Deficits and Debt
Politico | May 13, 2013
It seems the debt deniers are back.
If recent news reports are any indication, there is a growing sentiment that after enacting the nearly across-the-board “sequestration” spending cuts, Washington has already done enough to reduce the deficit and should avoid further deficit reduction that could disrupt the fragile recovery.
However, this rhetoric is based on the false notion that deficit reduction and economic growth are mutually exclusive. While we definitely should avoid immediate austerity, starting by reversing the austerity now in effect via the sequester, we must replace these less-than-intelligent, across-the-board cuts with a long-term fiscal plan — one that protects the recovery and promotes economic growth.
The austerity we currently face is precisely the result of our inability to deal with long-term deficits. Instead of reforming our Tax Code and entitlement programs, we’ve slashed important investments in the worst possible way.
Supporters of the status quo accuse those of us who want to fix the debt of supporting sharp austerity. Yet the civic leaders, small-business owners, current and former public officials and hundreds of thousands of average Americans who have joined me in supporting the Campaign to Fix the Debt believe exactly the opposite: We believe in ridding ourselves from the austerity already in effect. More important, we believe in growth. The key to unlocking this country’s economic potential isn’t to give up on smart deficit reduction; it is to enact a responsible plan to replace the mindless cuts that are currently the law of the land. Simply put, the only way out of this foolish austerity is to enact comprehensive deficit reduction.
Policymakers may pretend the current situation is sustainable, but in reality everyone loses.
By resisting continuing efforts to reach a responsible deficit-reduction deal that could replace the sequester, those in my party concerned about protecting programs that provide support for low-income people, enhancing public investments and ensuring the economic recovery is the tide that lifts all boats may very well be, unintentionally, thwarting all three goals. Indeed, by taking the view that we’ve done enough to control the debt, they may be condemning us to the sequester’s continued austerity and to the foolish across-the-board cuts they correctly deplore.
Our current situation is the worst of both worlds. Excessive, mindless deficit reduction in the short term when it will harm the economy, and rapidly growing debt over the long term when that debt will start slowing down economic growth. What’s more, the recent political maneuvering in which Congress acted swiftly to eliminate the sequester’s furloughs of air traffic controllers — while efforts to cancel the sequester as a whole went nowhere — underscores the political reality that the mindless cuts may be here to stay. Unless Congress replaces the sequester with a comprehensive deficit-reduction plan, 4 million meals for seniors will be eliminated, 70,000 children will be kicked out of of Head Start, and 125,000 American families will be at immediate risk of losing rental assistance and, along with it, their homes. The only way to avoid allowing a few powerful interest groups to get their own carve-outs from the budget cuts while leaving everyone else in the cold is to come to an agreement on a responsible deficit-reduction plan to replace the sequester.
Fortunately, there is a better way forward. The recent deficit-reduction plan put forward by Erskine Bowles and Alan Simpson, for example, would replace immediate austerity with a comprehensive plan that is smarter, larger and more gradual. Such a plan would help restore this country’s economic credibility. The markets must be reassured that the government is willing to control its debt over the long term. Enacting a plan now allows us to gradually phase in changes , allowing Americans time to adjust. Moreover, gradual changes would help the economy avoid the kind disruptions that are sure to occur if our elected leaders wait until market forces leave them with no choice other than through dramatic, sudden policy changes.
Rep. Chris Van Hollen (D-Md.) made this point at a recent Bloomberg forum when emphasizing the need to “take actions today that kick in over a phased period of time in the long term to address the out-year deficit and debt” in order to avoid a “‘squeezing out’ effect … that will put the brakes on the economy.”
Only by reducing our overly heavy debt burden can we be sure we’re putting our economy in an environment most conducive to sustained growth. Designed properly, a comprehensive deficit-reduction framework can promote short- and long-term economic growth. Such a deal would avoid the effects of the sequestration and reduce uncertainty; improve confidence in future economic growth; promote work, savings and investment over the long term; and reduce the likelihood of a debt-fueled fiscal crisis in the future. Only a comprehensive approach, one that reverses today’s austerity but enacts intelligent deficit reduction over time, will truly fix our debt.
