November 25, 2014

Concord Coalition Says Congress Should Use Spending and Tax Cut "Reconciliation" Package to Reduce the Deficit

WASHINGTON -- With critical decisions now pending on the fiscal year 2006 spending and tax cut “reconciliation” bills, The Concord Coalition said today that Congress should make deficit reduction the clear fiscal policy goal of the two bills. In keeping with its established criteria for evaluating budget plans, Concord said that everything should be on the table, sacrifices should be distributed fairly, scorekeeping gimmicks should be avoided and tax cuts should be postponed or, at minimum, offset. To ensure enforcement, Concord also reiterated that pay-as-you-go rules should be reinstated for entitlement increases and tax cuts, a position recently supported by a bipartisan majority in the Senate.

“Leaders of both parties say they are concerned about the budget deficit but they are locking themselves into positions that threaten to make the situation even worse. Most Republicans want spending cuts but they insist on cutting taxes by an even greater amount. Most Democrats oppose the size of the tax cuts urged by Republicans but oppose the spending cut proposals as well. The best way to end this standoff is to agree on the common goal of deficit reduction, put everything on the table and negotiate the necessary trade-offs, ” said Robert L. Bixby, Executive Director of The Concord Coalition.

“This year's budget resolution calls for two reconciliation bills -- a spending cut bill of $35 billion and a tax cut bill of $70 billion. Simple arithmetic dispels the notion that this combination is aimed at deficit reduction. It is hard to rally support for a spending cut labeled the ‘Deficit Reduction Act of 2005' when it will be followed by a tax cut that, by the same logic, should be labeled the ‘Deficit Increase Act of 2005,'” Bixby said.

Reconciliation bills enjoy special procedural protections, such as exemption from a Senate filibuster, and should be used to facilitate the hard choices needed for deficit reduction. The Senate has already passed a $35 billion spending cut bill. The House is considering a spending cut bill of $50 billion, exceeding the budget resolution target. Both the House and Senate are expected to take up tax cut bills of roughly $70 billion before the Thanksgiving recess.

While some have argued that the spending reconciliation bill should not go forward because it might threaten low-income programs such as food stamps and Medicaid, Concord noted that Congress could look at other parts of the budget for savings. For example, the spending bill passed by the Senate spread the sacrifices by identifying savings from Medicare payments to insurance companies and finding additional savings in farm programs.

“Given the large recent budget deficits and the even larger deficits projected for the near future when the baby boomers' begin to retire, a spending cut bill is a step in the right direction. Congress should be debating the appropriate mix of spending cuts to include in a balanced package, not whether or not to cut spending at all. It makes no sense, however, to follow this up with a tax cut that will more than wipe out the hard fought gains,” said Bixby.

The Concord Coalition has established a list of 10 criteria for evaluating budget plans. Five of those criteria are particularly relevant to the reconciliation process at hand:

Are major tax cuts postponed until a balanced budget has been achieved?

If large tax cuts are included in a budget plan, deeper spending cuts than otherwise would be required are needed in order to achieve a balanced budget. This invites political opposition; each spending cut can be challenged as being necessary to pay for a tax cut.

Does the plan distribute short-term sacrifice fairly and equitably among Americans of all ages and income groups, expecting the wealthy to do their fair share, and exempting only the very poor?

The fruits of a balanced budget will be enjoyed by all. Thus, no economic group, except for the very needy, should be exempt from contributing to eliminating the federal budget deficit, and those who can more readily shoulder the burden should be asked to do so. This is true of both spending reductions and tax increases.

Do the numbers add up without resort to score-keeping gimmicks?

Budget tricks should be avoided. Clever accounting does not fool the economy. One deceptive technique in a budget plan is to include attractive tax or spending initiatives that have a modest impact during the years before the budget is supposed to be balanced and then entail large costs as they become fully effective thereafter.

Can the plan attract substantial bipartisan support?

Starkly partisan budget proposals may appeal to true believers and party loyalists, but they are not likely to be enacted and even less likely to be enforced. The best way to ensure that a plan can stand up over time is to infuse it with broad bipartisan support from the beginning. This, in turn, requires that priorities be set and compromises be made. Everything must be on the table.

Does the plan contain credible enforcement mechanisms?

At some point, Congress and the President will need to either cut spending or raise revenues by more than is implied in the current budget resolution. It will help to have budget process measures in place that stiffen political spines. The pay-as-you-go (PAYGO) rule makes good sense in this regard. It promotes fiscal responsibility by requiring anyone who proposes a tax cut or entitlement expansion to answer the question: ‘Can we afford it?'

The full list of Concord's criteria can be found at: http://www.concordcoalition.org/issues/fedbudget/doc/balanced-budget-ten-criteria.html

The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-N.H.) and Bob Kerrey (D-Neb.) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.

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CONTACT:
Tristan Cohen
(703) 894-6222
communications@concordcoalition.org