The Hill | October 16, 2012
In representing the great people of southern Minnesota for 12 years in Congress, I witnessed my share of partisan skirmishes. But as a centrist Democrat, I also took part in efforts in which both parties worked together to do what was right for the country. We did that in my very first term, when President Reagan found common ground with the Democrat-controlled House and the Republican-controlled Senate to pass much needed Social Security reform. Later, in bipartisan fashion, Reagan and Congress fashioned immigration reform and a major tax overhaul and simplification. In my last congressional term, President Clinton led a bipartisan coalition to pass the North American Free Trade Agreement (over the objection of some in his own party). After retiring to Minnesota, I watched as Clinton then worked with a Republican Congress to enact a children’s health initiative and welfare reform.
Today there is another critically important issue that requires bipartisan cooperation – our nation’s skyrocketing national debt.
The time is now because we are standing on the edge of the “fiscal cliff.” At year’s end, we face abrupt, nearly across-the-board spending cuts totaling almost $1 trillion over the next ten years. The effect of these cuts is coupled with the expiration of numerous tax policies, including the Bush era tax cuts and the Obama payroll tax cuts. The non-partisan Congressional Budget Office estimates that if we fall over the cliff come January 1, the economy will contract by an annual basis of 3.9 percent in the first quarter of 2013 – and unemployment will spike. Already, fear of the cliff – and of Washington politicians doing nothing to avoid it – has led to businesses putting off new hiring and investments.
But that’s just the immediate problem. Over the long-term, our national debt – now at $16 trillion – is simply unsustainable. Indeed, our rising debt threatens our standard of living and the resources we will have in the future. Simply servicing the bloated debt will soon lead to annual trillion-dollar interest payments and will eventually result in interest rate hikes that will make it harder for average people to borrow money to buy a home or a car.
Many politicians talk about cutting “domestic discretionary spending” and “waste, fraud and abuse” as an answer to our deficit challenge. But those items are too small a portion of our federal budget to offer a solution. Instead, we need a balanced, comprehensive approach that will look to both sides of the ledger – spending and revenue. And, more importantly, on the spending side we need to focus on the drivers of our debt, entitlement programs. While raising revenue, it is best to also reform our tax code to eliminate or reduce economy-distorting deductions and loopholes. Lastly, the right kind of long-term debt deal must make sure to protect our fragile economic recovery – meaning these large-scale spending and revenue measures must be phased-in over time.
Getting politicians of both parties to agree to a debt-reduction program that accomplishes all of these goals may seem like a herculean task. But my experience tells me it can be done. There is much consensus already in place for what we need to do. The Simpson-Bowles Commission report and the Rivlin-Domenici plan both prove that there can be bipartisan support for a comprehensive approach to this fiscal challenge. With the “fiscal cliff” looming, I truly believe that the petty politics of the moment will soon give way to the urgency of action.
As the Presidential debates continue, I certainly hope that President Obama and Governor Romney lay out concrete plans to address the debt and avert both the near-term “fiscal cliff” and the long-term debt crisis. But if they don’t, voters need to let them – and Congress – know that the time is now for serious action. You can do this by adding your name to the 225,000 who have already signed the petition at FixTheDebt.org, which urges passage of a comprehensive deal to create a short- and long-term fiscal fix.
My own experience in Congress makes me confident that we can get this done.
The Hill | October 3, 2012
Three weeks into the Comeback America Initiative’s almost five-week fiscal responsibility bus tour, it’s clear we have a real showstopper on board with us: a 100-pound, 10-foot-long digital display whose flashing digits tell their own story. This “U.S. Financial Burden Barometer” is a much truer measure of the country’s financial sinkhole than the well-known National Debt Clock, which debuted in 1989 at $2.7 trillion and has since grown to more than $16 trillion. The Burden Barometer makes that stunning number seem like small change: at present, the barometer’s tally is at more than $70 trillion and is growing by $10 million a minute! That’s up from about $20 trillion in 2000.
