April 26, 2010
The bipartisan presidential commission charged with recommending proposals for reducing the long-term deficit will meet for the first time today, with opening remarks at the White House by President Obama. The Democratic and Republican co-chairmen of the 18-member commission say that there is no way the U.S. can “grow its way” out of a budget deficit likely to total $1.4 trillion this year, and that both spending cuts and tax increases will have to be considered. With questions abounding about the makeup and mandate of the National Commission on Fiscal Responsibility and Reform, here is a handy guide for following the deliberations in the coming months and making sense of the rhetoric and terminology:
COMMISSION GOALS: LESS THAN A BALANCED BUDGET
Main goal: Proposals that would create a “primary budget balance” by 2015. “Primary balance’’ does NOT mean a balanced budget. Revenues would cover all spending — EXCEPT for interest payments on the debt, which the White House estimates will total $571 billion, or 3 percent of GDP, in 2015.
Secondary goal: Come up with longer-term recommendations to deal with projected explosion in Medicare and Social Security benefits. No specific deficit reduction numbers here.
THE COMMISSION STRUCTURE: IMPASSE LIKELY
Members: The Commission has 18 members: six appointed by President Obama; six current Republican lawmakers; and six current Democratic lawmakers.
Key obstacle: Any proposal must receive at least 14 of 18 votes, but six Republican lawmakers are expected to oppose any tax increases, prompting Democrats to veto entitlement cuts.
Senator Judd Gregg, R-N. H., is not running for re-election, and he co-sponsored a Senate bill for a bipartisan commission. He could try to broker a deal with Democrats.
The Senate bill, which was defeated, would have created the same commission but also required that Congress vote on the panel’s recommendations, which are due Dec. 1.
Because President Obama created the deficit commission by executive order, Congress is free to ignore the proposals. But political analysts say the commission could still be important in framing the real battle that will probably take place in Congress after the midterm elections.
READING THE CHAIRMEN
Both co-chairmen, Republican Alan Simpson and Democrat Erskine Bowles, are skilled dealmakers who have been willing to defy party orthodoxy.
What to watch on day one: How high do they set expectations? Is the goal to agree on proposals, or just to agree on the problem?
What to watch after day one: Do they float novel compromises that could provide templates for lawmakers next year?
HINTS OF MOVEMENT ON KEY ISSUES:
Social Security: Will Democrats hint at willingness to trim future Social Security benefits like raising the minimum benefit age or tweaking cost-of-living adjustments?
Do Republicans resurrect former President George W. Bush’s plan to partly privatize Social Security — a nonstarter for Democrats?
Medicare: Will Democrats hint at any willingness to revisit Medicare for possible additional savings, having just finished a battle over health care reform? Will Republicans distance themselves from the “Roadmap” proposal by Rep. Paul Ryan, a GOP panel member, which Democrats say would eventually eviscerate Medicare?
Tax increases: Many Republican lawmakers have vowed to fight any tax increases, though the vast majority of budget analysts say long-run deficits are too big to be closed without tax hikes of some kind. Will Republican panel members hint at any flexibility?
President Obama has promised not to raise taxes for any family earning less than $250,000 a year — which many budget experts also criticize as impractical. Will Democrats soften that pledge?
Tax reform: Is there any support for eliminating many tax breaks, possibly while cutting overall rates, as a way to increase revenue?
Hints of movement: Republicans soften their insistence on “revenue-neutral’’ tax reform; Democrats criticize “middle-class” breaks, like the home mortgage deduction.
Red herring alert: Proposals for a value-added tax, a form of national sales tax. Though increasingly popular among Democrats, the VAT idea provokes instant furor among conservatives and is considered politically unfeasible by the Obama White House.
Everything is on the table.” Official stance of President Obama and the commission’s co-chairmen on reducing the deficit, but the Democratic subtext is that tax increases have to be part of any plan.
“Spending is the problem.” Republican refrain, meaning that tax increases should not be part of any deal and that the key is to slow the growth of entitlements.
“Tax expenditures.” Budget jargon referring to tax breaks, which budget analysts consider almost the same as spending. Democrats increasingly support cutting “tax expenditures,’’ though generally not big popular ones like the home mortgage deduction. Republicans often bristle at idea that tax breaks are similar to spending.
“Spending Commission.” Republican nickname for their idea of a deficit-reduction commission that wouldn’t touch taxes.
“Deficit hawks.” Originally a fairly neutral nickname for fiscal conservatives, but now used as a pejorative by some liberal groups to describe people whose real goal is to cut Social Security. See also “Deficit Hysteria” and “Wall Streeters.”