As Clock Ticks, the Super Committee Hears from Predecessors
On Tuesday, November 1, 2011, the Joint Select Committee on Deficit Reduction held a hearing entitled “Overview of Previous Debt Proposals.” Former Clinton Chief of Staff Erskine Bowles and former Senator Alan Simpson (R-WY), co-chairs of the National Commission on Fiscal Responsibility and Reform, as well as former Senator Pete Domenici (R-NM) and former Congressional Budget Office Director Dr. Alice Rivlin, co-chairs of the Bipartisan Policy Center Debt Reduction Task Force. From the day the Super Committee was formed, its members have said they would draw on previous deficit reduction proposals, specifically naming these two commissions.
During his opening remarks committee co-chair Jeb Hensarling (R-TX) commented that America faces a legitimate fiscal crisis and that structural reforms to entitlements, especially healthcare, are needed if the committee is going to fulfill its statutory responsibility to reduce the growth of the deficit by $1.5 trillion over the next ten years. He said he is especially concerned about the rising rate of Medicare spending and noted that it is not possible for the U.S. federal government to “tax away” its problems. Democratic co-chair Patty Murray (D-WA) reiterated the importance of striking a balanced and bipartisan deal that does not unduly burden the middle class and more vulnerable Americans. She reproached her Republican colleagues, saying that Democrats would be willing to make painful concessions if Republicans would do the same. She went on to say, “It’s not enough for either side to simply say they want to reduce the deficit – now is the time when everyone needs to be putting some real skin in the game and offering serious compromises.”
Simpson and Bowles testified before the committee on the findings of the National Commission on Fiscal Responsibility and Reform. They both urged the committee to take action on a comprehensive fiscal plan that will reduce the deficit. Mr. Bowles stated that the so-call “Simpson-Bowles” plan was based on six guiding principles – ensuring the plan would not disrupt a fragile economic recovery; protecting the truly disadvantaged; doing nothing to jeopardize the safety and security of the country; investing appropriately in education, infrastructure, and research; reforming the tax code; and cutting discretionary spending where appropriate. Simpson commented that he does not believe the committee’s mandate to find $1.5 trillion in deficit reduction is enough and that the Simpson-Bowles recommendation of reducing the deficit by $4 trillion is the minimum amount needed to restore the United States’ fiscal stability, stabilize U.S. debt, and begin to reduce the growing debt-to-GDP ratio. Both Simpson and Bowles warned the committee about the necessity of acting quickly, saying that while they acknowledged that it may not be possible for the committee to have the reforms drafted into legislative language and scored by the CBO by the November 23 reporting deadline, it is crucial that committee agree on an overall framework.
Domenici noted that the United States faces two major challenges. First, it must accelerate growth and job creation; and second, it must reduce future deficits so that the U.S. debt will no longer grow faster than the economy. He argued that these objectives reinforce one another, saying that faster growth will reduce deficits, and stabilizing the debt will cut future interest rates and reduce uncertainty, spurring growth. In order to achieve these goals, Domenici contended that the committee will have to go well beyond the charge of identifying at least $1.5 trillion in savings over the next ten years, because even savings of this magnitude would still leave the debt rising faster than economic growth. Domenici suggested that they should work on a bargain involving structural entitlement and tax reforms, which would save at leave $4 trillion over ten years. He went on to say that the committee should take advantage of the full scope of its authority by compelling authorizing committees to produce fundamental tax and entitlement reforms and provide for “fast-track” consideration of those reforms.
Dr. Rivlin focused her testimony on the Bipartisan Policy Center Debt Reduction Task Force’s recommendation for reforming Medicare and the federal tax code. She argued that there can be no lasting solution to the U.S. debt crisis without structural changes in the Medicare program to slow its cost growth. She recommended transitioning Medicare to a “defined support” plan that would keep traditional Medicare but give seniors the opportunity to choose among competing private plans that could save them money. Dr. Rivlin also suggested a number of reforms the tax code in order to raise revenue and increase fairness, including a two-bracket income tax with rate of 15 percent and 28 percent; setting the corporate tax rate at 28 percent; and taxing capital gains and dividends as ordinary income.