The Comeback America Initiative created the Burden Barometer to engage voters on the full dimensions of our fiscal challenge and encourage them to pressure candidates for national office to get serious about solutions — or pay the price on Election Day. While the Debt Clock shows our country’s current gross federal debt, the Burden Barometer reflects the federal government’s total liabilities, unfunded promises and other commitments and contingencies.
The $70 trillion figure incorporates liabilities such as publicly held debt; unfunded military and civilian pensions and retiree health obligations; unfunded social insurance promises, most prominently, Medicare and Social Security; and a range of other federal commitments and contingencies, including the Federal National Mortgage Association and the Pension Benefit Guaranty Corporation. To arrive at an official and credible tally, we used the figures in official financial statements of the U.S. government and other official government reports, among them the annual Social Security and Medicare Trustees Reports and the Congressional Budget Office’s current projected deficit for fiscal 2012.
Clearly there’s creative accounting in many politicians’ assessments of the nation’s fiscal condition — and plenty of demagoguery, too, from partisan and ideological players who want you to think we don’t have a problem or that there are easy answers. Economic growth alone can’t fix our woes and more tax cuts will not pay for themselves. We need to start making tough choices.
If a politician says there’s no need to reform our social insurance programs, don’t believe it. We have to combine Medicare, Medicaid and Social Security reforms, along with other reductions in defense and other federal spending, with revenue increases or the math just won’t add up. In addition, we must rationalize our healthcare promises and focus on controlling costs.
The good news is that serious action, taken soon, can slow the Burden Barometer’s rise, and even significantly reduce the number being displayed. That’s because, unlike the Debt Clock — which won’t drop by a dollar due to fiscal reforms — the Burden Barometer includes present and future spending as determined by our government’s promises and policies. If our elected officials enact meaningful reforms, even if they are phased in over time, the Burden Barometer’s number could instantly go down by tens of trillions of dollars.
Whether that incentive will be enough is an open question. The truth is, our greatest deficit today is one of leadership. It will take political courage and extraordinary presidential leadership that we haven’t seen in the past 10 years to bridge the partisan divide and reach the sort of grand bargain needed to avoid a U.S. debt crisis. But we know this is possible because a number of Republicans and Democrats have already gotten behind nonpartisan solutions that can get bipartisan support.
For example, some within each of the parties have agreed we should change current formulas and premium subsidy models to provide greater support to lower-income individuals and less support for higher-income beneficiaries. They’ve acknowledged the wisdom in reining in healthcare costs by changing the way we pay for medical care — moving away from fee-for-service system and toward “outcome based” payments — and reforming our medical malpractice system. They’ve gotten behind the idea of closing various tax “loopholes” to make the system simpler and fairer, and to generate more revenue. What we need is more elected officials to join them in breaking partisan ranks and putting the interests of the country before the special interests and partisan ideology.
The stakes for our country are huge, and the time for action is now.
The Government We Deserve | October 4, 2012
My fellow Americans.
Grave issues face this country. This year is unlike any other year. After listening to the Presidential candidates debate, I’ve decided to give Americans a real choice for president: me.
First, a little bit about myself.
I know what it’s like to be poor. My great-great grandfather was poor, so I understand getting by on almost nothing. I can think back to a time when he didn’t even have indoor plumbing.
I know what it’s like to be a minority. I’m a male, and the majority of the population is female. Most people belong to religions other than mine. Only a small share of the population is my age.
But, unlike my opponents, I don’t identify with some narrow subgroup of the population. I support the right of women and men of all races and religions to pursue the American dream––as long as they agree with my policies. Now, one of my opponents has special appeal to female Tibetan Scientologists from Utah, the other to black male lumberjacks living in New York City. That means the rest of you still have a chance to be represented by voting for me.
