Economy

Day of budget hearings reminds everyone of the task ahead

Today’s hearings in the Senate and House Budget Committees highlight the ocean of varying perspectives on the President’s budget and the appropriate approach to take on essential reforms and deficit reduction. Though committee members were certainly guilty of playing the blame game, on both sides of the aisle, many showed a genuine concern for our nation’s unsustainable fiscal path and expressed cautious optimism about reform and debt reduction. Whether this concern can be turned into action, into a plan, remains uncertain.

In an attempt to frame the debate, Republicans spared with Treasury Secretary Timothy Geithner on the President’s failure to lead and Democrats decried Republicans’ ideological entrenchment. Can this divide be bridged?

Virtually all parties involved agree that Congress must address the unsustainable path our country is on, with tax and entitlement reforms being the very foundation of any actionable plan. Yet, there is a very basic disconnect between what has been said and what has been done.

A few things are quite clear. The President’s budget represents a missed opportunity, much like the super committee was a missed opportunity. The President erred by releasing a budget without a plan in place that acknowledges our fiscal reality beyond the next 10 years. And he erred by using what should be a bold plan for our nation’s future to attack Republicans and upper-income taxpayers. The President adopted the politics of division that he once lambasted on the campaign trail.

Meanwhile, our debt situation will get steadily worse beyond the 10-year window used in the President’s budget. Using White House long-range budget projections, not CBO numbers, the President’s plan curbs debt growth, predominately through tax increases that add complication to the code and previously passed spending caps, for the next few years only to let it explode down the line as can be seen in the graph below. On this graph, debt moves from a dangerous level to a catastrophic one.

Members of the baby boom generation are reaching retirement age. Health care costs are increasing at a rate faster than inflation. These are facts that will continue to drive entitlement growth. Yet, the President’s plan ignores this reality and offers no substantial reforms to Social Security, Medicare, or Medicaid.

Spending is, of course, only one-half of the equation. Revenues must catch up with spending. Broadening the base and lowering rates with the savings from tax expenditure elimination can raise more revenue while simultaneously fixing a code that is too complicated and puts a damper on economic growth. And it can be done fairly, without accusations of class warfare. Yet the President has not released a plan. As Senator Kelly Ayotte (R-NH) said while questioning the Secretary Geithner, “It’s one thing to say something; it’s another thing to do something in terms of leadership…We never saw a proposal on paper.”

Geithner’s ramblings on “broad principles” in both committee hearings showed that the President still has not grasped the requisites of his leadership position. He has not put himself out there. He has not laid his cards on the table and said, “This is my plan. Let’s have the debate.” Republicans and Democrats must put out their ideas, have a genuine debate on the merits of those ideas, and seek livable compromise. If this were easy, it would already be done.

Leaders of both parties have failed Americans, particularly younger Americans, the generation saddled with a weak economy, a high level of debt, and diminished investment in infrastructure, education, and innovation because of crowding out in the budget by entitlement spending. At the end of the Senate hearing, in a Remember the Titans moment, Sen. Kent Conrad (N-ND) posed the question, “Can we find a way to come together?” Members of both parties echoed these sentiments throughout the day.

Now is the time to get this done. Senator Conrad continued, “I hope we all show the courage that is required.” We hope so too.

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