Other CRFB Papers

Op-Ed: Weak Leaders Fumble the Public Purse

Washington Times | September 23, 2013

The past decade has been a disaster when it comes to fiscal stewardship and political leadership. Our official federal debt has tripled, and the best measure of our fiscal burden — the total of federal liabilities and unfunded obligations — has soared even more, to more than $70 trillion during the next 75 years. Washington is in partisan and ideological gridlock with prospects for a fiscal “grand bargain” this year being remote, and perhaps unlikely until 2017. For the first time in America’s history, we are on course to leave future generations with a country that is worse off than the one we inherited.

I have sounded this alarm throughout the past 10 years, stating bluntly that our situation is dire and that the solutions will require the public and our elected officials to put partisanship aside and act in the best interests of our nation. The good news is that most Americans understand we have a problem and want something done about it. In addition, we still have time to right the ship of state. As I see it, there are some steps that we need to take to preserve the American Dream for our children and grandchildren:

We need to set a realistic fiscal objective for 2013. A grand bargain is not in the cards, and Congress needs to pass a short-term continuing resolution to keep government funded. The House did so on Friday and sent the measure to the Senate. Still, a funding agreement for fiscal 2014 should include several fiscal actions in addition to raising the debt ceiling.

Congress and the president should work together to replace the senseless sequestration with alternative mandatory and discretionary spending cuts for at least the next two years. They should also set targets for additional spending reductions through social-insurance reforms and additional revenues through comprehensive tax reform. The relevant congressional committees should be charged with coming up with related legislation by a specified date.

To ensure more timely and informed actions moving forward, Congress should also enact biennial budgeting, a meaningful no-budget-no-pay bill, the recently introduced Inform Act, and a substantive Government Transformation Commission that can recommend cost-control measures. Finally, the individual mandate under Obamacare should be delayed, because the government is not ready to implement it effectively.

We must change the way the federal government keeps score. Right now, policymakers focus on annual deficits and 10-year baselines. A more comprehensive and credible approach should take into consideration all our unfunded promises and liabilities, including Social Security, Medicare and civilian and military retirement obligations, and a much longer time frame. Importantly, that figure can go down if we achieve a responsible grand bargain — unlike the amount shown on our National Debt Clock. We also need to focus our fiscal reform efforts on the ratio of debt to gross domestic product, and not the budget deficit. In fact, we should ultimately replace the debt ceiling with a debt-to-GDP limit.

We must broaden the fiscal message to include state and local governments. They share many of the fiscal woes of the federal government, including huge unfunded pension and retiree health obligations. They are more vulnerable than the federal government for several reasons. They can’t print money, and their credit ratings are at risk. In addition, “bad news flows downhill” — meaning that as the federal government restructures its finances, which will ultimately happen, it will cut back on the funding that state and local governments rely upon. Therefore, it is critical that cities and states act quickly to get their fiscal houses in order.

We need to fix our dysfunctional democracy. Unless we dramatically reform our political system, we will be unable to address the key fiscal challenges and other sustainability tasks that lie ahead. This will require redistricting reform (gerrymandering has made countless districts uncompetitive), revisions of our current primary system, more equitable and consistent requirements for ballot access, extensive campaign-finance reform and term limits. If Congress won’t act on these and other needed reforms, we should also consider a state-based effort to convene a “clean call” Constitutional Convention under Article V that would propose specific fiscal, political and states-rights amendments for ratification by three-fourths of the states.

We must build on successful public engagement models. President Obama can take a lesson from former President Bill Clinton, who promoted Social Security reforms by joining other public officials and public policy experts in town hall meetings across the country. By emulating this strategy of citizen education and engagement, the president can energize and activate the American public, providing the “cover” that many politicians need to support actions that carry political risk.

We must address our biggest deficit — the leadership deficit. Our elected officials have shown too little backbone when we need the courage and conviction that goes with true leadership. This will take both the emergence of nontraditional leaders and political reforms that will encourage more qualified people to seek office.