In today’s troubled world, I know what it is to be a real man who deals with power. Just thinking about putting troops or police in harm’s way exhausts me. Heck, my hair has already thinned and grayed thinking about the sacrifices I will have to endure as the most powerful person in the world. I’ll try to make available some before-and-after pictures for you to see, too, how eight years in the White House will age me eight years. One day, others will testify how they witnessed my bravery when they weren’t out grabbing me another Diet Coke so I could stay awake past midnight in the Situation Room.
And, I know what it’s like to be a woman. My mother was a woman. I know all too well the difficulties of childbirth: I was right there next to my mother when thrown into the spurned class of the bare at birth. Now, as a candidate, I’m not supposed to talk too sympathetically about myself, but my surrogates have put together candid shots of what my mother, if still alive, would have said about my destiny even from a young age. Other women who have known me when I was out in the working world pursuing my destiny while they were taking care of the family will talk about my humanity and dedication to my family.
Finally, I know what it’s like to struggle. At times I’ve even been between jobs. After leaving the presidency, I’ll have to struggle while I decide whether to sit on corporate boards or make millions of dollars writing my autobiography.
But enough about me. Now to real policy for real Americans––that is, those who show their respect for America by voting against my opponents.
First, you. You’ve paid an unfair share of taxes and gotten an unfair share of benefits. You’re not like that rich guy who pays no income tax or the welfare cheat with houses in Malibu and Miami. They support my opponents. But I understand you. If you’re rich, you already pay infinitely more tax than someone with no income with which to pay taxes. That’s not fair. And if you’re poor, it’s clearly because my opponents’ government policies don’t support you enough or don’t give you adequate incentives. That’s not fair, either.
As for the 99.5 percent of you who are in the middle class, my opponents continually tell you how much they care, but they really don’t. If they did, why do they confine their borrowing from China and other friendly lenders to a few trillion dollars?
Next, jobs. My opponents hire Harvard economists who calculate the expected growth in the labor force assuming that the unemployment rate will decline to about 5 percent. Then each claims that he individually will create the jobs that the economy would normally create. Not me. Under my policies, the unemployment rate will fall to 4 percent, so I will create at least 1 million more jobs than either of my opponents.
To spur economic recovery, I’ve combined the Democratic Keynesian and Republican supply-side economics of my opponents. That means I can spur demand when I provide you more benefits and increase supply when I reduce your taxes. The former will induce people to spend more, the latter will encourage them to work and save more. Under Steuerle-conomics, a dollar of spending and a dollar of tax cuts will together spur several dollars of increased output, while reducing the deficit because of the economic expansion and investment.
And let me thank you in advance, my fellow Americans, for accepting those higher benefits and lower taxes for the good of your country.
As for the budget, I will take whatever increased deficit I might induce and cut it by two-thirds by the end of my two terms. My opponents pledge to cut their additional deficits only by half, and usually for years after they’ve left the White House.
I could go on. For instance, one of my opponents favors healthcare vouchers for the nonelderly and opposes them for the elderly, the other favors just the opposite. Both my opponents would reduce Medicare benefits, either through vouchers and greater price controls. I, however, would grant healthcare providers higher incomes and health consumers more benefits than either of my opponents. And it won’t cost existing taxpayers or Medicare recipients a dime. I’ll just create a special form of government debt that will be paid only by future generations not yet voting.
As you can see, I have everything it takes to run for president in today’s world. I simply take today’s campaign strategies to their logical conclusions. Honest deception! That’s my motto.
USA Today | September 21, 2012
In February of 2010, when we accepted the job as co-chairs of the National Commission on Fiscal Responsibility and Reform (often referred to as "the Simpson-Bowles commission"), we thought we were taking on this debt challenge for our grandkids. But the more we examined the nation's financial condition, the more we understood how dire the situation was. We weren't taking this assignment on only for the good of our 15 grandkids, it turned out, nor for our seven grown children. We were taking it on for all of us.