Washington Post | April 29, 2013
In the 2½ years since the National Commission on Fiscal Responsibility and Reform that we co-chaired released its final recommendations on charting a path toward meaningful and bipartisan debt reduction, we have traveled the country, speaking to hundreds of thousands of Americans of all ages, incomes, backgrounds and ideologies about our debt challenge. No matter our audience, those we spoke with shared two things: a thirst for the truth about what it will take to right our fiscal ship and a willingness to be part of the solution so long as everyone is in it together.
Unfortunately, in Washington, the past two years have been defined by fiscal brinksmanship. Policymakers have lurched from crisis to crisis, waiting until the last moment to do the bare minimum to avoid catastrophe without addressing the fundamental drivers of our long-term debt.
To be sure, some progress has been made the past two years. Policymakers have enacted about $2.7 trillion in deficit reduction, primarily through cuts in discretionary spending and higher taxes on wealthy individuals. Yet what we have achieved so far is insufficient. Nothing has been done to make our entitlement programs sustainable for future generations, make our tax code more globally competitive and pro-growth, or put our debt on a downward path. Instead, we have allowed a “sequestration” to mindlessly cut spending across the board — except in those areas that contribute the most to spending growth.
But there are seeds of hope that a bipartisan agreement might be achievable.
In December, the two parties were as close as they’ve ever been on a plan to put our fiscal house in order. Although they did not reach agreement, we continue to believe that broader compromise is possible. In particular, President Obama deserves a lot of credit for his budget, which lays the foundation for constructive bipartisan discussions by incorporating the tough choices and politically difficult compromises contained in the last offer he made during negotiations with House Speaker John Boehner in December.
While the president’s budget represents a significant step forward, it does not go as far as necessary to keep our debt declining as a percent of our economy. There are significant, substantive differences between the parties on key issues. But we hope that instead of retreating to their respective partisan corners, leaders in both parties will work to bridge the divide.
That’s why we released a new plan this month that builds on the most recent negotiations between the president and the speaker. In crafting it, we drew on the conversations we have had with policymakers from both parties in the past two years, and we worked to address concerns raised about the plan we put forward in 2010. This new plan represents what we believe is both necessary and politically possible, highlighting areas where there is bipartisan agreement and outlining ways to bridge differences on other areas.
The plan we propose would achieve $2.5 trillion in deficit reduction through 2023, replacing the immediate, mindless cuts of the sequester with smarter, more gradual deficit reduction that would avoid disrupting a fragile economic recovery while putting the debt on a clear downward path relative to the economy over the next 10 years and beyond. Importantly, the plan would achieve this deficit reduction while respecting the principles and priorities of both parties.
Our proposal contains concrete steps to reduce the growth of entitlement programs and make structural changes to federal health programs, such as reforming the health-care delivery system to move away from the fee-for-service model and gradually increasing the eligibility age for Medicare. At the same time, it would provide important protections and benefit enhancements for low-income and vulnerable Americans, such as an income-related Medicare buy-in for seniors affected by the increase in Medicare’s eligibility age and greater protections against catastrophic health-care costs for low-income seniors.
Our proposal recognizes that additional revenue must be part of a comprehensive deficit-reduction plan for both substantive and political reasons. Our plan raises revenue through comprehensive tax reform that lowers rates, improves fairness and promotes more vibrant economic growth.
These structural reforms are accompanied by spending cuts in all parts of the budgets put forward by both parties, including cuts to defense and non-defense programs. The plan also includes a shift to the chained consumer price index to provide more accurate indexation of provisions throughout the budget, with a portion of the savings devoted to benefit enhancements for low-income populations. Together, these policies would put the debt on a downward trajectory as a share of gross domestic product — and would keep it declining for the long term.
