations to the Super Committee for reducing defense spending by $103 billion. The first recommendation is to shift 100,000 service members from active duty to the National Guard and Army Reserve, saving $90 billion over ten years. Rep. Coffman also points out that there would be additional savings in military retirement benefits, although he does not provide a specific estimate. His second recommendation involves reducing our military presence in South Korea by continuing the current policy of having one-year tours of duty there, instead of three years as the Pentagon seeks. This change (or lack of change) would save $13 billion relative to implementing the DoD's policy. Rep. Coffman also suggests reducing our force size and the number of U.S. bases in Europe and South Korea, although he gives no specific recommendations or cost savings.

The second letter to the Super Committee comes from 78 House Democrats, calling for allowing the federal government to directly negotiate prescription drug prices. Citing a 2008 House Oversight Committee report, they estimate that these changes would save $156 billion over ten years and save seniors an additional $27 billion. This is the second letter submitted to the Super Committee that has recommend changes to Medicare, although it is not as comprehensive as the Lieberman-Coburn plan that was submitted last week.

In addition to supporting direct negotiation of drug prices, the group implicitly supports extending Medicaid rebates to dual eligibles (people who qualify for both Medicare and Medicaid), which is essentially a subset of the first policy they endorsed. Given that dual eligibles are required to obtain drug coverage through Medicare even though Medicaid has realized significant savings by setting limits on prescription drug spending, extending the rebates is another way to reduce the price that the government would pay for drugs. Estimates from CBO have this policy saving $112 billion, and many versions have been included in prominent fiscal plans. 

These proposals are now included in our table of submissions to the Super Committee:

Committee/Organization/Individual Date Ten-Year Savings

Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia (Minority) (CRFB Overview)

9/15 $1.4 trillion

U.S. PIRG/National Taxpayers Union (CRFB Overview)

9/15 $1 trillion

President Obama (CRFB Overview)

9/19 $1.9 trillion
Sens. McCain, Carper, Coats, and Udall 9/20 N/A
Sen. Coburn 9/21 $300 billion
Rep. Coffman 9/23 $103 billion

Sens. Coburn and Lieberman (CRFB Overview)

9/28 >$500 billion
78 House Democrats 10/5 $156 billion

 

Senators Sessions and Snowe Get Specific on Budget Process Reform

Budget process reform is back in vogue. Coming on the heels of yesterday’s hearings about budget process in both the House and Senate, Senators Jeff Sessions (R-AL) and Olympia Snowe (R-ME) have introduced a bill that would reform pieces of the budget process to avoid certain gimmicks and make other improvements.  Their "Honest Budget Act" would,

  • Reform the budget process to make it more difficult to move appropriation bills unless a budget resolution is already in place.
  • Reform the process for “emergency spending” to make it more difficult to enact spending through emergency procedures.
  • Improve the cost estimate of loan and loan guarantee programs to better reflect the actual value of the loan, and their risks.
  • Adopt a rule that would no longer allow budget authority rescissions to count as savings, unless they result in actual cash savings.
  • No longer allow changes in mandatory spending bills to be used to offset discretionary spending bills.
  • No longer would count tax collection timing shifts as savings.
  • Eliminate automatic “within-grade” step increases for federal employees.
  • No longer allow general fund transfers to the Highway Trust Fund to be scored as deficit neutral.
  • Reinstate the budget point of order limiting Congress’ ability to defer increased spending to future years in order to make room for more immediate needs in the current year.

While budget process reform is not a silver bullet and will not alone solve our budget ills, a better process will certainly improve matters and can make it more likely that savings from a fiscal plan stay in place and are real.  The Peterson-Pew Commission on Budget Reform has some additional ideas for improving the budget process and getting the country's fiscal situation in order.

Congress Talks Budget Process Reform

Congress is getting serious about considering reforms to the dysfunctional budget process. Last month the House Budget Committee held two hearings on the topic that featured testimony from CRFB board members Jim Nussle, Alice Rivlin and Rudy Penner. House Budget Committee Chairman Paul Ryan (R-WI) is reportedly preparing a package of budget process reforms to be considered by the end of the year.  