That's how critical this issue is. If we can't get members of Congress to put aside their ultra-partisanship and pull together rather than apart, we face the most predictable economic crisis in history. Fortunately for everyone, it is also the most avoidable economic crisis in history.
During our service on the commission, Members of Congress would constantly come up to us and say "save us from ourselves." All of these elected officials in both parties understand what our nation faces. They know what needs to be done, but fear the political consequences if they make the hard votes to reduce spending or increase revenues.
That is why we have joined with a distinguished group of former public officials, business leaders and concerned citizens to form the Campaign to Fix the Debt. Through this campaign, we hope to help make deficit reduction not only good policy but also good politics, and we are already making progress. Nearly 150,000 citizens from across the country have signed a petition calling on leaders in both parties to work together to find common ground on a bipartisan plan to reduce the debt based on the principles set forth by the Simpson-Bowles Commission.
The Simpson-Bowles commission offered a reasonable, responsible, comprehensive and bipartisan solution that won the support of a majority of Democrats and Republicans on the commission. Most importantly, it would reduce the deficit by $4 trillion over the next decade — enough to put the debt on a clear downward path relative to the economy.
Our plan showed that this problem is too large to cut our way out, it's too large to tax our way out and it's too large to grow our way out. We need a combination of cutting low-priority spending throughout the budget, reforming entitlements to slow the growth of health care spending and make Social Security solvent, and reforming the tax code to promote growth and generate revenue in a progressive manner. As we make these changes, we must be sure to phase them in gradually to protect what is clearly a very fragile economic recovery and to avoid cuts that would harm the most vulnerable in society.
The "fiscal cliff" is the exact wrong way to reduce the deficit. By mindlessly cutting spending across-the-board, letting tax rates go up on everyone and abruptly taking $500 billion out of the economy in nine months, going off this fiscal cliff would throw us back into recession.
Yet continuing on our current path by punting these measures would send a dangerous message to the markets that America is not willing to deal with our debt. Let there be no question in your mind: the fiscal path our nation is on is simply not sustainable. The only responsible course of action is to replace the fiscal cliff with the framework that gradually and thoughtfully reduces the debt over the next decade and puts America's fiscal house in order.
As we travel the country talking to Americans from across the ideological spectrum, we hear the same thing from nearly all of them: they want real solutions, and they want them now. They are thirsting for the truth and bold leadership from their elected representatives. They understand that the problems are real; the solutions are painful; and there is no easy way out. They know they are going to have to give up something, but they are willing to do it so long as everyone else does. Above all, they just want their leaders to lead.
All of us must put aside our individual wish lists and think about what's really important for the country. If we're unwilling to do that, then future generations are going to be in a world of hurt. But if our leaders can agree on a plan to fix the debt, then the future of this country is bright.
The Hill | September 18, 2012
Members of Congress will return home for yet another recess in the next few days, leaving behind nothing but a swirl of rumors about how they plan to address America’s major fiscal issues.
Until now, lawmakers seem to have held out hope that voters aren’t paying attention to the particulars of the “fiscal cliff” and America’s out-of-control national debt. Neither party revealed specific plans for dealing with these challenges at their recent political conventions, or since. New stories appear each day in the political press suggesting that lawmakers are preparing to once again punt on the tough choices required to address our looming fiscal crisis.
All of this is status quo political maneuvering. But there are two major reasons to believe that it won’t fly this time around. The writing on the wall about the implications of inaction is getting too bright to ignore, and a well-resourced, national, bipartisan campaign has been launched to take the issues straight to the voters in lawmakers' districts.
Alarm bells about the fiscal cliff are going off with increasing frequency. Last week, Moody’s Investor Service, the major ratings agency, warned that the U.S. could lose its sterling credit rating if Congress doesn’t reach a deal to replace the abrupt, mandatory spending cuts and tax increases that are set to take effect in January with a plan to stabilize and ultimately reduce the debt as a percentage of GDP. A ‘kick-the-can’ solution that simply delays the abrupt tax increases and automatic spending cuts for a few months would leave this uncertainty hanging over an already struggling economy.
