OK, Big Deficit Talkers: It's Time to Pick a Plan

For all the midterm talk about the budget, so far not a single elected Congressman has endorsed the Domenici-Rivlin or Simpson-Bowles deficit reduction plans.

Yesterday, the Bipartisan Policy Center's Debt Task Force, a year-long fiscal reform effort headed by former Senate Budget Committee Chairman Pete Domenici and former OMB Director and Vice Chair of the Federal Reserve, Alice Rivlin, hit the media.

So far, not a single elected politician in Congress, has endorsed the plan.  The Domenici-Rivlin plan now joins the initiative by Wisconsin Rep. Paul Ryan, and the draft fiscal plan presented by former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles, as real deficit reduction plans that have become radioactive.

Why?  Didn't many of the voters, especially Tea Party activists, demand budget cuts and smaller deficits earlier this month on Election Day?  Didn't we hear from candidates of both parties, but especially the Republican hopefuls, that cutting government spending was Job 1?

Ah, that was merely talk, it seems.  Come January many of the loudest campaign trail voices will be strangely muted.  We will hear, "what we meant was we wanted to cut waste and abuse, and we will get rid of earmarks in spending bills. That's what we meant, not cuts to Medicare or Social Security and certainly no cuts to defense or increases in taxes."

In budget speak, we refer to that as "numerical amnesia."  It especially afflicts people who have no notion of what the federal budget funds.

Too many in Congress forget what spending the federal budget truly contains.  We pay 84 per cent of the budget to interest on the public debt, Medicare and Medicaid and other health entitlements, Social Security and other pensions, and subsidies to sectors of the economy such as agriculture and energy. All of the rest of the budget--all health research, law enforcement, national security, and education--compromise only about 16 per cent of the budget.

In short, one could--tomorrow--shut down every activity of the federal government except the entitlements listed above, and not balance this year's budget. Every single activity, firing every person involved in those activities.

It's simple arithmetic, then. Real debt reduction takes real courage.  Or as Bill Russell used to say to rookies after he had blocked their shot into the fifth row of seats, "Welcome to the NBA."

What the Domenici-Rivlin proposes is as follows:

a.  Create a "Social Security tax holiday" for one year, allowing both employees and employers to save approximately $640 billion in taxes and create, as the Congressional Budget Office estimates, more than 2.5 million new jobs.

b.  Balance the primary budget by FY2014 and stabilize the national debt at 60 per cent of Gross Domestic Product by FY2020.

c.  Cut individual and corporate income tax rates, eliminate almost all tax loopholes in current law, increase child care and low income tax benefits, and establish a National Debt Reduction Sales Tax of 6.5 per cent.

d.  Reform Medicare and Medicaid to save tens of trillions of dollars during the next 30 years.

e.  Make Social Security solvent for 75 years.

f.  Freeze domestic and discretionary appropriated programs for 4 and 5 years, respectively.

g.  Cut other pensions and subsidies, like farm subsidies and government retirement programs.

Notably, it was recommended unanimously by a bi-partisan group of 19 former mayors, governors, two former Secretaries of Commerce, and a host of very experienced budget experts.  Every participant from former New Orleans Mayor Marc Morial to former Oklahoma Gov. Frank Keating, endorsed the plan.

The President's fiscal commission, headed by Simpson and Bowles, has been meeting in private now for several days.  It has until Dec. 1, less than two weeks from now, to make formal recommendations to the President.  Many doubt that the commission can get the necessary 14 votes (out of 18 members) to recommend anything like either the Domenici-Rivlin plan or the outline presented by Simpson and Bowles.

No doubt hundreds of interest groups right now have begun letter-writing campaigns against all such comprehensive plans.

Members of the 112th Congress will be bombarded by emails, letters, and tweets, warning of dire electoral consequences if their Member of Congress dares vote for such things.

Undergirding that reality is a recent Wall Street Journal poll showing that among the most vocal opponents of any comprehensive deficit reduction plan are voters who identify themselves as Republicans or Independents.

So, as the slogan goes, "Be careful what you wish for, you may get it."

For all those who talked ad infinitum about their devotion to fiscal restraint and lower debt, welcome to the big leagues.  You have been able to talk on the campaign trail; now you have to vote in Congress.

The only hope for any of these comprehensive plans is the hard fact that in early spring the Congress will have to vote to increase the federal debt limit.  Lots of folks have already said they will not, under any circumstance, vote for such an increase.

Of course, they will vote for one.  The only question is what kinds of fiscal restraint amendments will be necessary to get 218 votes in the House and 60 votes in the Senate.

Maybe a plan like that of Domenici and Rivlin or Simpson and Bowles will then become more palatable.