Not to be outdone by their colleagues on the other side of the Capitol, the Senate Budget Committee this morning held a hearing on the topic as well. CRFB President Maya MacGuineas testified in the first panel of the hearing, which looked at biennial budgeting. With Congress having difficulty enacting an annual budget, some have proposed a switch to a biennial process, in which a two-year budget would be approved one year and the next year would be spent on stricter oversight and evaluation of federal spending. MacGuineas first began by stating the obvious, our budget process is broken and reforms are needed. She then noted some of the downsides of biennial budgeting, such as the fear of using supplemental appropriation bills in the off years. However, strict process rules could prevent that from happening. She also offered a number of points in favor of the two-year approach: namely, more time to allow Congress to better focus on national priorities and better use the data collected on program performance, and it would give program managers more time and stability in their budgets. Additionally, MacGuineas noted that other budget process reforms used successfully by other countries, such as multi-year budgeting and portfolio budgeting, which is budgeting using rankings of national priorities, could be useful, especially in helping to carry out a long-term, comprehensive fiscal plan. The Peterson-Pew Commission on Budget Reform offered a detailed package of budget process reforms in the report, Getting Back in the Black.

CRFB board member William Hoagland also testified at the hearing on the second panel. His testimony centered on reforming the so-called "vote-a-rama" process in the Senate, which is a marathon of non-stop votes on amendments to budget reconciliation bills. Hoagland offered the following changes to this process: require a 1-day layover period for resolutions and reconciliation bills and unanimous consent to yield back time on a budget resolution or reconciliation bill; if 50 hours is the time limit, limit each Senator to two amendments and allow the minority party to have the right of first refusal on the first amendment; adopt in statute a clear definition of germaneness; and either do away with Function 920 (allowances) in a budget resolution, or do not allow any amendments to this function on the Senate floor. Finally, he d noted that there may be more "gotcha amendments" in election year budget debates, meaning that a move to biennial budgeting with the budget starting in the odd numbered year might reduce this practice.

If that wasn't enough budget process for one day, the House Judiciary Committee held a hearing today on a Balanced Budget Amendment (BBA) to the U.S. Constitution. CRFB board member Douglas Holtz-Eakin was one of the experts called upon to testify. Holtz-Eakin testified that the U.S. needs a fiscal rule and requiring a balanced budget could be such a rule. He also noted that a sound criticism of BBAs is their inability to deal with factors outside of the government's control, such as wars or the economic cycle. A 2/3 majority vote in Congress to waive the requirement could address this issue. He also noted that enforcement mechanisms have still not been totally thought out and require more discussion. The hearing was important in light of the fact that both houses of Congress must vote on a balanced budget amendment by the end of the year under the debt limit deal that avoided a government default earlier this year. Check out CRFB's Fiscal Toolbox to compare a balanced budget amendment with other process tools.

There are lots of budget process reform ideas out there. The Peterson-Pew Commission's budget reform one-stop shop can help you make sense of it all.

Senate Hearing on the Economic Effects of Our Budget Deficit

The Senate Committee on Banking, Housing and Urban Affair's Subcommittee on Economic Policy is a holding hearing on the "Economic Implications of the Federal Budget Deficit" this morning and CRFB President Maya MacGuineas and CRFB Board Member Douglas Holtz-Eakin will be testifying. 

CRFB has been leading the call for the Super Committee to "Go Big." Maya's testimony will offer further economic justification for this approach. 

The hearing is being webcast on the Senate Banking, Housing and Urban Affairs Committee website

Read Maya MacGuineas' testimony here and Douglas Holtz-Eakin's here.

The Cyclical Economic Effects on the Deficit

In a letter to Rep. Chris Van Hollen (D-MD), the ranking member of the House Budget Committee, CBO Director Douglas Elmendorf estimates the cyclical economic effects due to a slowed economy on the size of the federal deficit. He finds that cyclical effects will contribute $340 billion to the deficit this fiscal year, which is roughly one third of the $973 billion (or 6.2 percent of GDP) deficit projected for FY 2012. Adjusting for these cyclical effects, the deficit as a percentage of GDP in 2012 would be around 2.2 percent lower, or about 4.0 percent of GDP.

This letter highlights two important facts about the U.S. deficit. The first is that the recession and continuing economic challenges are still having a significant effect on the deficit, accounting for nearly a third of the projected deficit in 2012. Secondly, there is still a larger structural deficit unconnected to the economic downturn that makes up the other two thirds of the projected deficit. Structural contributors to the deficit are unconnected to cyclical swings and therefore would remain even if the economy were operating at full capacity. Perhaps the interplay between these two conclusions was summed up best by CRFB senior advisor Ed Lorenzen in an article in the National Journal (subscription required):

“Obviously part of the point is to show that stronger economic growth would make the deficit outlook look better, but it also shows that even if the economy were operating at full potential, which we’re a long way away from, we’d still have a structural deficit. It’s still a substantial problem; it’s going to take tough choices beyond economic growth to solve the problem.”