Ultimately, however, it is “We the People” who must take the lead. Independent-minded Americans of all political affiliations and diverse groups need to come together to focus on common concerns and goals. My travels across the country have convinced me that a significant majority of Americans would rally behind specific economic and political reforms, as long as they are deemed to be comprehensive and fair. In the end, the prescription we need is a consensus for action, and a voting public that says “enough” to politicians who refuse to be part of the solution.

Report: CBO’s Long-Term Budget Outlook

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 Correction: This paper originally stated that the Social Security trust fund is projected to be exhausted in 2033. The combined Social Security and Disability (OASDI) trust funds are actually projected to be exhausted two years earlier, in 2031.

Op-Ed: Reason to Hope for Fiscal Sanity

The Hill | September 17, 2013

For more than a decade, I have dedicated myself to sounding the alarm about our government’s fiscal mismanagement and promoting a change in course to preserve the American Dream for future generations. Now I am ending my full-time efforts so others can take the lead, especially younger Americans who have the most at stake.

The task ahead will be challenging, but based on what I’ve seen and heard, especially in my travels to all 50 states, we have more reason for hope than despair. Here’s why:

We the People are in charge.

Today we have a government that is neither representative of nor responsive to the American people. That can change if Americans insist on accountability and punish unduly partisan and ideological politicians in the voting booth.

The truth is, President Obama—like President Bush (43) before him—has failed to use the powers of his office to champion responsible reforms to the American people. And our leaders on Capitol Hill, both Republican and Democrat, have shown an appalling lack of courage in standing up to the extreme wings of their parties. As long as Republicans kowtow to those resisting any increases in revenue—despite a tripling of our national debt in the last decade—and Democrats knuckle under to those refusing to rein in the unsustainable costs of our social insurance systems, we will remain in political gridlock.

More than anyone else, I have gauged the will of my fellow citizens when it comes to fixing our government’s financial mismanagement—most recently in a nationwide bus tour through 27 states last fall. Their verdict could not be clearer. In gatherings across the country, with participants of every political stripe, we obtained 92 percent agreement on six key principles to guide a fiscal “grand bargain.” The reforms should lead to economic growth, and be socially equitable, culturally acceptable, mathematically accurate, politically feasible, and able to achieve meaningful bipartisan support.  When we discussed specific reforms, most conservatives and liberals were willing to put aside ideology as long as proposals were deemed to be fair and part of a comprehensive plan.

That tells us that politicians in Washington can gain the public support they need for bold reforms as long as they explain our urgent need to act and then lay out responsible positions. I am convinced that over time political courage and leadership will be rewarded—and cowardice will be punished.

More policymakers are focused on the issue.

There is a growing roll call of present and former government officials who recognize the need to achieve a fiscal grand bargain. During Comeback America Initiative's (CAI) tour last fall, which engaged Americans on our nation’s deteriorating financial condition, we had the explicit support of, among others, two former chairmen of the Federal Reserve, two former chairs of the RNC and DNC, former directors of the Office of Management and Budget, and a who’s who of former governors, senators and representatives from both parties.

It is also clear from recent news reports that President Obama and Speaker John Boehner (R-Ohio) would like to strike a deal on a grand bargain. An increasing number of members are also acknowledging the reality that the status-quo is unacceptable and unsustainable. Hopefully, we will reach the tipping point where enough politicians in Washington will put the good of the country before the next presidential election.

More organizations have joined the cause.

CAI has been far from alone in its efforts.  The Concord Coalition and the Committee for a Responsible Federal Budget have pushed for fiscal responsibility for a number of years, and now they are joined by newer organizations like Fix the Debt, the Peter G. Peterson Foundation, and The Institute for Truth in Accounting.  The group No Labels is pushing for a new politics of bipartisan problem-solving, and the Government Transformation Initiative is a coalition of corporations, non-profits and others dedicated to changing the way government does business. There is even a Millennial-led organization, The Can Kicks Back, which is mobilizing young people to fight for their fiscal future. The grassroots efforts of these and other organizations, coupled with the pressures they’ll bring to bear in Washington, will augur well for our future.

