Friday, January 8, 2010

Deficit Cutting vs. Gimmicks

Via Yglesias, here's William Galston endorsing the Conrad-Gregg Commission idea for cutting the deficit:

This sets up an early test for President Obama. If he endorses an empowered commission as part of a substantial increase in the debt ceiling (or in his FY2011 budget), he will signal his commitment to fiscal truth. If he constitutes a toothless advisory commission through executive order, he will signal just the opposite—and fool no one.
I'd say exactly the opposite: if Obama endorses a commission that requires a supermajority in both Houses of Congress to pass anything, we'll know that he's not serious about deficit reduction.

Fortunately (for deficit hawks, at least), that's not what Obama wants to do.  Stan Collender, reading this Podesta/Ettinger op-ed, has the following interpretation (skipping to the good part):
4.  We're going to do this is two stages.  First, we'll propose policies that, not including the annual interest payments on the national debt, will balance the budget by 2014.  We're calling this the "primary balance."  Second, we'll balance the budget including annual interest payments by 2020.
5.  We're also going to propose three budget process changes.  The first will be year-by-year deficit targets that first lead to the primary and then full balance by 2014 and 2020, respectively. The second will be some type of Gramm-Rudman-Hollings-like adjustment that automatically will make changes in spending and taxes if the annual deficit targets aren't reached so that we don't fall behind.  The third will be a pay-as-you-go requirement that applies to both revenues and spending.
The emphasis is mine -- because the real key to deficit reduction isn't a commission or a new process, it's to publicly endorse policies that will shrink the deficit.   This is, at the end of the day, what matters: do politicians value deficit reductions enough that they're willing to say that they favor the kinds of policy changes that will reduce the deficit (i.e. spending cuts or revenue increases, or both). 

Stan Collender runs through a series of policies (mainly, letting certain Bush-era tax cuts expire, but also some spending cuts) that would achieve the goals that Podesta and Ettinger lay out.  As far as process changes, I tend to think that strong paygo rules are helpful, although only as long as Congressional majorities really want to cut the deficit.  Gramm-Rudman style gimmicks, however, are so unlikely to be helpful that I suspect they are counterproductive; Members of Congress (and I suppose the president) get to take credit for deficit reduction when the gimmick is introduced, but then can easily support waiving its harsh provisions before they kick in -- and once again, get credit because they will be saving popular programs.  Commissions -- even well structured ones -- have that same flaw.

I'm not a deficit hawk, so I have no dog in this fight, but my advice to those who care about deficits is: anyone who talks process is not serious.  The real test for honest deficit reduction is policies that will reduce the deficit, not convoluted processes that will allow pols to take credit for plans to reduce the deficit.

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