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Committees Tackle the Deficit

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Document date: February 01, 2011
Released online: February 15, 2011

Abstract

The United States faces a dire budget problem, largely the result of the aging of the population and soaring health costs. The president's National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center's Debt Reduction Task Force both agree that Social Security, Medicare, and Medicaid reforms are necessary, although health costs are the far greater problem. They also recommend restructuring the personal and corporate tax systems. These commissions' efforts show that reasonable policy packages can get bipartisan support even in an intensely partisan era.

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Introduction

Numerous committees have formed to suggest ways of restoring fiscal stability. Some come from the political right or left, but the most interesting include members who span the ideological spectrum. The most important is the president's National Commission on Fiscal Responsibility and Reform (NCFRR 2010). The president appointed six members drawn from both political parties, and Democratic and Republican congressional leaders each appointed six elected members—three from the House and three from the Senate. The commission's rules stated that Congress had to consider its recommendations if at least 14 commission members supported them. That ensured that at least two elected members from each party had to be on board before the Congress would be forced to act.

Few budget watchers thought the commission had any chance of success, especially after congressional leaders appointed some members from the extremes of their parties. But commission members and their staffs worked diligently in a collegial fashion. They finally recommended radical revenue-raising tax reform, a 15-cent increase in the gas tax, comprehensive Social Security reform, options to restrain growth in federal spending on health care, and severe caps on defense and nondefense discretionary spending.

Only 11 members ultimately voted for the commission report, but the fact that it got more than majority support was a notable achievement. Moreover, support spanned the ideological spectrum from Senator Tom Coburn (R, OK), one of the most conservative members of the Senate, to Senator Richard Durbin (D, IL), a solid liberal. Although the Republican Party has adamantly opposed tax increases, three Republican senators voted for a plan that contained significant new revenues. The commission claimed that by 2020, roughly 70 percent of its deficit reduction would come from slowing noninterest spending growth and 30 percent from revenue increases. In the long run, the commission held spending to 21 percent of gross domestic product (GDP), a severe limit given the costs of an aging population and ever more expensive health care.

A private bipartisan committee called the Debt Reduction Task Force (DRTF) and headed by former Senator Pete Domenici (R, NM) and Alice Rivlin, President Clinton's director of the Office of Management and Budget, also recommends radical tax reform, enforceable limits on Medicare and Medicaid cost growth, Social Security reform, and a stringent approach to discretionary spending (DRTF 2010). However, their deficit reductions relied more heavily on tax increases than did the president's commission. The task force recommended a new value-added tax (VAT) to supplement the existing tax system.

So far none of the committees has received enthusiastic support from elected officials. The president has been tepid in his support of his own commission, looking favorably only on their tax reform suggestions. Speaker Pelosi dubbed an earlier version of the commission report "unacceptable," and as this is written, Speaker Boehner praised the commission for drawing attention to the budget problem but said nothing about their proposed solutions. Nevertheless, the output of the president's commission and various committees is extremely valuable. They offer a rich variety of policy options, and that will be useful when we finally act on our budget problems. The fact that radical tax reform appears in more than one report makes an option that appeared earlier to be implausible worthy of discussion. Perhaps most important, the experience of the president's commission and the DRTF shows there are policy packages that can get bipartisan support even in an intensely partisan era.

End of excerpt. The entire brief is available in PDF format.



Topics/Tags: | Economy/Taxes | Health/Healthcare | Retirement and Older Americans


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