Clearly the hole we have dug ourselves is deep, and getting deeper, and our political system is badly broken. But I am hopeful about our ultimate prospects for success. We the People have awakened, and Washington is slowly waking up, too.  If we act boldly and responsibly, our best days will surely lie ahead.

Op-Ed: Government Shutdown? A Leap of Trust Can Seal a Budget Deal

Christian Science Monitor | September 16, 2012

Budget talk in Washington is again dominated by nonnegotiable demands and a potential government shutdown – or even an unprecedented default on US debt in October. Despite the heated rhetoric, we believe that a bipartisan agreement is still possible on a meaningful budget deal that puts America on the path to fiscal responsibility.

We believed this in 2010, when we co-chaired a bipartisan national commission to fix the debt, and we still believe it. The country simply can’t afford to keep lurching from one fiscal crisis to the next. True, some fiscal progress has been made, but the underlying problem remains: In just a decade, the debt will be equal to 77 percent of our economy – draining resources to pay interest on the debt, and negatively affecting American jobs, consumer credit, and the country’s competitiveness.

Still, we’re hopeful about a fiscal deal, in part because of our experience in revising a deficit-reduction plan based on last winter’s negotiations between President Obama and House Speaker John Boehner. In the process of splicing that plan together, it became clear to us that the two sides had been quite close to reaching an agreement and that the remaining policy differences could be bridged if both sides were willing to go a little further and come to a principled compromise without compromising their principles.

Our revised plan, The Bipartisan Path Forward, would go further than many Democrats have been willing in reforming costly entitlement programs that are driving long-term debt, particularly health care. It would, for instance, move away from Medicare’s fee-for-service delivery system and gradually increase the eligibility age. Our plan would also require Republicans to accept more revenues beyond the expiration of the 2001 upper-income tax cuts agreed to in January.

Our plan would implement entitlement reform in a way that provides important protections for the most vulnerable. And it would raise revenue through tax reform that repeals or reforms various deductions, exclusions, and credits; lowers rates; and ultimately reduces the deficit. Both sides would have to go beyond their political comfort zones to reach a real budget deal. But the end result would put the debt on a downward trajectory for the long term.

The sad lack of trust between the two parties in negotiating on fiscal policy has been perhaps an even greater obstacle to an agreement than the deficit details themselves. However, the dinners that the president hosted with Republican senators earlier this year were an important and long overdue effort at building the understanding that will be critical to getting that kind of a bipartisan agreement.

These social events have led to discussions between senior White House staff and Republican senators about the budget and replacing the mindless, across-the-board cuts in defense and domestic programs (known as sequestration) with smart, selective cuts.

President Obama also deserves credit for the budget that he proposed earlier this year. It took a significant step toward a possible bipartisan agreement by incorporating the tough choices and politically difficult compromises contained in the last offer he made during negotiations with Mr. Boehner in December – including reduced cost-of-living increases for seniors and expanding means-testing for Medicare.

For their part, a growing number of Republican senators have indicated they are willing to accept new revenues as part of a deficit reduction plan that also contains meaningful entitlement reforms. To be sure, significant differences remain between the parties on important details, but there has been a mutual willingness – at least between some GOP senators and the White House – to make politically difficult compromises if the other side is doing so as well.

Budget negotiators should also take heart in bipartisan Senate agreements on the politically difficult issues of immigration and student loans. They have led to renewed interest in bipartisan discussions on the budget. They show what can be accomplished when both sides talk to each other instead of past each other.

We are also encouraged by timely proposals on tax reform emerging from Congress – from the yeoman’s work of House Ways and Means Chairman Dave Camp (R) of Michigan and from Senate Finance Committee Chairman Max Baucus (D) of Montana and ranking member Orrin Hatch (R) of Utah. A bipartisan deal on tax reform could unlock one for the budget.

The senators’ “blank slate” approach would eliminate every tax preference and require advocates to justify adding each one back. This approach will hopefully result in many tax breaks being eliminated or scaled back, even beloved deductions such as for mortgage interest. Such a strategy could accomplish the Republican goal of substantially reducing rates and the Democratic goal of raising new revenue.

