August 31, 2015

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Tuesday, November 1, 2011 - 12:00 AM

Members of the Joint Select Committee on Deficit Reduction (“super committee”) have a timing problem that compounds their political problem. Put simply, they may run out of time to reach agreement on the kind of comprehensive changes that are needed to put the nation’s finances on a sustainable path. However, with a little cooperation and a strong dose of leadership, they need not let the clock run out on their efforts.

The super committee’s political problem is easy to see. Its official goal is to cut the deficit by $1.5 trillion over 10 years. This won’t be easy, but as the Government Accountability Office (GAO) recently pointed out, even if lawmakers are able to achieve this goal it would still leave the debt on an unsustainable growth track. That is why the President, the chairman of the Federal Reserve Board, many members of Congress and countless outside commentators have urged the super committee to aim for a more ambitious target – anywhere from $3 trillion to $5 trillion.

However, to reach this goal, often described as “going big,” the super committee will have to tackle the two thorniest fiscal policy issues – entitlement and tax reform. These issues have stymied every other long-term budget negotiation this year because they are where the parties have their biggest differences.

And yet, we...

Thursday, October 20, 2011 - 12:00 AM

Last January, members of Congress paired up with colleagues of the opposite party for the State of the Union Address. It was a welcome, if symbolic, display of political civility.

In the ensuing months, Congress and the Obama administration have struggled to put this civility into practice as they have grappled with sincere disagreements over the best approach to meeting the nation’s fiscal and economic challenges.

Agreements were eventually reached on funding levels for the remainder of the 2011 fiscal year and on a complex process for raising the statutory debt limit. These agreements, however, largely avoided entitlement and tax reform -- the core issues on which Democrats and Republicans disagree and on which so much of our future depends.

Moreover, the partisan, petty and contentious atmosphere that continues to hang over Capitol Hill has angered the public and rattled financial markets.

There is hope, however, that the new joint congressional committee -- set up to find ways to reduce projected deficits by $1.5 trillion over the next 10 years -- can change things.

With an even split between the two parties and the backing of congressional leaders and the President, the committee has an opportunity to transcend politics as usual, exceed its modest mandate and forge a fiscal...

Tuesday, September 27, 2011 - 7:49 AM

The “dynamic scoring” debate is back again. Last week the House Ways and Means Committee—chaired by Dave Camp (R-MI), who also happens to be a member of the debt-limit deal’s “super committee”—held a hearing on the subject, calling on the Joint Committee on Taxation’s chief of staff, economist Tom Barthold, to explain why that committee still estimates the revenue effects of tax legislation using “static” methods.

The Washington Post’s Lori Montgomery reported on this “old battle,” wondering out loud whether the super committee will resort to dynamic scoring as a “magic elixir that greases the skids to a more far-reaching compromise.”

Well, unfortunately for certain policymakers, dynamic scoring is not so magical.

“Dynamic scoring” refers to revenue estimates that would be...

Thursday, September 8, 2011 - 12:00 AM

It is not inconsistent to provide effective short-term support for the economic recovery while laying the groundwork for long-term deficit reduction. To do so, however, Washington will have to move beyond the inflexibility and partisan vitriol of the recent debt limit debate.

President Obama took some helpful steps in this direction in his speech to Congress this evening. He offered several short-term proposals that could conceivably provide both an economic boost and a basis for bipartisan cooperation – which are together essential ingredients for effective fiscal policy and for repairing some of the damage that the debt limit debate inflicted on public confidence.
 
A full evaluation of the President’s plan, however, will need to take into account the ideas he will release later for paying for his new proposals and moving the federal budget toward a sustainable path. A credible plan to stabilize the debt over the long term will be essential to making short-term measures more effective. It is not just a matter of making the numbers work; it is sound economics.

As The Concord Coalition has long argued, “fiscally responsible deficit spending” need not be an oxymoron. During periods of economic difficulty when deficit spending may be required, the key is to ensure that the country gets the...
Wednesday, August 17, 2011 - 1:23 PM

The “no new taxes” pledge taken by Republicans in Congress has been a huge obstacle to achieving bipartisan agreement on a comprehensive deficit reduction plan. Many Republicans interpret the pledge as ruling out revenue increases of any kind, even those that close narrow loopholes and special interest deductions. The devotion seems to extend to a “grand bargain” for deficit reduction that would actually enact future cuts in tax rates, but pay for some of the revenue loss from those cuts by limiting deductions and loopholes.

However, it is encouraging that some of the newly appointed Republican members of the debt limit deal’s super committee have already indicated a refreshing openness to considering this approach. Congressman Fred Upton (R-MI) recently told a group of constituents that “tax reform is long overdue” and that he is “not afraid of looking at tax loopholes” in finding common ground on deficit reduction. And, Congressman Dave Camp -- a Republican super committee member from Michigan who also chairs the tax-writing House Ways and Means Committee -- when questioned about tax increases has said that “nothing is...

Monday, August 8, 2011 - 4:55 PM

Members of the new Congressional Joint Committee on Deficit Reduction will have a threshold decision to make: Do they want to take their mandate seriously?

