Today's Fiscal Debate: The Good and the Bad

In the wake of the Super Committee being unable to recommend a package of savings, many other lawmakers have been stepping in to fill the void on debt reduction efforts, the trigger, and what to do about expiring provisions at the end of December. The reactions have been diverse, with some productive and some disturbing reactions.

Framing these discussions has been the trigger and a sizable list of expiring provisions. Unless a balanced budget amendment is passed by the end of the year (and we know the chances there), automatic cuts will hit both defense and non-defense parts of the budget starting in 2013.

First, the good. The Gang of Six has now been joined by two other senators: Senator Bennet (D-CO) and Senator Johanns (R-NE). They seem to be reviving their efforts for a big, bipartisan fiscal plan after efforts for a grand compromise fell short in the debt ceiling debate and within the Super Committee. Also, many lawmakers have called for a vote on the Fiscal Commission plan (see, for example, here and here), which could be another form of pressure on congressional leadership to try to take another crack at a deficit reduction plan. The outpouring of support among lawmakers for a Go Big approach despite the Super Committee failure is encouraging.

Of course, there have also been talks of going backwards on deficit reduction. The call for undoing parts of the trigger have been deeply discouraging. A number of lawmakers in both chambers of Congress have talked about doing this. But here's a better idea than dismantling the trigger: if you're concerned about the trigger's automatic defense or domestic spending cuts, enact a fiscal plan! As we talked about last week and even before that, the entire purpose of the trigger is to be unpleasant so that lawmakers come together to make a deal. Budgeting is all about priorities, and fortunately a big solution for debt reduction could set the country on the correct course and could be sufficient in size and scope for lawmakers to be justified in turning off the blunt approach to savings that the trigger takes.

Even more discouraging than simply dismantling or turning off the trigger would be doing so in exchange for adding to the deficit now. There have been growing calls (see here and here) from both sides of the aisle to dismantle parts of the trigger in exchange for extending various spending and/or tax policies that are set to expire at the end of this year. Not only would this worsen deficits and debt now, but it would weaken one of the central pressures on lawmakers to actually come to a bipartisan agreement on debt reduction.

The sequester must stay in place to do its job: force lawmakers to make a deal. Some lawmakers, such as the Gang of Eight and others pushing for a Go Big solution to the debt, are using the sequester as a motivator, while others are simply looking to avoid the difficult decisions. Leadership requires making the tough calls, and which path we follow will greatly determine how our budget looks in the coming years.