Dismayed Over Federal Budget, Some Experts See Positive State Examples

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Federal officials could take some lessons from the success that many state leaders have had in putting together responsible budgets, according to former elected officials and others at a recent  panel discussion in Washington.

Federal officials could take some lessons from the success that many state leaders have had in putting together responsible budgets, according to former elected officials and others at a recent  panel discussion in Washington.

“There is something about being a governor that seems to force hard choices that don’t always happen in Congress,”  said Robert L. Bixby, executive director of The Concord Coalition. Concord presented the panel discussion Thursday in connection with giving its 2015 Economic Patriot Award to former Indiana governors Mitch Daniels and Evan Bayh III.

In addition to the award winners, other panel members were Michael Castle, a former Delaware governor; Tim Penny, a former Minnesota congressman with experience in state budgeting as well, and Maya MacGuineas, president of the Committee for a Responsible Federal Budget. Bixby served as moderator.  

In some states, of course, unrealistic forecasts and poor budget decisions have led to difficult budget situations. But the panelists noted that many state leaders have done well with their budgets.

In Castle’s view, most state officials ultimately understand the need to “sit down and work out your differences.” But in Washington, he said, elected officials “get into these huge ideological fights” that make it “very hard to bring people together.”

State constitutional or statutory provisions help keep many state budgets on track. In addition, fiscal irresponsibility can quickly hurt a state’s credit rating.

But panel members pointed to other factors as well, including a difference in public expectations for state and federal officials.

While going to Congress may be seen as “almost like going to a foreign country,” Bayh said, people expect a governor to be a practical problem-solver. He also suggested that it may be easier for part-time state legislators to keep political issues in perspective: “These people have lives, they have jobs, they go back to the community, and so politics is not on their minds 24-7. . . .”

Penny said interest groups have a smaller role at the state level than in Washington, and this can make it easier for state officials to reach compromises. He added: “It’s harder to find a sensible center in politics in Washington.”

More generally, the panelists repeatedly expressed disappointment at the failure of elected officials in Washington to address the big fiscal, economic and demographic challenges facing the country.

Beyond all the statistics about these problems, Daniels said, advocates of fiscal reform must make the moral case for finding a better path: “No American I know wants to believe they have penalized their own children, and the next generation, or has plundered them.”

MacGuineas pointed to approaching “fiscal speedbumps” that would force Congress to make decisions on things like expiring tax breaks, a debt ceiling increase, transportation funding and Social Security’s Disability Insurance program.

These will give lawmakers a chance to fix bad policies and perhaps lay the groundwork for larger improvements such as broad reforms to the tax system and Social Security.

“I think there are opportunities,” MacGuineas said. “I’m not sure that I can say I’m overly optimistic about them.”

Later in the program, however, she said she was encouraged to see some focus in the presidential race on the need for fiscal reform.

Her organization and The Concord Coalition are pursuing a joint initiative called “First Budget” to promote public engagement on fiscal reform and encourage the 2016 presidential candidates to provide voters with detailed budget plans.

“The response in Iowa and New Hampshire, where our focus is, has been terrific,” MacGuineas said, noting that people “really care about this issue.”

In addition, she said, “there are a number of candidates now who are talking about entitlement reform, talking about tax reform . . . . you are hearing some specifics out there.”

Castle and Daniels emphasized the pressure that Social Security, Medicare and Medicaid are putting on the rest of the federal budget.

Because of that pressure, Castle said, it would be a mistake for people to think that modest cuts in other domestic programs or defense alone can fix the federal budget. Unless Washington makes changes in the entitlement programs, he said, “this problem is not going to go away.”

Daniels said that people who benefit from other federal programs such as academic research are starting to understand how much they stand to lose if federal budget problems are not addressed.

He also hopes that problems like the projected depletion next year of Social Security’s Disability Trust Fund would result in greater public awareness of the strains on the federal budget.

“You don’t wish for train wrecks like that,” he said. “But in this case, maybe it will be a teaching moment.”

With the Highway Trust Fund scheduled to run dry within a few weeks, several panelists expressed frustration that lawmakers have had so much difficulty finding a reasonable way to finance transportation needs that are widely agreed upon.

Penny said he was “perplexed” that transportation funding had become such a partisan issue because “that was not at all the way this issue was approached years ago.”

Daniels said a good option for funding long-term investments in infrastructure is “opening the door to private capital, which is involved all over the world except here, in a very big way.”

Indiana had found some ways to do this, he said, something he had explained earlier in the day in testimony to the Senate Finance Committee. He also supports greater reliance on user fees such as tolls, which he describes as “in a lot of ways more fair than what we’ve been doing.”

With transportation funding and many other issues, lawmakers clearly have a variety of options from which to choose. But neither party in Washington has the ability to simply push through its own proposals.  

So to make any real progress, the two parties will have to reach compromises.

As Bayh, a former U.S. senator, put it: “At some point we’ve got to get back to the notion that compromise is an act of statesmanship rather than an act of betrayal.”

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