Sound Bipartisan Advice on Post-Pandemic Fiscal Policy

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Policymakers in Washington have responded to the economic fallout from the COVID-19 pandemic with a remarkable display of bipartisanship. All four rescue bills to date have passed with overwhelming support from both parties in the House and Senate.

A crucial question is whether that pattern will hold as they turn their attention to the long-term task of rebuilding the economy. That will be much more difficult. Democrats and Republicans have very different views on the size and scope of government. Getting anything done will require compromise. Moreover, they will need to deal with changes brought about by the pandemic as well as the underlying structural deficit that had the budget on an unsustainable track before the pandemic began.

As I wrote back in March, “The nation will recover from this pandemic. The sooner we stop the spread of the virus, the sooner that will happen. When it does, policymakers will need to turn their attention to the fiscal fallout. We will have a much larger debt but more importantly we will still have the pre-existing condition of an unsustainable gap between routine spending and tax policies.” 

It was very encouraging to see earlier this month when a bipartisan group of 60 House members led by Representatives Scott Peters (D-CA) and Jodey Arrington (R-TX) issued a letter stating, “We must confront the economic fallout from this crisis head on. As the crisis recedes and our nation recovers, we cannot ignore the pressing issue of the national debt, which could do irreparable damage to our country.”

They urged that “further pandemic-response legislation include provisions for future budget reforms to ensure we confront these issues when the economy is strong enough.”

“These reforms,” they wrote, “should have broad, bipartisan support. They should not stand in the way of our making the necessary decisions to deal with the crisis at hand. They should ensure that, in addition to addressing health and economic needs, we lay the foundation for a sustainable fiscal future by building on reforms with established bipartisan support.” 

Specifically, they recommend a set of reforms based on three important standards: transparency, accountability and responsibility:​​​​

  • Require GAO “to present an annual report to Congress and the country detailing the fiscal health of the nation.” 
  • Adopt mechanisms such as the Time to Rescue United States Trusts (TRUST) Act to “help Congress in navigating the decisions to restore our fiscal health and sustainability.” Several major federal trust funds face insolvency within a decade and enacting a consensus process would “give these programs the priority and urgency they deserve.”
  • Develop a credible plan “to bring the debt burden to sustainable levels as the pandemic recedes and the economy recovers.” This should include “a process for establishing overall budgetary goals—such as debt-to-GDP targets—that would reduce debt limit brinkmanship as long as the budget remains on a responsible path.”

Importantly, these reforms do not reflect a partisan agenda. They do not pre-determine any specific size of government, debt, spending or taxes. Nor do they require that any actions be taken that would get in the way of responding to the current crisis. They simply require that Congress confronts known long-term problems in a systematic way once the time is right. 

It is interesting to note that the theme of this letter was echoed last week in a new report from the Aspen Institute’s Economic Strategy Group co-authored by a bipartisan group of experts including Jason Furman, Timothy Geithner, Glenn Hubbard and Melissa Kearney. The report is focused on steps to promote economic recovery in the near-term but notes in the conclusion:

“At the same time, once the economy recovers, reforms will be needed to put the country on a more sustainable fiscal path. The federal government will need to reduce ineffective entitlement and other spending while raising additional revenue in as efficient a manner as possible. The magnitude of this adjustment will depend on the ultimate desired level of debt relative to the economy and the difference between interest rates and growth rates.”

When 60 members of the House, 30 from each party, come together on a set of recommendations for difficult and long-festering problems, the rest of us should take note. Each of the members who signed their names to this letter knew full-well that they could be exposed to political fire from interest groups, partisan opponents and perhaps even primary challengers within their own ranks. Nevertheless, they came forward, together, in the national interest. 

We need more such examples of cooperation and political courage. We should applaud their effort, and more importantly, we should help them achieve their goals. 

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