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| Senator Patty Murray | Senator John Kerry | Senator Max Baucus |
Today's Wall Street Journal contained a rather bland article by the 3 Democratic Senators who are on the Joint Select Committee on Deficit Reduction. What they say in the article is: we can do this; we have done it in the past; we need to work together.
I suppose it is only appropriate to start with a cordial, hopeful message. I do hope they are right.
The committee's mandate is to find $1.5 trillion in deficit reduction over the next ten years. If not, there will be mandatory across-the-board spending cuts in defense and non-defense spending--but not entitlements like Social Security and Medicare spending, which are the real long-term threats to the budget. The idea is that the automatic cuts will be so distasteful to both parties that they will be forced to reach a consensus and propose a more practical set of measures (cost cuts and revenue enhancements) to help reduce the debt.
Joint Select Committee on Deficit Reduction
| Democrats | Republicans | |
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| Senate members |
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| House members |
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One major problem is that many Democrats have vowed to not touch entitlements, which is unrealistic and irresponsible, and many Republicans (all of the members of the committee, as I understand) have vowed not to raise taxes, which is unrealistic, irresponsible and unfair to boot. Both of these stances may be largely based on political posturing, but my opinion is that the Republicans may be acting on a partial understanding that irresponsible actions on their part will hurt the economy and jobs, which will make it nearly impossible for President Obama to win the election in 2012.
The other problem, of course, is that economic growth is slowing, and massive ill-considered short-term cuts may be just the thing to tip the economy back into recession. Of course, this is exactly what candidate Michele Bachmann is calling for when she says repeatedly that there is no need to raise the debt ceiling. (Conservatives point out that Barack Obama said nearly the same thing when he was a junior Senator). It's hard to know if Bachmann's statements are based on her own ignorance of economics, or if she knows better, and is simply pandering to a disgruntled electorate which is ignorant of economics. I suppose it is the latter--she must know better.
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| I know better |
Committees, aggressive time-frames, and automatic mechanisms aside, here is what is needed, and in this order:
Step 1 should be relatively easy: massive tax simplification and reform. The Economist said that by one measure the tax compliance industry in the U.S. is 7 times the size of the automobile industry. The government obviously needs to take our hard-earned money, but can't they do it in a simple straightforward way, which the average citizen can understand? The first step to tax fairness is tax transparency and simplicity. This is something both sides should be able to agree on, and it would go a long way to showing voters that government actually is capable of getting something right. Obama should get behind this. It will increase his credibility and will certainly be simpler to do than healthcare was.
Step 2 is harder: massive reform of entitlements, especially health care related entitlements like Medicare. In his plan, Representative Paul Ryan noted that the average Medicare recipient puts just over $100 thousand into the system, and gets out somewhere around $300 thousand. This is obviously unsustainable. Fixing it will be difficult, and may have to be phased in over the long term. I suspect it will have to entail a re-working of Obama-care, probably including the famous "public option" which may be the only way to have meaningful cost reductions.
Simple as that...
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