Many deficit hawks are describing last week’s midterm election as a “defining moment for the country” in facing up to the mounting federal debt, and there were plenty of indications in the exit polls that the Republicans’ sweep back to power in the House signaled voter demand for tough action to reduce federal spending and dramatically slow the growth of the long-term debt.
But whether the rise of the Tea Party and voter repudiation of congressional Democrats will be enough to jolt President Obama’s bipartisan fiscal commission into action remains much in doubt. On Tuesday, Senate Budget Committee Chairman Kent Conrad, D-N.D., offered a tepid prognosis of the chances the 18-member commission will deliver a package of spending savings and revenue raisers by Dec. 1 for Congress to act before adjourning.
“The bipartisan task force is hard at work, but it’s going to be very difficult to get 14 of 18 members to agree,” Conrad, a commission member, told reporters during an event Tuesday at the Newseum in Washington, D.C., sponsored by the Peter G. Peterson Foundation. “But I hope that we’re able to convince our colleagues that now is the time.” (Pete Peterson, chairman of the foundation, also finances The Fiscal Times).
Conrad spent part of Monday conferring with Erskine Bowles, the Democratic co-chairman of the commission, discussing various options and trying to figure out a way to shake loose a plan supported by a super majority of members. But the commission’s main problem from the beginning has been to convince Democrats to support reductions in big-ticket government programs, such as Medicare and Social Security, and Republicans to go along with anything that smacks of a tax increase. For now, at least, it doesn’t appear as if Bowles and Republican Alan Simpson, the other commission co-chair, have made a lot of progress.
“There are people on the left and on the right that are in total denial,” Conrad complained. “There are people on the left who do not want to touch entitlements. That is just unrealistic. I would say to my friends on the left, it is unrealistic. Medicare and Social Security are headed for insolvency. The idea that nothing has to be done is divorced from reality. On the right, those that say no new revenue, I believe, are also in denial. If you look at the cuts that would have to be imposed if this were done simply on the spending side, they would be too draconian.”
Many groups including AARP, the largest senior citizen organization, and the National Committee to Preserve Social Security and Medicare, have argued that Social Security will remain solvent for decades and shouldn’t be tampered with to try to address long-term budget deficits. Republican leaders, meanwhile, say they will oppose tax increases – insisting that there is plenty of tax revenue but not nearly enough spending discipline.
Whether Republican lawmakers are inclined to vote on recommendations from the deficit commission before the new Congress is sworn in next year remains to be seen. A spokesman for Senate Republican Leader Mitch McConnell of Kentucky said today that McConnell has “purposely taken a hands-off approach to the commission to give them the breathing room they need to operate. He made a point of keeping this out of the realm of the political world,” the spokesman said, “and I don’t expect he’ll be changing that until they report.”
A spokesman for House Republican Leader John Boehner of Ohio, who is in line to become the next speaker, declined to speculate on what the Republicans would do if confronted with recommendations from the presidential commission.
Conrad appeared with Sen. Evan Bayh, D-Ind., and former Sen. Pete V. Domenici, R-N.M. at the Peterson Foundation’s kickoff of a $6 million national multi-media campaign called “OweNo,” to try to engage Americans in a movement to address the long-term fiscal problems.
The total outstanding debt of $13.7 trillion (including $9.13 trillion of publicly held debt and $4.4 trillion of intra-government borrowing) is projected to bump up against the statutory $14.3 trillion debt ceiling by next spring, and Congress will face having to raise the debt ceiling again or risk defaulting on government bonds.
The non-partisan Congressional Budget Office projects that the publicly-held debt will reach 62 percent of the nation’s economy by the end of the year – the highest percentage since shortly after World War II. Assuming no significant change in law, the CBO projects that the federal debt would grow to about 80 percent of Gross Domestic Product by 2035. Interest payments, which absorb federal resources, that could otherwise be used to pay for government services, currently amount to more than 1 percent of GDP. Under CBO’s conservative scenario, interest payments would rise to 4 percent of GDP, or one-sixth of federal revenues, by 2035.
“The unsustainable outlook for our long-term national debt and deficits threatens our nation’s economic health and stands to impact the lives of every American, particularly our nation’s most vulnerable citizens,” Pete Peterson said at the Newseum event. “Public focus on our nation’s fiscal challenges has never been more intense. At this moment, there is a unique window of opportunity for action on this critical issue.”
The promotional campaign jointly announced by Peterson and his son, Michael Peterson, vice chairman of the foundation, includes the airing of a series of TV ads focused on “Hugh Jidette,” a fictional potential 2010 president candidate who openly advocates spending and tax policies that would saddle future generations with increased debt – mocking current federal government practices. “Let’s borrow like there’s no tomorrow,” Hugh declares as his audience gasps.
“We want to help build a bipartisan consensus across the country to tackle our fiscal issues – a movement of Democrats and Republicans and Independents that will support our elected leaders to do the right thing for this nation’s fiscal future,” Michael Peterson said.
The “OweNo” national television advertising will run on the national broadcast Sunday shows, including NBC’s “Meet the Press,” ABC’s “This Week,” CBS’s “Face the Nation,” and “Fox News Sunday,” as well as CNN’s “State of the Union.” The multimedia campaign will include the satirical television commercials, online advertising and social media tools. The initial phase of the OweNo campaign also includes a significant focus on the political bellwether cities of Columbus, Ohio and Denver.
Peterson Foundation to Launch ‘OweNo’ Anti-Deficit Ad Campaign (The Wall Street Journal)
Democrats, Republicans set to tangle on debt-limit increase (The Hill)
Call for return to tougher budget rules (Financial Times)