President Obama established the National Commission on Fiscal Responsibility and Reform on February 18, 2010 and appointed Erskine Bowles and Alan Simpson to co-chair it. The Commission was charged with “identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.” Specifically, the Commission was to propose recommendations for balancing the “primary” budget – excluding interest payments – by 2015, and for improving the government’s long-term fiscal problems.
The Co-Chairmen achieved a remarkable success in pursuing its mandate in a bipartisan fashion. That accomplishment is even more noteworthy when one considers the extraordinary nature of the challenge, and the equally difficult political environment over the past year. In 2009, the deficit soared to 10 percent of gross domestic product [GDP], the highest level since World War II. Projections by the nonpartisan Congressional Budget Office [CBO] show the debt spiraling out of control due to entitlement spending, primarily driven by two existing health care entitlements. While the Commission worked on this problem over the past year, the President and Congress pursued the enactment of a new $1-trillion health care entitlement – which also raised taxes by a half trillion dollars and reduced Medicare by another half trillion – and they used the Budget Act’s reconciliation procedures to force this legislation through Congress on a purely partisan vote.
In this climate, the Co-Chairs of the Fiscal Commission proposed a comprehensive and credible plan for getting the Federal government’s fiscal house in order. By laying out specific proposals, they have shown the magnitude of the government’s spending and debt problems, but they have also demonstrated that fiscal solutions are indeed necessary and possible. Although I could not support the entire plan, many of its elements surely are worthy of further pursuit. They establish a much-needed foundation and justification for fundamental policy reforms.
Testimony before the Commission, and the reports of the CBO and the Government Accountability Office [GAO], make clear the government’s current course is unsustainable.
The GAO currently estimates the fiscal gap – that is, the difference between planned spending and the revenues coming in – is equal to $88.6 trillion. This is a 40-percent increase from the March 2009 estimate, demonstrating the extent to which delay only makes the problem worse.
The CBO’s economic model breaks down after 2037 due to the excessive levels of debt the government is expected to accumulate over the course of the next decades.
By 2025, CBO estimates that spending on Social Security, Federal health care and net interest will use every single dollar of revenue the Federal Government takes in.
America is rapidly approaching a tipping point. Should the government fail to reform entitlements, those very programs will collapse under their own weight and bury the next generation under a crushing debt. Clinging to the status quo will only lead, inevitably, to economically stifling tax increases, or deep, sudden, and highly disruptive benefit cuts. Failing to address this problem now – when the necessary adjustments are manageable – assures forced austerity in the near future, imposed by credit markets in a state of panic.
This was the problem I tried to confront in my own comprehensive entitlement and tax reform plan, A Roadmap for America’s Future, which I initially released in 2008. In developing and releasing this plan, I sought to advance the debate on the government’s long-term fiscal challenges, and hoped it would lead other policy makers of both parties to put forth their own plans aimed at tackling these problems and allowing America to continue fulfilling its promise: to leave the next generation better off.
In this spirit, the balance of this statement analyzes and critiques key elements of the Co-Chairs’ proposals.
View full analysis here.