Op-ed : The “fiscal cliff”
is quickly approaching, but President Obama, Gov. Romney, and Congressional leaders have not revealed their specific plans to avoid it – if they have one.
Given that it is an election year, this is no surprise. But it is also what makes this election so vitally important. The winners of this year’s elections will determine how the fiscal cliff is addressed, as well as whether—and how—we will address our other major economic and financial challenges.
The American public cannot continue to let politicians kick the debt can down the road. It is time for common sense proposals regarding what can realistically be achieved in the Congressional lame-duck session, while simultaneously setting up the next Congress and the President, whoever that may be, for success in 2013.
ACTIONS THAT NEED TO BE TAKEN
A lame duck Congress is not going to achieve a so-called “grand bargain” to reduce our growing deficit. It is not realistic: the timeframe is too short, the issues are too complex, and the public is not adequately engaged. Additionally, the election may result in a change of control on one or both ends of Pennsylvania Avenue. If this occurs newly elected officials should be given the chance to recommend certain actions and reforms.
However, the current Congress and President Obama must do something to address the fiscal cliff, as it poses a serious threat to our economy. They should extend some of the expiring provisions at the end of the year, instead of letting all the scheduled increase in taxes and reductions in spending occur. They should also pay for certain temporary extensions and couple the major structural ones (e.g., Bush tax cuts, across the board spending cuts) with an enforceable commitment to achieve a grand bargain by no later than the end of 2013. This commitment should have a stated goal of reducing our debt as a percentage of GDP to specified levels, by no later than 2020, with a target of at least a 3-to-1 ratio of spending reductions to revenue increases over time.
Additionally, the process to achieve this grand bargain next year is important. There should not be another special committee to achieve a grand bargain. Instead, the relevant existing committees— including Budget, Appropriations, Ways and Means, and Senate Finance—should be employed to deliver reforms to meet the deficit reduction targets. Moreover, tougher enforcement mechanisms should be required to ensure action from the new Congress. If legislation is not passed by the end of 2013, automatic spending cuts and tax surcharges, on the same 3-to-1 ratio, should be activated.
HOW TO MEASURE SUCCESS
Debt as a percentage of GDP needs to be reduced to no more than 60 percent, and if this is achieved it would be the first measure of success. Right now U.S. public debt is one way to gauge our nation’s financial challenge, but in actuality our financial problem is much greater.
Another representation of the U.S.’s financial challenge is the federal government’s total liabilities, unfunded social insurance promises, and a range of other federal commitments and contingencies—not just U.S. public and intra-governmental debt, which is the basis for the National Debt Clock.
The U.S. Financial Burden Barometer, developed by the Comeback America Initiative, aggregates all of these figures. It is a new way to judge the success, or failure, of policy reforms, since unlike the Debt Clock the number displayed by the Burden Barometer can be reduced significantly, even if the reforms are phased-in over time. For example, major reforms to Social Security or Medicare would cause a dramatic change in the Burden Barometer.
HOW TO HOLD POLITICIANS ACCOUNTABLE
Politicians need to be held accountable, not only for passing a grand bargain by the end of 2013, but also for meeting projected debt-to-GDP targets over time. In order to guarantee that Congress follows its own plan beyond 2013 a new accountability mechanism must be put in place, such as a tax penalty or dividend approach as a supplement to automatic spending reductions.
For example, if high deficits occurred in future years this would cause automatic spending reductions and temporary tax surcharges, on a prospective basis unless a supermajority of the Congress agreed to override them. Conversely, if Congress meets or exceeds its deficit reduction goals this would trigger temporary tax rebates (dividends). This enforcement mechanism must be transparent and tough so that Congress is forced to act or face serious consequences. If enforcement triggers are put in place, members of Congress will feel pressure from their constituents, even if the markets do not reflect the related risks.
Voters have the power to compel politicians to act, and it is time to hold our elected officials accountable for whether or not they act. This election calls for a grassroots education and engagement effort targeting the public, and voters in swing states. Real progress can be achieved by uniting as a nation, educating ourselves on the issues, and forcing politicians to discuss substance and solutions this election season.
David M. Walker, former U.S. Comptroller General, is spearheading the $10 Million a Minute Tour, which kicks off Sept. 7 in Manchester, N.H. This unprecedented national and non-partisan fiscal responsibility bus tour will visit about 20 cities in swing states and key congressional districts, and wrap up Oct. 9 on the steps of the U.S. Capitol. You can find out more at www.10millionaminute.com .