October 30, 2014

Many Options for Fiscal Reform

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

With the new session of Congress getting under way, three members of a bipartisan deficit-reduction commission told Kansas City business leaders and others last week that a wide range of fiscal reforms deserves to be high on the legislative agenda.

G. William Hoagland, Joseph J. Minarik and Robert L. Bixby – all members of the Bipartisan Policy Center’s Debt Reduction Task Force -- spoke Wednesday at a program hosted by the Greater Kansas City Chamber of Commerce.

Bixby, executive director of The Concord Coalition, emphasized the need for sweeping reforms such as those proposed by the task force (also known as Rivlin-Domenici) and the President’s bipartisan National Commission on Fiscal Responsibility and Reform (Bowles-Simpson).

He noted that more and more of the federal budget is “going on auto-pilot” – spent on entitlement programs that do not require annual congressional action. In addition, Bixby said, interest costs are “going to go through the roof” over the next decade if the government continues its heavy borrowing and interest rates rise much above today’s unusually low rates.

Hoagland, a longtime Senate staff member and current vice president of public policy for CIGNA Corporation, focused on the need for fundamental changes in U.S. health care. Factors that make it difficult to rein in high costs, he said, include expensive technology, lifestyle choices, a fee-for-service system that encourages excessive treatment, and the fact that many consumers know little about their medical costs.

Hoagland discussed one of the most promising proposals from the Rivlin-Domenici panel: a “premium support” plan that would allow older Americans to choose between traditional Medicare and an array of private plans. Competition would encourage greater efficiency, and the growth of government spending would be moderated.   

Minarik said it would be difficult to sufficiently rein in future deficits through spending cuts alone, pointing out that some members of Congress are already talking about undoing some of the “automatic” cuts that were included in last year’s debt limit legislation.

On tax policy, Minarik built the case for reducing or eliminating many of the special breaks that some taxpayers receive. This would enable to the government to lower tax rates while still raising additional revenue to help reduce federal borrowing.