Op-Ed: Not Just Another Budget Commission

Forbes [1] | Dec. 21, 2009

Last week Bruce Bartlett devoted his Forbes column to criticizing plans for a budget commission to make recommendations on how to deal with the country's fiscal imbalances. This is the approach the White House and Congress seem poised to pursue to come up with the specific policies to put the nation's budget back on a sustainable path.

In making his case, Bartlett chose to take a number of swipes at our new report, Red Ink Rising, which calls for policymakers to commit to and develop a plan to stabilize the government's growing public debt at no larger than 60% of the economy by 2018.

The mission of the Peterson-Pew Commission on Budget Reform, made up of some of the most respected budget authorities in the nation, is to make recommendations to reform the country's outdated and ineffective budget process. We determined that the first step, given our horrid fiscal condition, is to develop a "fiscal goal" and put forth a framework to achieve it. (We will soon make further recommendations on more technical reforms such as budget baselines, government trust funds and new budget enforcement mechanism.)

We arrived at the 60% ratio because it reflects international standards at a time when one of the primary focuses of stabilizing the debt is to reassure foreign creditors that the U.S. continues to be a sound place to invest.

We picked 2018 because what was once a long-term fiscal problem, driven primarily by aging of the populating and growing health care costs, has become a more immediate problem exacerbated by the recent economic crisis. We now have to move more quickly. Waiting a full decade would have been risky, concerning the possibility of a fiscal crisis occurring before we stabilize the debt. However, we also recognized that acting too quickly could destabilize the budding economic recovery. So we attempted to balance both fiscal and economic considerations.

Some will say the goal it too aggressive, while others will complain it doesn't go far enough. Ultimately, Congress will have to decide whether our recommendations make sense. Bartlett's criticism however, comes a bit out of left field.

Bartlett argues that we failed because we didn't "put forward a serious, detailed plan for cutting the deficit that left no sacred cow unscarred." Well ... true ... we did not. But as Bartlett knows, because we talked about it over the telephone extensively before he published his article, we never intend to. Putting forth a budget plan of some type was not the purpose of our budget commission--not even close. It's like criticizing Bartlett's call for a value-added tax for failing to fix Social Security.

Red Ink Rising focuses on the first step in reforming the budget process during times of fiscal stress: setting a fiscal goal. Before our leaders can agree on the legislative specifics, they need to agree politically and publicly that debt reduction must be a national priority and that they need to set a specific national fiscal goal.

Sure, we could have put out a report calling for raising the retirement age, temporarily freezing discretionary spending, restructuring Social Security and Medicare, broadening the tax base, or creating a broad-based energy tax to deal with the nation's fiscal problems. The options that will be necessary are in fact well-known. Many of our members have been writing about them for years. There is no right or wrong answer for what combination the ultimate package will include. It will be the result of complex political negotiations. (We do show an illustrative budget of what it would take to achieve our proposed goal.)

But as we have seen in the past, getting prematurely specific is more likely to poison the debate then help. This has happened in presidential campaigns, for instance, where when the issue of raising the retirement age comes up candidates stumble all over themselves to promise they'll never do such a terrible thing (even though most experts agree it is in order given growing life expectancies). Most recently, when candidate John McCain suggested reforming the tax exclusion for employer-provided health insurance, candidate Barack Obama criticized it (again, even though almost all experts support the policy), and as a result the good idea was poisoned and left out of current health reform bills--an unfortunate outcome.

For the greatest chance of success, the right sequence is to first agree there is a problem and commit to a goal, and then to get specific.

Our report asks that we draw a "debt line in the sand" as a way to start discussing how our country must rebalance its spending and tax policies over the next decade. Once policymakers agree to a public fiscal goal and to debt reduction, we can move to a productive discussion of how to get there.

Copyright 2009, Forbes
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