It is going to take political courage on both sides to come together on fiscal common ground. The problem is real, the solutions are painful, and there is no easy way out. But there is room for a solution. We must find it for the sake of our grandchildren, ourselves, and our country.

Op-Ed: Now or Never on Debt Issue

The Hill | September 9, 2013

After an August in the countryside or their states or somewhere around the world or Martha’s Vineyard, the president and the Congress are back in Washington.

One hopes they are ready to govern -— because this period from now until the end of the year may be the last legitimate opportunity to do just that before the next election cycle begins in earnest.

The debate about Syria is on the center of the global stage but there is really only one domestic issue that needs to be addressed in this period: the budget and the debt.

With both the end of the fiscal year occurring and the debt ceiling needing reauthorization, it is difficult to comprehend how the issues that underlie and drive both of these events would not be taken up with fervor and a real intent to get something done.

At the center of these issues is of course the fact that we continue on the path of piling up an unfathomable amount of spending that is not paid for. The expenditure is made possible only through borrowing and passing the bills on down the line.

It is true the deficit has dropped a great deal in the last six months. It is also true that the sequester, if allowed to continue to operate, will cut that deficit even further. But no great solace should be taken from either fact, even though certainly on their faces they represent positive movement.

The fact that the deficit is down by over half from its high point is like saying that a person who has fallen off a tall building is doing “OK” when they are only halfway down.

The deficits at their present level still remain the highest in the post-World War II period. At the present rate of compounding, our debt will have tripled by the end of the decade from where it stood at the start of the Obama presidency. Our debt as a percentage of GDP will still be going up at what is generally accepted to be a bankruptcy-in-waiting rate.

Another positive sign of fiscal restraint on its face is the fact that the sequester is continuing to be executed. During the next fiscal year, which starts in October, it will begin to significantly affect domestic discretionary spending. But, it has to also be obvious that this is not the right way to get our fiscal house in order.

The sequester does save money and it does cut spending, but it does it in the wrong places, in the wrong way and at the wrong time.

The issue has never been discretionary spending. This is especially true after the almost trillion dollars in cuts put in place with the agreement reached in the summer of 2011.

The issue has always been entitlement spending and how to change the major entitlement programs so that they can be put on a glide path to sustainability, even as they still serve as a necessary safety net for seniors.

The sequester is an arbitrary, non-programmatic approach that will actually retard economic growth in the short run and most likely negatively effect revenues as a result.

Entitlement reform, such as changing the CPI calculation and the process for reimbursing Medicare costs, will actually create economic growth. It will show people that we are willing to address the real problems behind our debt and thus release all sorts of investment and economic activity.

Of course, all these points which have been made by many and which are obvious to most mean nothing if we do not have a government that functions and moves forward with answers and action.

The next few months are what could be called the “big casino” of governing.

The president either steps up and leads or his presidency ends up on a road to nowhere.

The Republican House either joins in with a constructive effort or else people will ask what is its purpose is when they are next on their way to a polling place.

As for the Senate, it just needs to get a nod, not even a verbal expression, from Sen. Harry Reid (D-Nev.) to the senators meeting in the basement that he will give them a pathway to action if they can come up with a bipartisan agreement. They can do this.

The folks are back in Washington. One presumes they came back to do something. Or is that too optimistic?

Op-Ed: Nation Does Not Need Another Government Shutdown

The Hill | September 6, 2013

The last real government shutdowns occurred in the winter of 1995.  Two funding gaps that winter resulted in a total of 26 days of hiatus when President Clinton battled it out with Speaker Gingrich and Majority Leader Dole over spending and taxes. While threats of government shutdown raised their head in 2011, 18 years have passed since anyone has really experienced a shutdown.

I had a ring side seat during the last shutdowns. I would advise against a repeat of the winter of 1995.
 
