It was one of the biggest assemblies in years of battle-scarred budget veterans: Democrats and Republicans; deficit hawks and doves; elder statesmen and fast-rising young stars. And for a brief moment Wednesday, it almost seemed that peace might be possible in Washington’s raging ideological war over when and how to reduce the government’s trillion-dollar deficits.
One day after President Obama’s bipartisan deficit commission held its first meeting, luminaries from former President Bill Clinton to Alan Greenspan, the former Fed chairman, expressed broad agreement that current federal deficits are unsustainable and will eventually trigger a crisis if they aren’t reduced. They didn’t have any quick answers, or dispel any doubts about the deep partisan fault lines over spending, taxes and the overall mission of government. Nor did members of Obama’s deficit panel dare predict whether they would even agree on any proposals.
“We’ve got fear-mongering on one side, and denial on the other side,’’ remarked Alice Rivlin, a panel member and a former budget director under President Clinton. But in a city where party lines are as hardened as crash barriers at the Capitol, the forum on Wednesday showed considerable agreement that the federal government’s long-run budget problems will eventually require both painful spending cuts and higher taxes.
The nonpartisan Congressional Budget Office estimates that the federal government’s publicly held debt will equal 130 percent of the nation’s annual economic output by 2020.
"I do not know anybody who thinks we can get to numbers even remotely like that without having some kind of crisis," said Robert E. Rubin, former Treasury secretary under President Clinton. “I am more worried about this than about anything else in my adult life.” The star-packed “fiscal summit” was hosted by the Peter G. Peterson Foundation, a nonprofit research group founded by the billionaire Peter G. Peterson. (The Fiscal Times, an independent business venture, is also funded by Peter Peterson, but is not affiliated with his foundation.)
New Survey Confirms Problem
At the forum, held in the Ronald Reagan Building, Peterson released a survey of top economic officials from eight previous administrations which showed that overwhelming majorities were predicting a crisis within ten years if Congress doesn’t make fundamental policy changes. “I’ve heard it said that Americans spend like socialists and tax like libertarians,’’ Peterson told the group. A Republican and former secretary of commerce under President Nixon, Peterson pointedly ignored current Republican orthodoxy by insisting that higher taxes have to be part of a solution. Peterson even spoke favorably about a “progressive consumption tax’’ ― an idea similar to a European-style value-added tax (VAT), which Republican leaders passionately oppose.
Obama’s Commission Under Fire
Even though the president’s deficit commission has barely started its work, it has already come under fire from hard-line Republicans and liberal Democrats. Grover Norquist, an influential anti-tax Republican activist, has already accused Simpson, a former Republican senator from Wyoming, of being part of a Democratic conspiracy to raise taxes. Some liberal groups, meanwhile, charge that the deficit commission is being used by wealthy conservatives and “Wall Streeters” like Mr. Rubin to justify cuts in Social Security and Medicare.
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“Something is terribly, terribly wrong with this Congress, which is a dysfunctional Congress in that sense. We were taught to bring home the bacon. Now the pig is dead,” said Simpson.
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Simpson and the panel’s Democratic co-chair, Erskine Bowles, both tried to buck their party’s orthodox wings and made it clear they were bracing for fierce criticism. “We’ve been here before,’’ Simpson told the Peterson forum. “When they rip the skin from your back, you grow another one twice as thick.” Simpson said partisan warfare has become much more hostile since he retired from the Senate in 1997, adding that widespread skepticism in Washington has been replaced by cynicism. At the same time, he warned, the spending keeps climbing. “Something is terribly, terribly wrong with this Congress, which is a dysfunctional Congress in that sense,’’ he said. “We were taught to bring home the bacon. Now the pig is dead.”
Civility and Agreement…
In contrast to many polarized Congressional hearings, liberal and conservative budget analysts made it clear at the forum that they agreed on many aspects of the government’s long-term budget woes. They tended to agree that the biggest looming fiscal problem is Medicare, the old-age health care program, where costs are being pushed higher by both the flood of retiring baby boomers and rapid increases in the cost of all medical care.
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“I do not know anybody who thinks we can get to numbers even remotely
like that without having some kind of crisis,’’ said Rubin.
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Conservatives like Greenspan and Peterson have acknowledged that higher taxes are probably necessary. Liberals, like Robert Greenstein, president of the Center on Budget and Policy Priorities, agree that spending restraints will be necessary as well. “Nothing can be off the table,’’ Greenstein told the forum. But Republican and Democratic lawmakers remain locked in an implacable disagreement over the need for tax increases.
…But Not on Taxes
“Here’s the problem on taxes,’’ said Rep. Paul Ryan, R-Wis., the House Republicans’ top strategist on fiscal policy. “When you take pressure off the need to reduce spending, you never reduce spending. We need to keep the focus on the problem. The problem is spending, it’s not revenues.” To that, Greenstein retorted: “I do not think it’s accurate to say this is simply a spending problem. It is an imbalance of spending and revenues.”
Ryan and other Republican lawmakers on the president’s panel have been careful not to explicitly oppose any particular proposals for deficit reduction. But almost all Republican lawmakers have vowed to oppose any tax increases, and they have been particularly loathe to hint at any possible backsliding before the midterm elections in November.
Few policy analysts or political operatives expect the deficit commission to overcome those party differences, and the panel’s co-chairs carefully avoided making any predictions about their chances of forging agreement. “Both of us agreed we may be only able to move the football a yard,’’ Simpson said. “We are going to get savaged from the right and from the left.” Erskine Bowles, a former chief of staff in the Clinton White House, said the panel’s success would depend on instilling “trust and confidence.” But when asked what he would think if the panel couldn’t agree on any proposals, Bowles made it clear he was prepared for that possibility. “In my mind, that won’t be a victory,’’ Bowles answered. “But we will have made real progress if we can get some push from them on elected officials to actually face up to this problem.”
Elaine Povich of The Fiscal Times contributed to this report. The Fiscal Times, an independent business venture, is funded by Peter Peterson, but is not affiliated with his foundation.
