Stop the madness, start discussing long-term solutions to debt issues
The recent budget showdown was both completely predictable and totally avoidable, as was the resulting damage to our economy and public confidence in our government. Not only did the shutdown and debt-ceiling standoff slow growth, waste money and inhibit basic governmental functions, but it distracted from the real issue: the long-term debt challenge facing our nation.
It is time for leaders to break the cycle of bouncing from crisis to crisis by taking three common-sense steps: Stop the madness, start talking and solve the problem.
Reopening the government and raising the debt ceiling was a good start in at least putting the madness on hold, and agreeing to establish a conference committee on the budget resolution will help facilitate a start of discussions. Our leaders must now find a way to make these discussions fruitful both in terms of slowing the growth of our debt and ending the practice of operating the world’s largest economy on a month-to-month basis.
We suggest deliberations should start by identifying areas of agreement. There seems to be broad-based support for reforming farm subsidies, modifying the federal worker retirement system and charging user fees that better reflect the actual costs of certain government programs. Savings in these areas could be used to soften the blow of the mindless sequestration over the next year or two and allow appropriators to fund defense and non-defense discretionary programs at more reasonable levels.
Trading across-the-board, temporary and anti-growth cuts for more targeted and permanent savings would represent an important step, but negotiators must resist the temptation to declare victory with such a “small ball” approach.
As Congressional Budget Office Director Doug Elmendorf recently warned, despite some improvements, “the fundamental federal budgetary challenge has hardly been addressed.” A budget conference that does not make progress in this area will not have lived up to its potential.
And progress could indeed be made if leaders start talking to each other instead of talking at each other. The two parties have been close to agreement in the past, and there is more potential for common ground than either side realizes.
Both sides have taken encouraging steps toward a principled compromise. The budget President Obama put forward earlier this year incorporated some tough choices and politically difficult compromises, including adopting a chained Consumer Price Index to measure inflation more accurately and achieving significant savings from Medicare. House Budget Committee Chairman Paul Ryan (R-Wis.) recently identified a number of areas of potential agreement in an op-ed, including means-testing Medicare premiums, modernizing Medicare cost-sharing rules and pursuing pro-growth tax reform.
Building from some of these policies and concepts, any responsible plan must have a few key elements. It should slow the rate of growth in federal healthcare spending by enacting structural reforms that improve incentives for all parties. It should eliminate unwarranted subsidies and low-priority spending while reducing fraud and improving the way we index the federal budget to inflation. It should protect and enhance important investments and support for low-income individuals. It should put in place a process that allows House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) to pursue comprehensive tax reform that cuts tax preferences to lower rates, promotes growth and reduces the deficit. Finally, it should find a way to reform Social Security on a separate track to make the program financially sound for future generations.
Savings from these policies should be used both to reduce the mindless cuts from sequestration and help to stabilize and reduce the debt as a share of the economy. A plan large enough to at least stabilize the debt could also be used to justify a permanent indexing of the debt limit, which would put an end to the repeated political brinksmanship by eliminating the need to pass debt-ceiling increases so long as the debt remains on a sustainable path.
Earlier this year, the two of us put forward a plan — built on the progress made in previous bipartisan negotiations — to achieve $2.5 trillion in savings, replacing the sequester with smarter, more gradual deficit reduction that would avoid disrupting a fragile economic recovery while putting the debt on a clear downward path relative to the economy over the next 10 years and beyond. Importantly, the plan would achieve this deficit reduction while respecting the principles and priorities of both parties. It called for significant savings from entitlement reforms, but with important protections for low-income and vulnerable populations. Likewise, it proposed additional revenues for deficit reduction, provided that those revenues be achieved through pro-growth tax reform and not higher marginal income rates.
The proposal we put forward is not our ideal plan, and it is certainly not the only plan. We also recognize that it may not be possible to reach a bipartisan agreement on a plan as aggressive as the one we put forward. But so far, we have done the easy stuff (raising taxes on the wealthy and calling for unspecified cuts in discretionary spending) and we’ve done the stupid stuff (across-the-board cuts under sequestration). Now it’s time to do the tough stuff and the smart stuff: reforming our entitlements and tax code.
Policymakers should seek to reach agreement on a framework that at a minimum stabilizes the debt as a share of GDP. Reaching such an agreement will require Democrats to accept some structural reforms of entitlements, and will require Republicans to use a portion of revenues that will result from simplifying the tax code for deficit reduction, instead of using all savings to reduce tax rates. But such an agreement is achievable.
It is going to take real political courage on both sides to come together to find common ground. The problem is real, the solutions are painful, and there is no easy way out. But there is room for a solution if both parties commit to stop the madness, start talking and solve the problem.