President Obama’s bipartisan fiscal commission will hold its first meeting on April 27. It has two very ambitious assignments — find a way to balance the budget excluding interest on the debt by 2015 and “meaningfully improve” the long-term fiscal outlook. All of this is supposed to be done by December 1, 2010.
That’s quite a task. It may even be too much to ask. So here is a simple suggestion for the commission: Leave the short-term goal to the regular budget process and focus on the more important long-term goal.
President Obama’s bipartisan fiscal commission will hold its first meeting on April 27. It has two very ambitious assignments — find a way to balance the budget excluding interest on the debt by 2015 and “meaningfully improve” the long-term fiscal outlook. All of this is supposed to be done by December 1, 2010.
That’s quite a task. It may even be too much to ask. So here is a simple suggestion for the commission: Leave the short-term goal to the regular budget process and focus on the more important long-term goal.
Finding long-term solutions to the nation’s unsustainable fiscal outlook is what originally motivated members of Congress to propose a statutory commission. Only when that effort failed did the President step in by establishing an executive commission with the added goal of filling a gap in his budget.
The short-term budget goal could easily distract the commission from its long-term mission. Senate Budget Committee Chairman Kent Conrad, a commission member, had it right when he told POLITICO last week, “I don’t think a commission should be absorbed with the short-term budget. We need them to focus on long-term structural problems.”
Simply determining which baseline to use in assessing the required deficit reduction in 2015 would get the commission bogged down. They can’t know what it would take to balance the budget excluding interest payments before they know what actions Congress will take this year.
Consider the current range of projections for the 2015 deficit.
The Congressional Budget Office (CBO) baseline, traditionally the starting point for the congressional budget resolution, shows a deficit of $472 billion in 2015. Almost all of it ($462 billion) represents interest payments. Using this baseline, the commission would have to trim just $10 billion.
However, the CBO baseline is considered unrealistic because it assumes that the 2001 and 2003 tax cuts will expire on schedule; that the government will collect a windfall of additional revenues from the Alternative Minimum Tax (AMT) and that Medicare physician reimbursement rates will be substantially cut.
The administration has crafted its own baseline that assumes extension of the tax cuts, relief from the AMT and no Medicare cuts for doctors. Under this baseline, the projected 2015 deficit is $983 billion of which $586 billion represents interest payments. Thus, the commission would have to find savings or additional revenue amounting to $397 billion in 2015.
Another baseline would assume enactment of the President’s budget proposals. Under this baseline, the projected 2015 deficit is $752 billion, and the required deficit reduction would be $181 billion. Using CBO’s independent scoring of the President’s budget, the required deficit reduction would be $272 billion.
Finally, the Senate Budget Committee approved a budget resolution on Thursday that would accomplish most of the goal, leaving a 2015 deficit that exceeds interest by only $53 billion.
Choosing from these baselines would inevitably inject partisan conflicts into the commission’s work.
The President concedes that his budget leaves an unacceptably high deficit in 2015 — a problem the commission’s short-term goal is intended to address. But with elections looming and the deficit being a likely issue, it is hard to imagine that Republicans on the commission will be willing to assume enactment of the President’s policies, much less help him close a gap he was unwilling to fill on his own.
Meanwhile, as the parties fight over an elusive and politically charged five-year goal, the commission’s valuable opportunity to focus on the long-term problem would suffer. If, on the other hand, the commission goes straight to the long-term problem they might actually find more common ground.
They could begin with Social Security, which oddly enough has gone from being the “third rail of American politics” to the low-hanging fruit. Everyone knows what needs to be done but no one wants to do it. The commission could have a powerful effect by making an obvious recommendation to phase-in benefit reductions and increase dedicated revenues.
Reaching consensus on Medicare and Medicaid reform will be more difficult given the bruising health care reform debate. However, the commission could help to reinforce the need for cost control by recommending a budget for these programs with triggers to keep spending and taxes in line with targeted levels.
The commission might find even more common ground on steps to improve the tax code in a way that will increase efficiency and thus increase revenues. A thorough scrubbing of the system to identify preferences that serve no compelling use or that could be altered in a resetting of priorities is long overdue.
The President should be commended for establishing a five-year deficit reduction goal in his budget. Congress should work to achieve his goal, or even improve upon it in the budget resolution. For the commission, however, it would be far better to spend its limited time and political will on shoring up the unsustainable long-term outlook.
One miracle at a time.
