MY VIEW: Erskine Bowles and Alan Simpson Memo to Congress, White House: Get serious on debt

In an op-ed in today's Politico, former Fiscal Commission co-chairs and CRFB board members Erskine Bowles and Alan Simpson argue that there is a bipartisan compromise out there if lawmakers are willing to get serious about the debt. The fiscal cliff was a missed "magic moment" but the negotiations also showed there is room to compromise on a plan that could put debt on a downward path as a share of the economy. To adequately tackle the debt, they must go further than what has been done so far and even what has been talked about in previous budget negotiations.

President Barack Obama and Speaker John Boehner originally made substantial progress toward a comprehensive deficit reduction plan that could have gotten us most of the way. Importantly, these negotiations focused beyond the near-term crisis, with real discussions on structural entitlement reforms as well as comprehensive tax reforms. Both sides identified potential areas of agreement: using chained CPI to index both spending programs and the Tax Code with protections for low vulnerable populations; identifying additional savings from defense and domestic discretionary programs and unjustified subsidies; and finding savings in mandatory programs that can and should be included in a comprehensive deficit reduction plan.

That last round of negotiations should be the starting point for the next round — however, both sides will have to go further.

The president deserves credit for putting forward Medicare savings in his budget and offering further entitlement savings in the negotiations, but he and his fellow Democrats must be willing to do more to reform our entitlement programs. Reaching an agreement to achieve the amount of savings necessary to slow the rate of growth in health care to no more than 1 percent above the rate of growth in the economy will require a combination of Republicans and Democratic ideas for achieving savings from those programs.

For health savings, we’ll have to look at everything from increasing premiums for well-off beneficiaries to reducing reimbursements to providers and drug companies to modernizing cost-sharing rules to tort reform. We will also need to reorient incentives to change the delivery of care and make adjustments to reflect the aging of society. In short, it will require taking on favored and well-entrenched constituencies across the health care system. Remember, health care is the largest single driver of our future debt.

On the tax side, Republicans must be willing to acknowledge that more revenue will be needed as part of an agreement to meet our deficit-reduction goals, but those revenues need not be generated by “tax increases” but through comprehensive tax reform that broadens the base and lowers rates. The Tax Code is riddled with more than $1 trillion of annual tax breaks — most of which are just government spending in disguise. By reforming them, we can reduce individual and corporate tax rates in a way that keeps the Tax Code progressive while promoting economic growth and reducing the deficit at the same time.

If both sides move as one beyond their comfort zone on health and tax reform, those changes could be combined with the other spending cuts discussed in the negotiations last December to produce a package large enough to stabilize and begin to reduce our debt as a share of the economy.

Even they agree upon a plan, lawmakers still need to tackle the long-term challenges of controlling the growth of health care spending and making Social Security solvent. We have a ways to go, but if lawmakers are willing to start at where they were in fiscal cliff negotiations and go a little further, we could take a big step towards getting our fiscal house in order.

Click here to read the full op-ed.

"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.

Medicare

Dear Sirs,

 

Please consider one very simple solution for our medicare mess.

 

LBJ sold medicare as a self funded program.  We know how that turned out.  The entitlement came with no self correcting mechanism and no political will to otherwise compensate.

 

What if we increased the co-pay, not abruptly but gradually over time?  This simple change would have a powerful impact on the helath care market.  Yes people would need to save more over their working lifetimes, but this is healthy if you will.  More importantly, individuals would be more careful in their use and consumption of health care services, a market driver sorely missing in the out of control entitlement program.

 

I do not share your recommedendation of increasing premiums on well-off beneficiaries.  Why penalize those who work hard, save over their working lives?  Why muddy such an incentive system and the foundation of the American Spirit. 

 

Jeff Melville

 

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