Given that real GDP is expected to grow by 3.8 percent during the 2011 calendar year, the projected 4 percent deficit for FY 2012 should be troubling since it indicates that our debt as a share of GDP isn't getting any smaller. With the numerator, or debt, roughly increasing by 4 percent (in the absence of cyclical effects) and the denominator, or GDP, in debt-to-GDP calculations growing by 3.8 percent, we can see that debt would have continued on an upward path this year even if the economy were operating at full potential. This should serve as another wake-up call for lawmakers to enact a fiscal plan.

These findings underscore the need for a fiscal plan to be phased-in gradually in order to give the economy time to recover. In fact, one of the best ways to buy more time for the recovery is a "Go Big" approach to debt reduction, which could allow more upfront fiscal space for the economic recovery while giving markets confidence about our medium and long-term projections. The letter to Congressman Van Hollen also underscores the need for a "Go Big" approach to deficit reduction in order to tackle the largest structural contributors to yearly deficits--namely, entitlement programs and a tax code in dire need of reforms.

CRFB President Talks Super Committee on Nightly Business Report

CRFB president Maya MacGuineas was a guest last night on PBS' Nightly Business Report, where she commented on the Super Committee and the need for them to Go Big on deficit reduction. She talked about the difficulty of the task before the Committee, yet says that even if they succeed in finding the $1.5 trillion in savings they have been tasked with, it won't be enough.

Click here to see the video on PBS.org, or watch below (MacGuineas' commentary starts right around the 23 minute mark).

 

Watch the full episode. See more Nightly Business Report.

CED Calls on Super Committee to Exceed Its Mandate

Earlier today, the Committee for Economic Development (CED) released a set of six standards that they believe the Super Committee must follow in order to succeed. CED, a business-led public policy group based in Washington, stated in its press release that the standards were developed by the CED Subcommittee on Fiscal Health and "have the strong endorsement of the two CED Co-Chairmen, Donald K. Peterson, former Chairman and Chief Executive Officer of Avaya Inc., and Roger W. Ferguson Jr., former Federal Reserve Board Vice Chairman." Several other business leaders also endorsed the statement.

The six standards are:

  1. The Committee must reduce the deficit by far more than $1.2 trillion minimum required by the Budget Control Act, at least $4 trillion in total savings will be required to stabilize the debt.
  2. Medicare and Social Security must be on the table and be made sustainable for the long term.
  3. The agreement must include additional tax revenues and fundamental tax reform.
  4. The Committee must achieve substantial savings from non-Medicare, non-Social Security spending, including defense and domestic programs.
  5. The Committee must provide a boost to the struggling U.S. economy, but the effort must be simple and clean.
  6. The Committee must put together a deficit reduction program with genuine bi-partisan commitment that will withstand political challenge now and in the future.

CED also stated that it would be releasing more specific recommendations on how the these standards can be adhered to in the coming weeks, and that they would be engaged with members of the Committee as well as the voting public in an effort to support the Super Committee's work. Bowman Cutter, co-chair of CED's Fiscal Health Subcommittee and former OMB deputy director, was quoted in the release saying:

The business community understands that it cannot exempt itself from the political and financial pain that deficit reduction may cause. We cannot ask others to bear the necessary burden of reducing the deficit unless the spending programs and tax provisions important to business are put under the same microscope.

We are thrilled to see CED adding its support to the growing call for the Super Committee to GO BIG on deficit reduction, and we applaud them for releasing this set of standards and taking such an active role in supporting the important work of the Super Committee. These six standards would serve as an excellent framework to help the Committee reach agreement on a comprehensive, bipartisan fiscal plan that stabilizes and reduces our debt and puts the U.S. back on a sustainable fiscal path. CED concludes their statement with the following:

Members of the business community understand the threat that a renewed debt crisis would pose to our customers, our employees, and our shareholders alike. All Americans are in this together. Members of Congress who refuse to negotiate in the name of party principle, however sincerely held, will find cold comfort if they cause a financial panic for the “right” reasons.

It is time for our elected leaders to lead, and to find common ground for the national interest that they have sworn to protect.

 

Click here to read CED's full statement, Six Standards for the Joint Select Committee.

Click here to read CED's press release.