The New York Times today reports breathlessly that “the chairmen of President Obama’s debt-reduction commission have been unable to win support from any of the panel’s elected officials for their proposed spending cuts and tax increases, underscoring the reluctance of both parties to risk short-term political backlash in pursuit of the nation’s long-term fiscal health.” Is this news?
It is certainly not news that the commission is unlikely to find 14 members willing to embrace a common plan. From its inception, it has been clear that the commission’s main purpose was to provide the Obama administration political cover for budgetary malpractice. The composition of the commission made it predictable that it would break down along the fault line of tax hikes vs. spending cuts.
Despite this, the commission — or at least Erskine Bowles and Alan Simpson — have provided a real public service. The projected rise in deficits and debt literally threaten our prosperity and freedom. If we do not change course, our children will be saddled with an unfair debt and inherit a broken economy. So much for prosperity!
Even worse, our ability to defend this nation and project our values around the globe ultimately rests on our economic power. And too much of our debt is in the hands of countries that do not share our values.
To my eye, the commission report, even if it is never ratified by its members, effectively makes four key points:
1. The ballooning debt is a big problem that will require aggressive action to fix. No longer can anyone pretend that cutting out waste and fraud, freezing foreign aid, or soaking the rich is a real solution.
2. The problem is spending. Every aspect of spending must be reined in. The commission has their suggestions for the specific ingredients, but there can be no doubt about the basic recipe
3. The health-care bill must be on the table. The commission treats Obamacare with kid gloves. Obamacare is a fiscal mistake that makes things harder. Congress should repeal the new entitlement programs in it first and foremost.
4. The commission cuts $3 of spending for every $1 of higher taxes. I don’t think higher taxes are a good idea — their target of 21 percent of GDP is way too high — but the report makes two lessons very clear: First, liberal fantasies of a VAT or a carbon tax or some other new tax to finance their expansion are dead on arrival; and second, you can’t get additional revenue without tax reform. The Democrats plan to simply jack up rates in the current system is a non-starter.
The real news will be how much of this is incorporated into the president’s budget in February. History has shown that great problems require presidential leadership. Democrats control the White House and Senate, so they get to set the agenda. But more importantly, the president has an obligation to lead the nation to safety. Thus far, his two budgets were a blueprint for national disaster — a recipe for debt spiral and financial crisis. He must put out a budget that does not endanger our future.
— Douglas Holtz-Eakin is president of the American Action Forum.