Our proposal is not our ideal plan, and it is certainly not the only plan. It is an effort to show that a deal is possible in which neither side compromises its principles but instead relies on principled compromise. Such a deal would invigorate our economy, demonstrate to the public that Washington can solve problems and leave a better future for our grandchildren.
The Hill | April 26, 2013
Second presidential terms build legacies, and this president’s will be tied solidly to the decisions he makes about the national debt and the budget. He cannot leave the office with the debt approaching $20 trillion and expect history will look kindly upon his fiscal management of the nation.
So how is he doing in the first 100 days on this front? He is off to a good start, and it is certainly a lot better than he did in his last four years.
The budget President Obama offered was more serious than many of his other recent proposals. By including the chained CPI — a technical improvement to how we measure inflation that would help to extend the life of Social Security and increase revenue for the federal government — he sent a real signal that he is willing to discuss the kinds of more serious entitlement reforms that will have to be part of any deal.
And his so-called “charm offensive” seems to be going well. It is nothing short of absurd how little the president has interacted with members of Congress — including those from his own party — on these issues in the past. And the dinner series he initiated seems to be helping to start a real discussion. It’s hard to solve problems when no one is even talking.
But the real question is where this goes in the next 100 days. There isn’t much time; we need to get a deal hammered out before the country hits the debt ceiling late this summer or early fall.
This will take a lot more than raising tax rates on the rich, or even grudgingly dipping his toe in entitlement reform, as the president has talked about so far. While it is laudable that we have reduced the deficit in the past two years from where it otherwise would have been, we have only done the relatively easy policies thus far. Putting in place spending caps where you don’t have to specify what programs will change (and you have to count on Congress to make the promised savings stick — not a great track record here) and raising tax rates on the very well off are a start.
Next up: the tough stuff.
All told, we have achieved about half of the savings we need to reach a minimum target. Now in the next tranche, we have to tackle the much harder parts: entitlement and tax reform. The good news is that the tax committees are making impressive progress on moving forward with tax reform, which would broaden the base; lower rates; simplify the system; make it far more equitable and competitive; and raise revenue for the federal government in a much better way.
Where the president is going to have to really use his leadership is to help make the case for entitlement reform and why we have to make the needed changes to control healthcare costs and adjust the nation’s retirement system for growing life expectancies. He should make the case to Democrats on why they should prefer Social Security and Medicare reform under his presidency, and he needs to make the case to the nation as a whole about why putting a fiscal deal in place is so important and how the economic recovery will not take off without one.
And that will be part of the test. The president’s style has been to put an issue on the agenda and then take a huge step back right out of the room. That’s not going to work on this one.
The specifics are difficult and come with political risks. He will have to own the tough policy choices right along with the Democrats and Republicans in Congress.
And in order to make this work, he will have to use the bully pulpit as only the president can. He must make the case to the country for why a reformed tax code will make us more competitive, why we need to address the problems with entitlements in order to strengthen those programs, why a smart budget deal is part of an economic recovery strategy, why fixing the budget now will help us to preserve a strong safety net, and why we have to make the necessary investments we have been shortchanging for so long.
A few major speeches around the country laying these issues out would make a world of difference.
President Obama made a small down payment on his legacy in his first 100 days. Now he must invest a lot more political capital to make sure it pays off.
The Hill | April 10, 2013
When it comes to the federal budget standoff, those looking for a breakthrough are caught between a rock and a hard place. One side offers all cuts and no revenues to reach a balanced budget. The other offers tax increases with some spending cuts to appear even handed, but never actually moves the nation’s finances from red to black.
Uncertainty over the ultimate solution has businesses keeping capital on the sidelines, waiting to see what the playing field will look like in the months ahead. It is time to get a big deal to fix the nation’s debt and deficit problems and get everyone back in the game.
Dante once wrote, “The hottest places in hell are reserved for those who, in times of great moral crisis, maintain their neutrality.” It is time to turn up the heat on those who remain in their corners without a passable solution.
