April 20, 2010
Even before President Obama’s fiscal commission holds its first meeting next week, conspiracy theories are flying.
Grover Norquist, the acid-tongued conservative activist who heads Americans for Tax Reform, argues that the bipartisan commission is part of Obama’s secret plan to impose a European-style national sales tax on the United States. Less visible but on high alert are the armies of organized interest groups: Fortune 500 corporations, small-business groups, labor unions and immensely influential bodies representing the elderly.
Although few lawmakers or lobbyists expect the commission to agree on much, given the trench warfare between Republicans and Democrats, no one wants to be left out. The Peter G. Peterson Foundation, financed by the billionaire Peter Peterson, will host a star-studded “fiscal summit’’ with stakeholders from across the political spectrum on Wednesday. Participants include former President Bill Clinton; Robert E. Rubin, a former Treasury secretary under Clinton; and the deficit commission’s two co-chairmen, former Republican senator Alan Simpson and Erskine Bowles, a former chief of staff under Clinton. (The Fiscal Times, an independent business venture, is also funded by Peter Peterson, but is not affiliated with his foundation.)
Some liberal advocacy groups are planning their own counter-event and charge that Peterson, Rubin and other “Wall Streeters” are trying to steer the deficit debate in order to cut programs for the poor and the elderly. Roger Hickey, the hard-driving co-director of Campaign for America’s Future, fears the commission will be used as an excuse for those who want to slash Social Security and other entitlement programs. David M. Walker, president and CEO of the Peterson Foundation, said the foundation is trying to foster debate but is not wedded to a particular solution. “While there are many differing viewpoints, most experts and knowledgeable parties agree that our current fiscal path is unsustainable,” Walker said.
The speed and intensity of the various calls to arms highlight the commission’s political challenge. Some members already say they would consider it a success if the commission can simply forge a consensus on the urgency of the United States’ budget problems. “Everyone wants to know whether we’re going to cut their entitlements or raise their taxes,’’ grumbled commission co-chair Alan Simpson. “We haven’t even had a chance to start yet.” Despite Simpson’s status as a Republican elder statesman, he isn’t immune to pot shots from other Republicans. At Americans for Tax Reform, Grover Norquist accuses Simpson of being a “serial tax increaser’’ who capitulated to Democratic demands for higher taxes in 1982 and in the early 1990s without getting spending cuts in exchange. “He has a track record of being Charlie Brown with Lucy’s football,’’ Norquist said in an interview. “He ought to wear a sign that says ‘kick me.’”
President Obama created the commission by executive order in February, after a mix of Republicans and Democrats defeated legislation for a similar commission charged with creating deficit-reducing proposals and empowered with a mandatory Congressional vote. The Obama commission’s proposals, if there are any, will not have to be voted on by Congress. But they could have a big impact on the broader fiscal debate after the midterm elections, when the real battles in Congress are likely to begin.
The commission includes 12 current members of the House and Senate – six from each party – and six members appointed by the president. Mr. Obama and the commission’s co-chairs have all insisted that “everything is on the table,’’ but the voting structure makes compromises unlikely in the current political environment. Any proposal will have to get 14 votes, and the commission’s six Republican lawmakers are almost certain to vote against any tax increases. And while some of the Democrats would support cuts to entitlement programs, they would not do so without also getting support for tax increases.
Veteran lobbyists aren’t holding their breath.
“We all know the reasons that commissions are created – it’s either to kick the can down the road or to try to provide cover for politicians if they wish to engage subjects that are tremendously divisive,’’ said Dirk Van Dongen, president of the National Association of Wholesalers-Distributors. Even so, Washington’s interest groups are leaving nothing to chance.
Many are simply re-activating political networks that they used in earlier battles over Social Security and tax policy. Mr. Dongen, for example, is revving up a broad business alliance called the Tax Relief Coalition, which provided heavy support for President Bush’s tax cuts of 2001 and 2003. Likewise, labor unions and elderly lobbying groups are mobilizing the same broad coalitions that they used to successfully fight former President George W. Bush’s effort to partially privatize Social Security.
Nobody on either side wants to stay out of the battle, because lobbyists on all sides agree that the commission’s deliberations are likely to be just the first phase of more concrete budget battles in Congress next year. Budget analysts expect federal budget deficits to remain at about $1 trillion a year for the rest of the decade, and the problems are expected to get worse as the nation’s baby boomers retire in full force by the end of the decade. Both the Congressional Budget Office and the White House have warned that those levels are unsustainable, and major credit rating agencies have recently signaled that the United States’ AAA rating will be in trouble if policymakers don’t take action.
For practical purposes, analysts say there are two main avenues of deficit reduction. One is by trimming old-age entitlement programs, which account for 55 percent of federal spending and are climbing fast. But because Congress just approved a number of big Medicare cuts to help pay for the health care reform law, the focus is likely to be on Social Security.
Labor unions like the AFL-CIO and organizations representing senior citizens like AARP are already bracing for a fight over Social Security. The AARP and the big unions have even more clout than usual, because they provided crucial grass-roots support for President Obama’s health care plan. Those groups have also been hostile to letting a commission take the lead on budget policy. Drew Nannis, a senior vice president at AARP, warned lawmakers last week against using Social Security as a “piggy bank for deficit reduction.”
But business groups are worried about looming tax increases for individuals as well as consumers. And many conservative leaders were electrified by recent hints from some Democrats, like former Fed Chairman Paul Volcker, about a possible value-added tax (VAT), essentially a national sales tax that would come on top of existing sales taxes.