If President Obama and Republican leaders in Congress hope to build consensus around a plan for fiscal sustainability, they are off on the wrong track. They seem instead to be sharpening their differences.
A meaningful long-term plan will require compromises in key areas like tax reform and health care. Two bipartisan groups — the Bowles-Simpson and Domenici-Rivlin commissions – were each able to reach agreement on at least broad approaches in these areas.
On tax reform, the commissions recommended scaling back or eliminating most tax expenditures – deductions, exclusions and credits – in exchange for lower rates and higher revenues. Congressional Republicans have now ruled this out.
On health care, both the Bowles-Simpson and Domenici-Rivlin groups raised the possibility of controlling Medicare spending by shifting to a defined contribution or “premium support” model. The President has now ruled this out.
Time is not on our side. The federal debt limit will be reached sometime in the next three months, long before the current campaign-style rhetoric will play out at the polls.
External links:
Concord Issue Brief: Understanding the Debt Limit
Report from National Commission on Fiscal Responsibility and Reform
Report from Bipartisan Policy Center’s Debt Reduction Task Force
Treasury Secretary’s Warning on Debt Limit
GAO: Answers to Frequently Asked Questions About the Debt