Washington leaders have gotten quite good at taking the easy way out. The time to say goodbye to short-term fixes is long overdue. President Obama’s outreach efforts on Capitol Hill are a good start, but he has remained aloof for far too long. House Speaker John Boehner must lead his conference, rather than settling for lockstep opposition.
Every kick sends an opportunity to get serious about the nation’s debt and deficit a few months into the future, to the detriment of the economy’s long-term prosperity. Market forecasters Macroeconomic Advisors predict that the threat of a default on the nation’s credit card could reduce GDP by one half of a percentage point. That sort of self-inflicted wound could be fatal to a sluggish economy, and it is incumbent upon everyone to make sure it doesn’t happen. It will require the hard work and will of the White House, both chambers in Congress, and most importantly the collective voice of the American people.
Since almost everyone acknowledges that there is a problem, the next step is to evaluate the potential solutions. Rather than applying yet another half-trillion dollar Band Aid as Washington has done since 2011, legislators should make the next attempt mean something and make a sizeable dent in the nation’s deficit.
So far, participants in the discussion have fallen into three general groups: snake oil peddlers, wafflers, and true patriots.
The peddlers try to convince the public that this problem can be solved without revenues or changes to entitlement programs. It’s certainly possible to do that on a spreadsheet, but the approach is politically untenable. People who insist on a plan that has no hope of passage are not a contributing to the discussion. They need to pipe down or be shunned into silence.
Wafflers agree that something must be done, but steer clear of presenting or advocating an honest solution. These members should be encouraged to go all the way and embrace a plan. If they are unwilling or unable to do that, they should move on and give someone else the chance.
Finally, our true patriots should be commended for getting out on the front lines and proposing a solution. The answer doesn’t have to be loved by everyone. Given that it will require hard choices and shared sacrifice from all, it may not be popular. That’s why groups like Fix the Debt stand ready to support those that are willing to make the tough choices necessary to get the nation’s finances back on track.
This is the president’s contest to lose. Approaching fiscal matters a half a trillion dollars at a time ensures that this will be all anyone talks about, crowding out second term priorities such as immigration and gun legislation. If he wants to start ensuring his legacy, the president should kick his outreach efforts into overdrive. Speaker Boehner should use this opportunity to show that his conference can do more than say “no,” that it is open to constructive ideas that truly solve common problems.
The best part about the deal will be the dawn. As the cloud of uncertainty surrounding the nation’s fiscal future dissipates, Americans will once again be able to see the bright lights of our nation’s economic strengths. America can continue to be a beacon of hope and opportunity, but only if we act.
Forbes | March 28, 2013
In a pleasantly surprising move, the normally moribund Congress passed a Continuing Resolution (CR) to fund the government for the last 6 months of FY 2013. The President obligingly signed it. What’s more, the usual nasty and dilatory process was completed on time without excessive name-calling.
That made the CR a multiple winner. It got the country past 2 more cliffs. One was the blunt and thoughtless cuts of the sequester. The other was the expiration of the current CR. While mitigating some of the worst effects of the sequester, it maintained the total savings of the sequester. That’s a double win for a Congress that rarely scores victories.
That’s fine for now, but the CR is just one more short term stand-off between the warring Democrats and Republicans. They proved they can, when pressured, keep the Ship of State moving past cliffs, sequesters, debt ceilings, and other crises. But their short term fixes only prevent a total disaster. They give no long term certainty or direction to the country.
CRs are, in fact, a clumsy way to conduct the people’s business. They include all functions of government in one ugly package. They include some reviews of some spending, but they lack the careful scrutiny that is applied when all 13 appropriations bills are passed separately. Lacking a common budget target, legislators are forced to bundle all spending in to a CR.
In the past few years, frequent budget crises have become the rule for Congress. This year we avoided the cliff, dodged the debt ceiling, and now have eased the effect of the sequester. We will face another debt ceiling expiration in August, and probably have another CR in September. All of these could have been avoided had our political leaders agreed on a long term budget plan to stabilize the debt ratio at a reasonable level.