Business leaders are also weighing in about the urgency of action. As the New York Times reported last month, “A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months.”
It would be a mistake for policymakers to take these cues as a reason to simply institute a short-term fix that avoids the fiscal cliff and tees up another crisis next year. The fiscal cliff is simply a curtain raiser on the bigger issues we will likely face with the debt, including rising inflation, dollar devaluation, disappearing resources for public works, and a growing dependency on China. What we need is to replace the fiscal cliff with a long-term, bipartisan deal on the national debt that alleviates economic uncertainty and increases confidence that our leaders are up to the task of addressing the greatest fiscal challenge of our lifetime.
This message is starting to be heard more loudly and more clearly across the country. Great credit for the increased awareness is due to dedicated advocates such as former Senator Al Simpson (R-Wyo.) and former Clinton White House Chief of Staff Erskine Bowles, who championed the idea of an “everything on the table” approach and co-founded the Campaign to Fix the Debt.
Senator Simpson and Mr. Bowles, along with former Republican Senator Judd Gregg and former Democratic Governor Ed Rendell, the Campaign co-chairs, have announced that the effort has raised almost $30 million dollars in just over a month, with more coming in, to educate voters and mobilize them to urge lawmakers to get a debt deal done. The Campaign is employing all the tools of modern political outreach, including advocacy in many states and major advertising, media and online programs.
Already, nearly 140,000 concerned citizens across the country have signed the Fix the Debt petition. A growing number of CEOs and current and former public officials also have signed on to support the campaign at the national and local levels.
With this broad bipartisan backing, we hope to increase the noise and heat on the debt issue, in order to urge policymakers to reach a deal based on key principles. Legislation addressing the spending and revenue elements of the fiscal cliff needs to be accompanied by concrete steps toward a long-term debt reduction plan that is credible to the public and to domestic and international financial markets.
Such a plan must be bipartisan and comprehensive, addressing all parts of the budget, including cuts in low-priority spending, reforms of entitlement programs to reduce the growth of health care entitlements and make Social Security financially sound, and pro-growth tax reform which broadens the base, lowers rates, raises revenues, and reduces the deficit. It must also be large enough to stabilize and ultimately reduce the debt, but be implemented gradually to protect the fragile economic recovery and to give Americans time to prepare for the changes in the federal budget. Lastly, the plan should be conducive to long-term economic growth, protect the vulnerable, include credible enforcement mechanisms to ensure that the promised deficit reduction is achieved, and leave the next generation better off.
We are running out of time and rhetoric is of little value at this point. We need action.
The Financial Times | September 17, 2012
One of the few issues on which Barack Obama and Mitt Romney agree is the need for tax reform. Since the last overhaul in 1986, loophole after loophole has been added, producing a tax system that is complex, unfair, inefficient and detrimental to growth. Today, tax reform must also address three major challenges: escalating federal debt, rising income inequality and intensifying global competition.
Addressing the long-run deficit and stabilising the debt will require more revenue. Even after the economy recovers, current tax policies will not generate enough revenue to cover future spending on social security, health, defence and debt interest, let alone basic government operations and investments. In 2012, federal tax revenues are likely to be less than 16 per cent of gross domestic product, compared with an average of more than 18 per cent in the 20 years before the crisis hit in 2008.
When the US economy is operating near capacity, total tax revenues – federal, state and local – are much smaller as a share of GDP than in other developed countries. And there is scant evidence that taxes as a share of GDP and economic growth are negatively correlated. Indeed, there is a small positive correlation between income per capita and tax revenue as a share of GDP.
Special tax rates and allowances are a major reason why tax revenues are comparatively low in the US. So-called tax expenditures amount to about 7 per cent of GDP; more than what the federal government spends individually on defence, health and social security. Reducing the number and limiting the size of tax expenditures would simplify the tax code, remove distorting incentives and raise revenue. Mr Obama proposes to use some of the revenue from reforming tax expenditures for deficit reduction; Mr Romney would use all of it to cut tax rates, with disproportionate benefits to high-income taxpayers.