Surely members who were present in 1995 would agree. But how many current members have actually experienced a real government shutdown? The answer is only 1 in 5 current members of the 113th Congress were also members of the 104th Congress when the shutdowns occurred.  Specifically, only 88 members of the House of Representatives and 19 sitting senators were present for the last shutdown. Overall, only 107 of the 535 members might remember the challenge and heartaches of a real government shutdown.   That sad experience was generally shared between the parties, slightly more than half of these current members are Democrats, with only 45 current Republicans.
 
Fortunately, the four current leaders, Speaker Boehner (R-Ohio) and Minority Leader Pelosi (D-Calif.), as well as Senate Majority and Minority Leaders Reid (D-Nev.) and McConnell (R-Ky.) were on the scene in 1995. They should know no one benefited, neither political party, from the experience.  In the presidential and congressional elections that followed, Republicans lost 4 House seats, President Clinton won reelection over Senator Dole, and the Senate remained unchanged. The public’s respect for Congress was the real loss to our system of governance. The unfavorable rating of Congress increased over 5 points to 60 percent shortly after the 1995 shutdowns -- an unfavorable rating the current Congress would enjoy since today that metric tops 80 percent.
 
Besides the politics, the implementation of the shutdown was a major negative. One current Republican member, then chairman of the Subcommittee on Civil Service of the House Oversight and Government Reform Rep. John Mica (R-Fl.), reviewed the 1995 shutdown in detail. Mica concluded that the execution of the shutdown by the agencies and the President’s Office of Management and Budget, was “disorganized and illogical, at best, and oftentimes chaotic.”  
 
Today, talk of shutting down government this fall (or worse defaulting on our public debt) has once again entered the political lexicon unless certain “demands” are met.  A key demand by some conservative Republicans is that President Obama’s signature health care legislation should be “defunded.” 
 
While I agree with many of those who have concerns about provisions of the Affordable Care Act (ACA) , and wish health care reform could have been done with a more bipartisan approach that might have lessened the extreme divisions that exist today, to “defund” the law in any funding or debt limit bill or suffer the consequences of a government shutdown makes little sense to me.
 
First, most of the funding for the health care program is “entitlement” funding -- subsidies for families and individuals who purchase insurance on the exchanges, expansion of Medicaid and various Medicare benefits.  A continuing resolution (CR) deals with annually appropriated accounts, and even if some limited ACA authorized programs are subject to appropriations, eliminating their funding would not end the ACA at all. Congressional estimates of the programs subject to appropriations in the ACA total $100 billion over the next decade and $85 billion of that was simply to reauthorize programs that existed prior to the ACA.
 
While some appropriations will fund salaries of government employees who must administer the ACA, the 1995 government shut down illustrates that not funding government salaries does not guarantee employees will be furloughed.  In 1995, initially the Social Security Administration furloughed over 61,000 employees due to lack of government funding.  However, within a short time, nearly 5,000 were recalled to administer the processing and payment of social security benefits.  The basis for this decision lay in a 1981 Civiletti opinion that ruled that benefit payments (entitlements)  continue to be made and therefore the authority to administer those payments must also continue. 
 
Second, even if “defunding” on a House-passed CR could make it out of the Senate, which is extremely unlikely, it would be vetoed by the president and the veto would not be overridden. Then the government would shutdown.  But even more disconcerting for “defunding” proponents, if magically the president were to sign such legislation, because most of the funding for the law is not subject to annual appropriations, a government shutdown would be avoided but the key provisions of the ACA would continue. It would be a futile exercise; accomplishing nothing that advocates for defunding the law have sought.
 
The ACA should be amended if it is to achieve the goals of reducing health care costs, improving the quality of care delivered and ensuring coverage to those who are without health insurance. No legislation of this magnitude, impacting 20 percent of our economy could possibly be without fault. Had the legislation been considered under normal legislative procedures it is possible that some of the controversy surrounding it today would not exist.  Would of, should of, could of is in the past.  But “defunding” the program today will not accomplish the goal of those opposed to the law and it would further add chaos to implementing an already imperfect law this coming year.
 
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