Five Ways the New Democrat Coalition Can Pursue Its Fiscal Agenda

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The New Democrat Coalition, a group of 46 House members who describe themselves as the “pro-growth, fiscally responsible wing of the Democratic Party,”

The New Democrat Coalition, a group of 46 House members who describe themselves as the “pro-growth, fiscally responsible wing of the Democratic Party,” have announced a new platform designed to strengthen the role of moderates in Congress.

Among the many items on their “American Prosperity Agenda,” the New Dems pledge to “pursue a long-term, pro-growth fiscal reform that prioritizes investments in our future.” If the New Dems really want to make good on this plank of their platform, here are five things they can do in this Congress.

1. Propose a Responsible Sequester Replacement

Lower discretionary spending caps will go back into effect on Oct. 1, enforced by an across-the-board sequester. But these lower caps were never supposed to actually take effect: they were designed to be so irrational that lawmakers would be induced to agree on a so-called “grand bargain” that addressed the real long-term drivers of our debt.

Because Congress could not agree to curb entitlement spending or raise more revenue, the discretionary budget — the part of the budget that funds the “investments in our future” supported by the New Dems — is being reduced to historically low levels. Repealing the sequester caps and replacing them with better targeted policies designed to achieve long-term savings would improve our budget outlook and free up more federal funds for public investments.

2. Oppose Unfunded Tax Cuts

Over the last three months, the House has debated $385 billion in tax cuts that would add to future deficits because no offsets have been proposed. Even if members of Congress support specific provisions in principle, and care little for the pay-as-you-go (PAYGO) principle, they should still insist that tax cuts be offset or only made permanent in the context of comprehensive tax reform. Otherwise, one consequence would be that future tax reform efforts would be more difficult.

That’s because the projected revenue from these provisions is assumed in the current deficit projections. If the House tax cuts became law the “baseline” for tax revenue would be lower, requiring more work to close the gap between that revenue and projected federal spending.

3. Support a Comprehensive Solution on Social Security

Before the end of this Congress, the Social Security trustees project that the disability insurance trust fund will be exhausted. Absent a legislative fix, this would lead to a 19 percent across-the-board cut for beneficiaries who depend on the program.

While many in their party have advocated simply reallocating funds from the retirement program, the New Dems should demand that reallocation be accompanied by structural reforms that make Social Security as a whole sustainably solvent.

At a recent hearing held by the House Ways and Means Social Security subcommittee, public trustee Charles Blahous noted that failing to adopt broader reforms soon would jeopardize the program’s historical financing structure. The New Dems should take this as an opportunity to position themselves as true defenders of the program by proposing legislation that would keep it solvent for future generations.

4. Pay for Fixing Medicare’s Sustainable Growth Rate Formula

At the end of this month, the sustainable growth rate (SGR) formula will call for physician reimbursement rates for Medicare to be drastically cut. Typically Congress enacts a patch to avoid such cuts each year, but recently there has been a push to adopt a permanent fix.

While the framework of the fix has been largely agreed to, lawmakers have yet to agree on offsets. Our friends at the Committee for a Responsible Federal Budget have proposed a number of options to pay for a permanent SGR fix. The New Dems could pressure leadership in both parties to adopt some of them, or propose a paid-for SGR fix of their own.

5. Propose a Long-Term Fix for the Highway Trust Fund

The Highway Trust Fund has faced a shortfall for years due to the declining value of the gas tax, which is not indexed to inflation. Instead of addressing the structural imbalance between dedicated revenues and spending on transportation, lawmakers have relied on short-term patches — most of them gimmicks.

Using revenue from other sources like corporate tax reform, as proposed the President in his budget and by a number of others, would also not be a long-term solution, nor would it maintain the historical “user pays” principle that forms the basis of the highway trust fund. The New Dems should oppose such proposals and rally around a reliable long-term funding source.

Each of these opportunities provides a chance for the New Dems to offer real solutions and serve as a model for fiscally responsible governing.

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