Business leaders, economists push for deficit cut
By Lori Montgomery,
As lawmakers squabble over cuts to domestic spending, pressure continues to build for a broader approach to the nation’s budget problems.
On Thursday, a powerful group of leaders in the business, academic and economic communities sent letters to the White House and Capitol Hill urging policymakers to work together to reduce the deficit by overhauling government retirement programs and an inefficient federal tax code. The push comes amid growing support for the kind of ambitious deficit reduction plan offered last year by President Obama’s fiscal commission, and recently embraced by a bipartisan majority of 64 senators.
One of the missives was signed by 64 economists and budget experts from both parties, including former Federal Reserve Board chairman Paul Volcker, former Clinton Treasury secretary Robert Rubin and several senior officials from the George W. Bush White House, including economic adviser Lawrence Lindsey and Council of Economic Advisers chairman Greg Mankiw.
“As you continue to work on our current budget situation, we are writing to let you know that we join with the 64 Senators who recently wrote that comprehensive deficit reduction measures are imperative, and to urge you to work together in support of a broad approach to solving the nation’s fiscal problem,” the group said in one letter.
A separate letter bearing a similar message was signed by six business and academic leaders, including Norman Augustine, the retired Lockheed Martin chief executive, and John Engler, the former Republican Michigan governor who now serves as president of the Business Roundtable.
“An effective deficit reduction plan cannot focus entirely on decreasing discretionary expenditures; it must also include tax reform, spending prioritization and actions to strengthen economic growth,” the group wrote. “Largely missing in the budget discussions to date are the entitlement programs, particularly the major ones: Social Security, Medicare and Medicaid. Any serious and sincere deficit reduction plan must include entitlement reform.”
Both groups praised the work of President Obama’s deficit commission, which in December offered a plan for cutting deficits by $4 trillion over the next decade. They also applauded the work going on in the Senate by the so-called Gang of Six to forge a bipartisan agreement on a long-term deficit reduction.
The White House has so far been reluctant to endorse the commission’s recommendations, particularly an overhaul of entitlement programs such as Social Security, Medicare and Medicaid. The Social Security system last underwent significant changes in 1983, while Medicare was targeted for sharp reductions in Obama’s health-care initiative. The tax code hasn’t been the focus of a thorough rewrite since 1986.
In a conference call to reporters, Engler and his fellow signatories said they may not agree with all the recommendations of the commission, which included a plan to increase federal tax collections by $1 trillion over the next decade, largely by reducing an array of popular tax breaks for individuals and businesses. Indeed, they said, tax reform might be approached in other ways: by simplifying the tax code, improving enforcement and even by granting multinational corporations a tax holiday for earnings brought back to the United States from operations overseas, a key goal of the Business Roundtable.
“Under this tax reform umbrella, we’re talking about … a very broad set of issues,” said Deborah L. Wince-Smith, a signatory and president of the Council on Competitiveness. “We are not as a group promulgating any one piece of this, but saying collectively it has to be addressed in conjunction with the deficit.”
The lack of specifics indicates the tough road ahead for forging agreement on overhauling some of the biggest and most complex functions of the federal government. A broad approach to deficit reduction would require both parties to make significant compromises, with Republicans breaking their long-standing opposition to new taxes and Democrats dropping their reluctance to touch entitlement programs, particularly Social Security.
But the letters, coming on the heels of similar pleas from a bipartisan majority of senators, show heightened support for starting that process, perhaps as part of a vote later this spring to raise the legal limit on government borrowing. A growing number of lawmakers — most recently Sen. Marco Rubio (R-Fla.) — have said they will not vote to increase the debt limit above $14.3 trillion without a plan for reducing the debt in the future.
“The momentum for a comprehensive approach has reached a point where there’s no stepping back,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, who helped organize the economists for the letter. “There will be fights along the way on every one of those details. But I think this comprehensive solution approach, which a year ago would have seemed absolutely impossible ... may be unstoppable.”