Fiscal Policy Enters Campaign Debate

Several developments this week give us hope that this election season will offer some much-needed focus on fiscal policy. Although exit/entrance polls from each state that has voted in the primaries so far have indicated that the federal budget deficit is the number two most important issue for voters behind the economy/jobs, there has yet to be much substantive discussion of the topic on the campaign trail. But that might be changing.

First of all, both President Obama and former Massachusetts Governor Mitt Romney offered tax reform proposals this week. Both plans involve eliminating some tax expenditures and lowering rates. Though neither new plan seeks to reduce the deficit, they both were obviously influenced by the Bowles-Simpson proposal which jettisons tax expenditures to broaden the tax base, which would allow rates to be reduced while still providing more revenue towards deficit reduction.

Secondly, Wednesday night’s Arizona Republican presidential debate saw more discussion about fiscal issues than previous debates, while also illustrating the need for a more informed and constructive campaign discourse on the subject. The first question from an audience member was about how the candidates would reduce the national debt. The contenders then spent the first part of the debate arguing over who would cut federal spending the most and who was more pure on earmarks. The word cloud below based on the debate transcript shows that the terms “budget” and “spending” are prominent. Compared to previous debates (see here and here) fiscal topics definitely manifested themselves more. “Debt” and “taxes” are also there, but are less pronounced.

While addressing federal spending is important, it is only one part of the equation. Former OMB and CBO Director Alice Rivlin put it well at Thursday’s CRFB event when she said that the key question is if candidates’ proposals will make deficits and debt worse or not, which brings us to the third promising development this week.

On Thursday, CRFB’s U.S. Budget Watch project released a new report, Primary Colors: The GOP Candidates and the National Debt. The study assessed how the policy proposals of the four major Republican presidential candidates would impact deficits and debt. Judging from the enormous media and public attention it has already received, this analysis was urgently needed. At the release event, CRFB president Maya MacGuineas emphasized that the intent of U.S. Budget Watch, which neither supports nor opposes any candidate for office, is to help inform voters on fiscal issues. President Obama will be included in an upcoming analysis.

U.S. Budget Watch also produced The 12 Principles of Fiscal Responsibility for the 2012 Campaign to help promote an informed and constructive debate this campaign season on the fiscal challenge facing the country and how to address it. And U.S. Budget Watch will continue to assess the budget impact of campaign proposals.

So, stay tuned! There promises to be much more discussion of fiscal policy in this election.