If the answer is yes, they will likely have to make decisions in the public interest that will not sit well with the party leaders who appointed them. If the answer is no, they will heighten public frustration with the political process and risk deep automatic cuts in programs many of them care about.

Which should it be?

The answer is obvious. In hard times, the national interest always tops narrow or partisan concerns. And yet, pressure on members of the committee to fiercely protect the interests of favored constituencies will be enormous. It has already begun in the form of intense lobbying of party leaders to only appoint “safe” members who are firmly opposed to compromise. 

Arrayed against this pressure is the stark reality that we can’t fund future spending commitments with today’s level of taxation. Unless someone steps up to the challenge of reconciling the competing values and needs of a diverse society, our nation will suffer the consequences -- not just within some artificial 10-year “budget window,” but for decades to come. 

Failure to confront this challenge got us into the fiscal ditch we’re in. The Joint Committee has...

Monday, August 1, 2011 - 6:02 PM

In this debt-limit game of musical chairs, the music has stopped and it’s time to grab a seat. The only one available is the deal worked out by congressional leaders and the Obama administration over the weekend. It is not a solution to our nation’s fiscal problems and is far from the “grand bargain” needed to put us on a sustainable path. However, a debt-limit deal needs to get done. This one at least avoids a self-inflicted wound caused by the government’s defaulting on its obligations, and it gives proponents of a grand bargain another turn at bat.

The main flaw in the agreement is that it reflects the continued refusal of our political leaders to confront fiscal reality. Once again, they are leading with discretionary spending cuts while leaving the biggest problems -- entitlement and tax reform -- for another day.

If this is what they have to do to pass a debt limit increase, so be it. But no one should pretend that they have solved anything other than an artificial political crisis. The fundamental fiscal crisis is pretty much unchanged.

A positive element is the proposed special congressional committee charged with finding deficit reductions beyond the initial trillion-dollar down payment. The committee is the only aspect of the agreement that...

Thursday, July 14, 2011 - 10:57 AM

The partisan vortex in Washington is now so strong that it threatens to swallow all rational thought.

As the nation rushes closer to default, politicians are rushing to their respective partisan corners. At times they truly seem more interested in blaming each other for causing a crisis than they are with preventing a crisis from happening. It is little wonder that credit ratings agencies such as Moody’s and Standard & Poor’s have repeatedly questioned whether U.S. Treasury bonds can maintain their AAA status.  The scenario they fear, which becomes more likely by the day, is not so much that the U.S. can’t pay its bills but that it will refuse to do so.

For a brief time last week, President Obama and House Speaker John Boehner appeared ready to challenge their respective political bases. Hopes were raised for a “big deal” that would include essential compromises on popular entitlement programs and tax breaks to reduce the deficit by roughly $4 trillion over 10 years. It was a good idea, but it didn’t last long.

Instead of looking at what the nation might gain in fiscal sustainability, politicians on both sides looked with horror at what they might lose in terms of partisan finger-pointing. A big deal would mean that Republicans could no longer accuse Democrats of trying to kill the economy with...

Monday, July 11, 2011 - 10:39 AM

The biggest sticking point in the debt-limit talks has been the disagreement over tax policy. President Obama has been encouraged by his fiscal commission to insist that higher revenues be part of any major deficit-reduction deal -- and to recommend that much of the revenue increase should come from broadening the tax base by reducing "tax expenditures." Although Republicans are coming around to the idea that tax expenditures are just subsidies run through the tax code, many of their leaders stand firm on the position that revenues as a share of the economy not rise from current policy.

While President Obama and other Democrats want revenue increases, they don’t want any changes that would raise taxes on middle class or lower-income households, arguing that such taxes would be overly burdensome and would harm the economic recovery. Meanwhile, Republicans only want reduced tax expenditures to pay for cuts in marginal tax rates, asserting that they would be the path to stronger economic growth and in turn higher revenues.

So both sides are reluctant to change their tax-cutting ways, and they continue to have their own great expectations for tax cuts. But tax cuts don’t always live up to such expectations,...

Thursday, July 7, 2011 - 12:00 AM

 

This originally appeared on The American Square at http://theamericansquare.org/profiles/blogs/go-long

President Obama says he wants to jettison the short-term focus that has guided recent budget negotiations in favor of a more comprehensive fiscal sustainability plan. This initiative could be the beginning of a major new phase in negotiations between the administration and congressional leaders. On the other hand, it could prove to be just another false start, designed for “positioning” rather than results. It will take more than one or two meetings to know the difference.
 
In any event, we seem to have come full cycle. This is where negotiations should have started several months ago when the President presented his original budget. But even if precious time has been wasted, the right goal is finally in view.
 
Our fiscal challenges demand an ambitious approach. Ratings agencies Moody’s, Standard and Poor’s, and Fitch have all warned the United States that its coveted Aaa credit rating will be reevaluated if swift and comprehensive action is not taken to get its fiscal house in order. Political gridlock featured prominently...