Not Another Budget Commission!
Bruce Bartlett, 12.18.09, 12:01 AM ET
In a previous column I explained why I think another budget commission is unlikely to solve our deficit problem. Since both Congress and the Obama administration appear to have ignored my advice and are moving to establish one anyway, I want to look a little more deeply today at the problems it will be up against.
First, let’s take a look at a high-powered report on the federal debt just issued by the Peter G. Peterson Foundation and the Pew Charitable Trusts on the problem of rising red ink. This bipartisan commission had a year to study the issue, substantial funds and able staff support from the Committee for a Responsible Federal Budget. Moreover, it had a blue ribbon list of members including every former Congressional Budget Office director plus assorted Office of Management and Budget directors and other big names in the world of people who know the federal budget the way a proctologist knows colons.
In short, the Peterson-Pew Commission had a tremendous number of advantages that a government commission would not have. Such commissions are usually starved for resources, have unrealistic deadlines and are often composed of people who have to learn the subject matter from scratch. More importantly, government commissions are invariably composed of members of Congress and Administration officials who are severely constrained, politically, in terms of what they dare sign on to. Consequently, their reports usually vanish without a trace almost immediately after being published.
Lacking such constraints, one would expect that the Peterson-Pew report would really lay it on the line, tell it like it is and put forward a serious, detailed plan for cutting the deficit that left no sacred cow unscarred. Sadly, it did none of these things. Its big recommendation is to stabilize the public debt at 60% of the gross domestic product by 2018. I was unable to find a single, solitary deficit reduction proposal anywhere in the report—not $1 of spending that should be cut nor $1 of revenues that should be raised. The whole report consists of nothing but hand-wringing and platitudes about the seriousness of the deficit problem, and how important it is that someone address it one of these days.
To be fair, the Peterson-Pew Commission did post on its Web site an illustrative list of possible spending cuts and revenue increases that would achieve its goal of merely stabilizing the debt/GDP ratio. However, they are all rather vague–eliminating outdated programs, reforming contracting, broadening the tax base and the like–and none was officially endorsed by the commission or included in its official report.
I hate to be so critical because many of my friends were involved in the Peterson-Pew project. But my point isn’t to demean their effort, but rather to show how enormous the barriers will be to a government commission with the same mandate. That is especially true given that those proposing a government commission seem determined to guarantee its failure.
In my earlier column I explained why it’s a bad idea to appoint sitting members of Congress to a budget commission–mainly because their parochial interests will necessarily prevent them from recommending anything that will hurt their chances for reelection no matter how sensible. For example, no farm state senator is going to support abolishing agriculture subsidies even though they are among the most economically harmful and least justified major spending programs in the entire budget. Nor do I see a single Republican in Congress who would be willing to sign on to even the smallest tax increase, for fear that the tea party crowd would come after him or her with pitchforks, literally.
Yet despite the overwhelming difficulty of getting a member of Congress to sign on to anything that would inflict the tiniest bit of pain on anyone, let alone a key constituent group, the sponsors of a new deficit commission have, bizarrely, decided to fill it almost entirely with current members of Congress and make it virtually impossible for them to come to an agreement on anything. That is because the commission would be required to have the support of three-quarters of its members to recommend any specific deficit reduction measure.
To see how stupid this is, just look at how dysfunctional the U.S. Senate has become when it only needs 60% of its members to support anything remotely controversial. Now imagine how much more dysfunctional it would be if the threshold was 75%. That’s exactly what will happen if the deficit commission needs 14 of its proposed 18 members to support a measure before it could be recommended. Although the sponsors defend this provision as necessary to ensure broad support within the commission for its recommendations, it is simply a recipe for total gridlock.
Nevertheless, I can’t really blame members of Congress for lacking the courage or responsibility to get the budget under some semblance of control. All the evidence suggests that they are just doing what voters want them to do, which is nothing.
It’s true, of course, that when asked about the deficit Americans will always say it is a serious problem and condemn their elected representatives for not doing enough about it. For example, according to a November CNN poll, two-thirds of Americans believe the federal government should balance the budget even during wars and recessions. Other polls show similar results. In fact, I don’t recall ever seeing a poll in which a majority of people didn’t think that the budget deficit was among the nation’s most serious problems, or one where they didn’t think the budget should be balanced at all times.
However, when asked about specific items in the budget it’s almost impossible to find anything that a majority of people is willing to cut. Indeed, invariably, they want to spend more on almost every program they are asked about. The table below presents results from a Pew Research poll in June. People were asked if the federal government should increase spending for various things, decrease spending or keep it the same. As one can see, there isn’t a single spending program that a majority of Americans favor cutting, and there’s only one, foreign aid, that as many as a third of them are willing to cut.
Lest one think that this poll is exceptional, a new study from the American Enterprise Institute cites several others with similar results. The bottom line is that in principle people want to cut spending and balance the budget, but they are totally unwilling to reduce any significant category of spending to achieve it. Nor are they willing to pay higher taxes. According to a CBS News/New York Times poll in July, 56% of people were opposed to paying more taxes to reduce the deficit and 53% were also opposed to cutting spending.
In short, the American people are schizophrenic. Simultaneously they want more spending, no increase in taxes and a balanced budget. This might be possible if we were starting from a position in which the budget was balanced. Over time, real growth in the economy would provide additional resources to raise spending without having to raise tax rates. But we are not in that position. We will have a deficit of $1.4 trillion this year and most of the budget is effectively on automatic pilot. 62% of federal spending goes to interest on the debt and mandatory programs such as Social Security and Medicare. Of the remaining amount, more than half goes to national defense and just 43% to domestic discretionary programs.
If we abolished every domestic discretionary program as well as all foreign aid and international affairs spending, it would only reduce the deficit by about half. We would also have to abolish the Defense Department if we wanted to balance the budget without raising taxes.
As the late economist Herbert Stein always used to say, trends that can’t continue don’t. But that doesn’t mean that inherently unsustainable trends can’t continue for a long time before some crisis finally forces action. It would be better to act in advance of a crisis, but at least insofar as the deficit is concerned it appears that a crisis of some sort–inflation, soaring interest rates, a crashing dollar–will be necessary before the American people are willing to seriously consider tax increases or meaningful spending cuts to get the budget on a sustainable path.
This is the key reason another budget commission is a waste of time. We just aren’t there yet in terms of economic or political conditions that would make people prefer the pain of budget cuts and tax increases to the status quo. In fact, a new budget commission could make matters worse by allowing our budgetary problems to fester while giving people a false sense that something meaningful is being done about them.
I agree with Senate Finance Committee Chairman Max Baucus, D–Mont. “We don’t need a commission to do our work. We don’t need a new process to solve the problem,” he said on Dec. 10. “To solve the problem, we just need to solve the problem.”
Bruce Bartlett is a former Treasury Department economist and the author of Reaganomics: Supply-Side Economics in Action and Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. Bruce Bartlett’s new book is: The New American Economy: The Failure of Reaganomics and a New Way Forward. He writes a weekly column for Forbes.