In late 2009, President Obama and Congress first toyed with the idea of creating a powerful commission to slash the long-term deficit and restore fiscal sanity to the nation. The Senate lost its nerve and killed the proposal, but Obama came back with an executive order creating a less influential panel to chart out a path.
What happened next tells a story of a dysfunctional federal government, unbridgeable political partisanship and missed opportunity. Over the ensuing year and a half, much energy, money and manpower was expended to address what virtually everyone in Washington agrees is an essential task: reining in the $1.5 trillion annual deficit and finally getting a handle on runaway spending, including health care and other entitlement programs that threaten to consume most of the federal budget in the coming decade.
After meeting for 7 months, the 18-member presidential debt commission headed by Democrat Erskine Bowles and Republican Alan Simpson overcame enormous political odds to win the support of a majority of the members in November of 2010. They wanted to reduce the deficit by $4 trillion over a decade, but the plan was largely ignored by Obama and Congress until recently. The president’s rebuff opened the door to nearly a dozen think tanks and politicians to devise elaborate copycat debt reduction strategies. Even Esquire Magazine weighed in with a plan of its own–but all did little more than provide background noise for the budget wrangling to come.
2010 was a wash out. With no progress on deficit reduction and a government shutdown looming over a stalled budget deal, two bipartisan “gangs” of lawmakers gathered early this year and struggled to craft deficit reduction plans. Like others, they knew that the real test was still to come—raising the debt ceiling One group finally gave up in frustration and the other made headway on spending cuts but not on raising revenues.
Obama’s By-Pass Operation
President Obama and House Speaker John Boehner, R-Ohio, earlier this month met secretly to negotiate a “grand bargain” along the lines of the Bowles-Simpson plan, only to see it blown up by House Majority Leader Eric Cantor of Virginia and other conservative House Republicans.
Now, as the White House and Congress face a looming August 2 deadline to resolve their differences and raise the $14.3 trillion debt ceiling /taxonomy/term/138733, both sides have almost nothing to show for all those months of debate and negotiation.
Bowles, a former White House chief of staff under President Bill Clinton, is disappointed that Obama waited so long to embrace his commission’s recommendations – including proposals for reducing benefits for Social Security and Medicare, cutting defense and eliminating many tax breaks. He is also worried that the year will end with nothing approximating the $4 trillion in savings that his commission hammered out, including $3 of spending cuts for every $1 of tax increases.
“I am frustrated, I have seen enough, I want these guys to do something real,” Bowles told MSNBC late last week. I don’t care if it’s one part or two parts, but let’s do something that really does reduce this deficit. Let’s reduce it now, and let’s reduce it by at least $4 trillion.”
Asked whether he blamed Obama for not endorsing and running with his commission’s recommendations right after they were unveiled last December, Bowles responded: “Look, do I wish he had signed onto it earlier, yes. But he is there now. You can see the power of the bully pulpit as he uses it now . . . The problem is that so many people are talking about [raising the debt ceiling] with just about $2 trillion of deficit reduction. That’s not a solution. That’s not going to fool our creditors.”
Both sides must share in the blame for missing what is likely to be the last real chance for a major realignment of federal spending and tax policy before the 2012 presidential election and beyond, budget and policy experts agree. Obama and the Democrats mishandled the idea of the deficit commission at a time when it could have been a bipartisan battering ram to achieve major savings and entitlement reforms Senate Republicans for their part refused to support creation of a truly powerful debt commission, and from the time they won control of the House in November 2010, Republicans have been unwilling to consider any semblance of a tax increase –even the elimination of wasteful tax breaks and loopholes.
“I think that history will record that the Democrats overplayed their hand and by doing so missed an opportunity, and that the Republicans, once they had a chance, proceeded to do the same thing,” said William Gallston, an economist with the Brookings Institution who helped draft one of the many alternative plans for stabilizing the federal debt. “So with each party having missed the opportunity, it’s not clear what the opportunity is now. I think a lot depends on the reaction of global markets to whatever happens or doesn’t happen.”
As for the likely compromise to raise the debt ceiling and create another debt commission, “It’s a punt,” said Brian Darling, a budget expert for the conservative Heritage Foundation. “When you’re punting decisions to a commission that you can’t make on your own, why would we expect that the commission’s recommendations would be ratified by Congress. I mean, the left is not going to want to see reforms of entitlement programs. Conservatives are not going to want to see tax increases on the table. And even if this commission is empowered to do those things, it’s never going to happen.”
The House is scheduled to vote on Tuesday on a set of measures including a constitutional Balanced Budget Amendment that has literally no chance of passing in the Democratic-controlled Senate, while Senate Minority Leader Mitch McConnell, R-Ky., and Majority Leader Harry Reid, D-Nev., are cooking up a plan behind the scenes to avert a catastrophic default on the U.S. debt while giving the appearance that the two sides are making headway on the deficit.
Missing the Moment
Both sides must share in the blame for missing what is likely to be the last real chance for a major realignment of federal spending and tax policy before the 2012 presidential election and beyond, budget and policy experts agree. Obama and the Democrats mishandled the idea of the deficit commission at a time when it could have been utilized as a bipartisan battering ram to achieve major savings and entitlement reforms and waited too long to get into the deficit cutting game. Senate Republicans for their part refused to support creation of a truly powerful debt commission, and from the time they won control of the House in November 2010, Republicans have been unwilling to consider any semblance of a tax increase –even the elimination of wasteful tax breaks and loopholes.
“I think that history will record that the Democrats overplayed their hand and by doing so missed an opportunity, and that the Republicans, once they had a chance, proceeded to do the same thing,” said William Gallston, an economist with the Brookings Institution who helped draft one of the many alternative plans for stabilizing the federal debt. “So with each party having missed the opportunity, it’s not clear what the opportunity is now. I think a lot depends on the reaction of global markets to whatever happens or doesn’t happen.”
As for the likely compromise to raise the debt ceiling and create another debt commission, “It’s a punt,” said Brian Darling, a budget expert for the conservative Heritage Foundation. “When you’re punting decisions to a commission that you can’t make on your own, why would we expect that the commission’s recommendations would be ratified by Congress. I mean, the left is not going to want to see reforms of entitlement programs. Conservatives are not going to want to see tax increases on the table. And even if this commission is empowered to do those things, it’s never going to happen.”
The emerging Senate compromise first suggested by McConnell would allow the president to raise the debt ceiling by $2.5 trillion in three increments over the next year. It would be tied to Reid’s proposal to set up a bipartisan, House-Senate committee to draft a deficit-reduction plan. The committee’s proposals would be submitted to the House and Senate for an up or down vote, with no amendments permitted, possibly by the end of the year or certainly before the 2012 election.
It is unclear whether the committee would be given a deficit reduction target to achieve, whether Medicare and Social Security would be on the table, and whether there would be any proposals considered for raising fresh revenues through changing the tax code.
“The commission’s recommendations, when they come to Congress, they might get expedited consideration, but I don’t expect that they would pass if they were to come up with any real bold solutions,” Darling told The Fiscal Times. “The debt ceiling seems like the opportunity to make the tough decisions because it clearly is a must-pass piece of legislation. If Congress can’t attach some very difficult decisions onto a debt ceiling increase they are not going to pass something in the form of commission recommendations that they have no incentive to pass.”