This year both the Republican House and the Democratic Senate have passed budgets. The Senate budget was the 1st in 4 years, and was a cause for public celebration. The bad news is that the House and Senate versions are poles apart. A compromise is considered highly unlikely.
The Republican budget balances after 10 years, and stabilizes the debt ratio at 55%. It raises no new taxes, and makes drastic cuts in health care spending. The Democratic budget lowers debt slightly, but does stabilize it. It increases taxes by $1 trillion, and makes small spending cuts. These budgets are reconcilable, but only if the politicians regard each other as the opposition, instead of the enemy.
Without a reconciliation, our budget process will move the country backwards into more CRs and more cliffs in 2014. We will survive, but continue to lurch from crisis to crisis.
Our economy will be denied the certainty it requires for a faster recovery.
What is lacking here is the Grand Bargain, a 10-year program to tame the long term deficit-drivers, and stabilize the debt so we can deal effectively with future emergencies. Every budget observer has a personal favorite version of the big compromise. The well-known Bowles-Simpson Plan is just one of many possible models.
Republicans are determined to raise no more taxes, and to reduce entitlements that are the long term debt-drivers. Democrats are equally determined to defend entitlements, and to impose more taxes.
Neither side can get everything it seeks. Yet, both sides remain adamant. Each believes that it can ultimately defeat the other, despite contrary historical evidence. Meanwhile, our economy underperforms at sub-standard levels. Uncertainties caused by the stalemate continue to confound markets and business decisions.
There is still time for compromise, but, so far, the will has been absent. The political parties and their leaders have to make an agreement. Nobody can do it for them. One day the light will dawn. They will begin to understand that compromise is strength, not weakness. The sooner that day comes, the better.
The Cincinnati Enquirer | March 25, 2013
Ohio’s congressional delegation must get serious about fixing the debt. In this time of serial self-inflicted fiscal crises, our Ohio leaders are in a powerful position to move Congress toward enacting a comprehensive plan that puts our economy back on track. We must push through the current deadlock between the two parties and find a way to deal with our growing national debt.
The debt problems we face are gigantic. At over $11.8 trillion, the publicly held portion of our national debt is over 73 percent of the size of our economy – the highest share since the 1940s – and it is slated to grow over the coming decades, despite the recent “fiscal cliff” tax increases and “sequester” spending cuts. Even after all of this, the truth is that we just haven’t done enough to get our debt under control.
It’s time for our leaders in Washington to come together and agree on a plan to get our debt under control. Because of the pivotal place in Washington that our representatives from Ohio occupy, they can be instrumental in leading the way to a bipartisan agreement that puts our debt on a downward path as a share of the economy over the long term.
Such a plan must reduce spending through smart cuts to unnecessary and inefficient programs, promote growth through reform to our overly-complex tax code and preserve the integrity of our entitlement programs by passing reforms that make them financially sustainable over the long term.
These reforms will require compromise from both parties and from both ends of Pennsylvania Avenue, but we owe it to our children and to future generations to stop accumulating more debt to leave on their shoulders.
We Ohioans have an opportunity to play a vital role in this process by showing our senators and representatives we support them in coming together to build a comprehensive plan and in making the hard decisions for the good of our country. We need to let them know that continuing to patch together short-term fixes, like we’ve seen over the past few months, is no longer an option.
The Campaign to Fix the Debt is a nonpartisan organization that is pushing our leaders to do just that. With a coalition of former elected officials, small-business owners, academics and more than 350,000 grassroots members from all around the nation, the Campaign has been building a popular movement to let our leaders know it’s time to stop kicking the can down the road and to finally deal with this issue.
We Ohioans can help. If you haven’t already signed their petition, go to www.fixthedebt.org and add your name. Whether or not you’ve already signed the petition, call or write to your representatives in Congress and let them know that it’s time to use common sense and come together to solve these issues.
Let them know that we can’t afford to let the debt continue to pile up for our children.
Let them know that the Ohio delegation needs to step up and provide the leadership this country so desperately needs. Most importantly, let them know you care about these issues and that you support them in fixing the debt.