But tax reform should not come at the expense of progressivity. Income inequality is greater in the US than in the other developed countries of the OECD. The US tax system is considerably less progressive than it was a few decades ago and it does less to counteract pre-tax income inequality than other OECD systems.
Widening inequality is reflected in opportunity gaps between children born into different income groups and a decline in intergenerational mobility: an American child’s future income is more dependent on his or her parents’ income than in most other OECD nations. Mr Obama’s plan counters these trends. The Romney-Ryan plan exacerbates them.
Proponents of greater progressivity often call for an increase in corporate taxes but this would lead to slower growth and fewer jobs. The US has the highest statutory corporate tax rate in the developed world. Even after tax expenditures are included, its effective marginal corporate tax rate is one of the highest in the world. Business decisions about where to locate investments are responsive to differences in taxes and have become more sensitive over time. Of all taxes, corporate income taxes do the most harm to economic growth.
Both Mr Obama and Mr Romney advocate corporate tax reform that lowers the rate and broadens the base. The economic benefits could be significant. The current system has large unjustifiable differences in effective tax rates that influence business choices about what to invest in, how to finance an investment, where to produce and even what form of organisation to adopt. These differences distort capital allocation, add complexity, increase compliance costs and reduce corporate tax revenues.
A lower rate would stimulate investment, narrow the tax preference for debt over equity financing and weaken the incentives for international companies to move production to lower-tax locations. But lowering the corporate tax rate is expensive – each percentage point reduction would cut revenues by about $120bn over 10 years. Scaling back the three largest corporate tax expenditures to pay for a cut could increase the cost of capital, thereby reducing investment and growth.
A more efficient and progressive way to pay for a lower corporate tax rate would be to increase taxes on dividends and capital gains. This would shift more of the burden towards capital owners and away from labour, which bears the burden in the form of fewer jobs and lower wages. Mr Obama proposes to raise rates on capital gains and dividends for the top 2 per cent of taxpayers. Most capital gains and dividends go to this group. Mr Romney would leave these rates unchanged for this group.
The US economy needs efficient and progressive tax reform and it needs more revenues for deficit reduction. Revenue increases have been a significant component of all major deficit-reduction packages enacted over the past 30 years. This must be the case now, too. Additional revenues as part of a credible long-run deficit-reduction plan and supported by progressive tax reforms will boost economic growth and job creation.
The Hill | September 11, 2012
Washington’s new pet solution to the “fiscal cliff” — the spending sequester and the expiration of tax cuts scheduled to collide in the first few days of January 2013 — is “let ’er rip.” In other words, let the tax cuts expire, let the spending cuts hit — we’ll clean up the mess later. It reminds us of Scarlett O’Hara’s “after all, tomorrow is another day.”
For each political party, this notion is predicated on an expected sweep — House, Senate and White House — in the November elections. The prevailing mindset is, “when we take control next January, even though it is after the scheduled train wreck, we’ll fix it all our way — and the other side can’t stop us.”
However, this gamble assumes the use of two legal, but economically and socially dangerous, mechanisms to circumvent the automatic tax increases and spending cuts. Mechanism 1: Even though the 2001 and 2003 tax cuts will expire on Jan. 1, the Treasury Secretary can simply leave income tax withholding unchanged, preventing taxpayers from immediately feeling the effect of elevated rates. Mechanism 2: The president’s budget director can continue to supply government agencies with cash in the same amounts that they would have without the sequester, delaying the spending reductions until later in the year.
As the logic goes, if the incoming president and Congress can then change the law and undo the “fiscal cliff” in early 2013, the taxpayers and the federal agencies can just continue on that path laid out in January by the Treasury secretary and the budget director.
