Taking pains to project a can-do spirit of collaboration, members of President Obama’s bipartisan fiscal commission began work on Tuesday to come up with proposals for reducing the government’s flood of red ink. In a brief kick-off ceremony at the White House, Obama repeated his insistence that “everything has to be on the table” --and urged the panel to propose the “hard choices’’ that Congress and the White House have been unable to make.
But while commission members were polite and tried not to rule out specific proposals, the deep partisan fissures over spending and taxes surfaced immediately and reinforced the skepticism among political handicappers about the prospects for a new consensus. Rep. Paul Ryan, R-Wis., a top House Republican on budget issues, suggested that the panel revisit the newly-passed health care law in search of spending cuts – almost certainly a non-starter for Democrats. “We just took $529 billion of savings out of Medicare, not to go toward extending Medicare solvency, but to go towards a new entitlement,’’ Ryan declared.
Ryan and other Republicans made it clear they were as opposed as ever to tax increases. "If the deficit is the symptom, spending remains the disease," said Rep. Jeb Hensarling, R-Texas. Democrats, determined that spending cuts have to be accompanied by tax increases, generally argued about the need to be open to all possible solutions.
And there were hints of division even between liberal and moderate Democrats. Erskine Bowles, the panel’s moderate Democratic co-chairman, carefully insisted on the need to deal with entitlement programs like Social Security as well as “revenues” – a delicate reference to tax increases. But Rep. Jan Schakowsky, a liberal Illinois Democrat, delivered a blistering defense of many spending programs. “We cannot afford to skimp on children’s education, on health care, on retirement security,’’ she declared as the panel wrapped up its first public meeting.
Three Groups, Three Agendas
The panel’s 18 members consist of at least three distinct groups. Six of the members, including the Republican and Democratic co-chairs, were appointed by President Obama and seemed most intent on overcoming differences. Alan Simpson, the former Republican senator from Wyoming and the panel’s Republican co-chair, held out hope of overcoming the “cynicism’’ and “toxic’’ atmosphere that he said now pervaded Washington. “I’ve worked with two or three other commissions that have succeeded,’’ Simpson told The Fiscal Times, in an interview after the panel adjourned on Tuesday. “When they say this is just another thing to throw on the bookshelf, I don’t believe that. "
But the other 12 members are current House and Senate lawmakers who were picked by Republican and Democratic congressional leaders and are likely to closely follow their party lines. Hensarling, a conservative House Republican, said he had “high hopes and low expectations’’ of agreeing on proposals by the president’s deadline of Dec. 1.
Ryan, the House Budget Committee’s top Republican, has been careful to avoid non-negotiable demands. But Ryan is also an ardent opponent of tax increases and recently offered a detailed “roadmap’’ for the budget that relies heavily on deep cuts in future Medicare spending. “I don’t want to make things even harder for this panel than they already are, and I don’t think it’s a good idea to negotiate through the media,” Ryan said in a recent interview. But like other Republican panel members, he asserted that the government’s budget woes stem from high spending rather than low taxes.
At least until the mid-term elections in November, the policy debate is all but certain to remain simple and rigid: Democrats will argue about the need to both trim spending and raise taxes, while Republicans will argue that any tax increases will simply hurt the economy and deepen the deficit which ballooned to $1.3 trillion last year as a result of the financial crisis and the recession. The recession cut deeply into revenue collections, and government emergency programs and bailout measures pushed spending to new highs.
Spend Less, Tax More
But the White House and Congressional Budget Office both predict that deficits will remain unsustainably high for the rest of the decade if Congress fails to make significant budget changes. President Obama’s budget plan for fiscal 2011, which includes some significant changes to reduce future deficits, still projects a deficit in 2017 of $778 billion. The government’s publicly-held debt would total $15.7 trillion – 74 percent of the nation’s gross domestic product. Some of Obama’s proposed changes include extending tax cuts of 2001 and 2003 for families earning less than $250,000 a year and maintaining the current income threshold for the alternative minimum tax. Those proposals, supported by both parties, will make the budget puzzle even more difficult than it already is.
The president wants the commission to agree on a package of proposals by December 1 that would balance revenues and spending for everything except interest on the debt by 2015. That would still leave a projected deficit of $571 billion in 2015, according to White House estimates, but it would require either wrenching cuts in many federal programs or painful tax hikes. Most budget experts agree, which puts Republicans in a difficult position in flatly ruling out higher taxes. But Democrats are squeamish too, particularly before the elections.
Ben S. Bernanke, the chairman of the Federal Reserve, told the panel on Tuesday that simply cutting entitlement spending would not be enough. “Choices regarding Medicare, Social Security, and other spending programs cannot be made in a vacuum,” the Fed chairman said. “No laws are more basic than the laws of arithmetic: For fiscal sustainability, whatever level of spending is chosen, revenues must be sufficient to sustain that spending in the long run.” Bernanke, a Republican, was nominated to become Fed chairman by President George W. Bush and then was nominated for a second term by President Obama. But neither Bernanke nor other budget experts who addressed the panel suggested that tax increases would be enough on their own either.
Rudolph Penner, a former director of the Congressional Budget Office who was appointed by Republicans, told the panel that the federal tax burden would have to climb by 50 percent by 2040 if tax increases were the only tool used to deal with the expected cost of old-age entitlement programs. Robert Reischauer, another former CBO director who was named by Democrats, was no more comforting. “Don’t look for any pain-free silver bullets, because there aren’t any,’’ he told the panel.
Fiscal Times reporter Adam Graham-Silverman contributed to this article. The Fiscal Times, an independent business venture, is funded by Peter Peterson, but is not affiliated with his foundation.