The debt ceiling deadline is days away, but something unusual is happening in Congress. Rather than playing the short game, and following the old tradition of kicking important budget decisions down the road, dozens of senators are building the case to think long. Even as they plan a vote to avoid default, they have a rare opportunity to accompany a debt ceiling increase with a plan to bring our fiscal situation under control. They should take that opportunity.
In recent days, the real action has been in the Senate, where Senators Reid and McConnell are working to put together a package that would enact the lowest hanging fruit in deficit reduction (which will likely include domestic discretionary caps that could hurt investments and programs for the poor), while appointing a new fiscal commission to recommend the rest.
If this plan is the only way to avoid default, so be it. But $1 trillion in cuts doesn't solve our deficit crisis. It's a small idea. And as Senator Alan Simpson told me once, "Small ideas have no power to inspire."
There is a big idea out there, and it is gaining traction in the Senate. A bipartisan group of Senators known as the "Gang of Six" released their own plan yesterday, to a group of nearly 50 senators. Despite calling for reductions in Social Security and tax expenditures -- the sacred cows of the left and the right, respectively -- this $4 trillion plan has shown its power to inspire.
The Senate's third ranking Republican, Lamar Alexander, declared that "this is a serious, bipartisan proposal that will help stop Washington from spending money that we don't have, and I support it." Senator John Kerry also approved, saying "I think it could be a component of whatever the debt deal is, because I think a lot of people would feel comfortable doing the debt if they saw this as part of the package." As one Senator reported, the Gang of 6 is hoping to transform into a "Mob of 50."
The Gang proposal would combine a deficit-reduction down payment with a process that forces Congressional Committees to report further deficit reduction, along with comprehensive tax reform, Social Security reform, and long-term health reform. Unlike the Reid-McConnell plan, as it stands, the Gang's approach would offer specific instructions and tough enforcement mechanisms.
The debt ceiling has been a difficult and possibly dangerous news peg for deficit discussions. But by focusing on getting Washington to think long about the debt, it's produced a once-in-a-generation opportunity. At this moment, we could get rid of the Alternative Minimum Tax, reduce tax rates to their lowest levels since Reagan, and still be able to put $1 trillion aside for deficit reduction. We could make Social Security sustainably solvent, so that current and future generations can count on it to be there for them and don't have to fear to 23% across-the-board benefit cut scheduled into current law. We could address the cost growth of Medicare and Medicaid in a way that maintains the guaranteed benefit for those who need it but also ensures these programs don't bankrupt us.
It isn't clear we can do any of these things in isolation. And it isn't clear that, absent a comprehensive package, we can find enough cuts to avert catastrophe.
Catastrophe, of course, can take multiple forms. The ratings agencies have warned us that failing to address our debt could result in a downgrade of U.S. Treasuries in as little as three months. This could potentially lead to a crisis as deep and wide as the one we have just faced. But there will be no one available to bail out the U.S. government, and instead of injecting stimulus into the economy we will necessarily enact sharp tax increases and spending cuts that could push us further in recession.
There is an argument that says we can avoid this crisis piecewise, but stumbling along is no solution. We cut a little spending now - largely by gutting investments and programs for the poor. We raise some taxes later - largely by increasing rates on work and investment. Meanwhile, debt would continue to accumulate, just not quite fast enough to cause a defection on our debt. Before you know it, under this scenario, it's decades into the future and budget and investment deficits have left us in a world where the economy is half the size of what it could be, taxes eat up whatever economic gains we do have, the safety net is a relic of what it used to be, and there is no fiscal space for policy or economic innovation.
That's the world we face if we don't act soon. That's why this is about more than politics, it's about our future. And that's why so many senators are unwilling to give up on the grand bargain.
Once in a rare while, a single political moment can have a profound effect on the future of the country. We may just be in one of those moments. Let's not pass up the opportunity.