But consider how perilous this high-stakes gambit really is. Both Republicans and Democrats agreed to the sequester’s automatic spending cuts because they knew that the federal government must cut its deficit by at least — and really much more than — the amount of those reductions. Since then, however, the president and Congress have avoided any action that truly lowers the future accumulation of debt. They cannot now simply continue to kick this fiscal hand grenade down the road; they cannot postpone budget savings forever. Temporary budgetary gimmicks provide no solution; they just put off January’s pain by risking much greater pain later in the year.
And if either party does control the government, and does “let ’er rip,” action must follow early in the 113th Congress. We have watched extremely critical legislation fall apart in the thicket of congressional procedure, no matter how committed a majority of members might be.
A narrow congressional majority can disintegrate on a particular issue if a small faction within that majority realizes that it can demand a price for going along. If either party plays games with the expiring tax cuts and the sequester, and then its majority falls apart when it actually tries to change these laws, tens of millions of taxpayers will wind up under-withheld and owing big tax payments at the end of the year, and federal agencies will face massive furloughs to avoid overspending when their fiscal year ends. That will not only directly disrupt the economy and abruptly slash the take-home pay of millions of Americans, but it will also send a chilling signal throughout the world that the U.S. federal government cannot manage its own affairs.
Finally, if the election yields continued divided government, the “let ’er rip” tactic devolves into a potentially catastrophic game of chicken. Can the new government agree to undo the temporary mechanisms and provide at least an outline of a fiscally responsible plan before the taxpayers’ under-withholding and the agencies’ under-funding is exposed, and before markets implode because of all these shenanigans? If not, this will yield nothing but wreckage.
The president and Congress can avoid this wreck. Doing so will involve hard negotiations and a budget process that bridges the post-election lame-duck session and the 113th Congress.
We have developed this process, which would force congressional committees in the House and Senate to meet savings targets established by the budget committees. We are well aware that Congress suffers from process fatigue after the failures of the past 18 months. But coming to grips with the need for another new budget process is just one more challenge that will have to be overcome if this nation is to remain exceptional.
We are not naive. Politics will be played. But the players must look ahead to the endgame before they bet the entire country — and that is what they will do if they continue to “let ’er rip.”
The New York Times | August 29, 2012
Getting our economy growing is our most pressing economic problem. But there can be no sustainable economic growth as long as we face America’s enormous debt overhang. If we don’t put our nation’s fiscal house in order, we face the most predictable economic crisis in history.
Solving this economic crisis the right way means avoiding the large, immediate, indiscriminate cuts and tax increases that are on the horizon, from the “sequestration” deal.
We should be careful not to cut too deep too soon. But failing to deal with the debt is the real risk we just plain can’t afford.
One of the key principles set out by the National Commission on Fiscal Responsibility and Reform, which I co-chaired with former Senator Alan Simpson, was that a debt-reduction plan must be phased in gradually so as not to disrupt a very fragile economic recovery.
Our commission’s plan would reduce the deficit by more than $4 trillion over the next decade, but would do so in a way that encourages, rather than hinders, economic growth and stability.
The real short-term risk to the economy isn't a carefully thought-out deficit reduction plan, but the mindless spending cuts and tax increases — known as the “fiscal cliff” — that are scheduled to go into effect at the beginning of next year.
Allowing those deep and abrupt measures to occur would put us into a double-dip recession. At the same time, continuing on our current path by punting these measures would send a dangerous message to the markets that America is not willing or able to deal with our debt.
The only responsible course of action is to replace the fiscal cliff with a gradual and thoughtful plan to save at least $4 trillion over the next decade and put the deficit on a clear downward path relative to the economy.
Such a plan can lay the foundation for sustained economic growth through a combination of debt reduction, comprehensive tax reform, and maintenance of important investments in education, infrastructure, and high-value research and development.
We should be careful not to cut too deep too soon. But failing to deal with the debt is the real risk we just plain can’t afford.