Will Obama and Republicans reach a budget deal?

Sunday, February 20, 2011; A19


We have confidence that there ultimately will be a budget agreement to fund the current operations of government. Of greater concern is whether those of us who serve in Washington will find common ground on a longer-range plan to rein in deficits and debt.

Since this economic downturn began, families across America have had to make tough choices to make ends meet. It is time for Washington to do the same. Unfortunately, the current debate is centered on domestic discretionary spending, so even drastic cuts to some programs will not address our overall debt crisis.

That's why we have been working since last summer to forge a bipartisan coalition in the Senate that's committed to act this year to address our deficits and debt. We now are working to turn the recommendations of the National Commission on Fiscal Responsibility and Reform into legislation.

The simple fact is, every dollar spent servicing our nation's staggering $14 trillion debt is a dollar that cannot be channeled into creating jobs, expanding our economy or other priorities.

The deficit commission's report represents a courageous first step in tackling our national debt and reforming our tax code in ways that make our nation competitive for the 21st century. It would lower tax rates and simplify a system in need of an overhaul. It puts everything on the table, including entitlement spending and defense. The commission laid out a plan to strengthen and protect Social Security for the next 75 years, and that needs to be part of this discussion as well.

Every day that we put off these difficult decisions, more than $4 billion is added to the national debt. While there are plenty of recommendations in the commission's plan that we would not have chosen, one thing is clear to both of us: Our nation will be far better off with a comprehensive deficit reduction plan than without one.


President of the Committee for a Responsible Federal Budget

Here's how it could happen: After a lot of harrumphing, the two parties agree that the fiscal situation has to be fixed and what should be achieved as a prerequisite for increasing the debt ceiling (though not necessarily how to do it). Let's say they agree that until a plan is passed to reduce the debt to 60 percent of gross domestic product by the end of the decade and stabilize it thereafter, the debt ceiling is increased only in three-month increments. So, no more punts.

Republicans try their hand at an all-spending-cuts plan. They eliminate foreign aid, farm subsidies and earmarks; cut welfare and funding for highways, education and the workforce; fix Social Security (through spending cuts only); and repeal the 2010 health-care law. And they still are not there. So they cut defense, cut domestic discretionary further and . . . lo and behold, they are still short trillions.

The Democrats' plan lets the tax cuts for the well-off expire, adds a millionaire surtax and lifts the cap on Social Security payroll taxes. They cut earmarks, too. And the deficit not only rages on, it continues to grow forever, since they didn't fix the problem area: entitlements.

Finally, it is made obvious to them and the country that extreme approaches to deficit reduction just won't work. And so they (gasp) compromise. I don't know that the chances are good, necessarily, but I am going to hold out hope that it is possible.


Senior fellow at the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center

Prospects for a major budget deal in 2011 are small. There is plenty of blame to spread around - including on the administration and congressional Democrats.

But one reason for pessimism to highlight is the "no new taxes" pledge, which has been signed by almost every congressional Republican - 235 out of 241 in the House and 41 out of 47 in the Senate - including the House speaker, the Senate minority leader and the leading Republicans on the two budget committees. This, despite the fact that Republicans have repeatedly voted for increases in spending throughout the past decade, including the biggest deficit-financed entitlement in the past 45 years, the 2003 Medicare prescription drug benefit.

Virtually every serious student of the budget understands that a major deal will require both tax increases and spending cuts. Budget discipline works only when it is imposed on both sides of the ledger. In the 1983 Social Security reforms and the 1990 and 1993 budget deals, Congress did just that, slashing spending and raising taxes.

In 1981 and 2001, by contrast, massive tax cuts did not lead to reduced spending, despite the hopes of those who espouse the "starve the beast" theory of fiscal reform. Instead, the tax cuts were followed by big increases in spending, boosting the deficit from both sides. And the result is clear: If some politicians refuse to ask their constituents to contribute to solving the fiscal problem through higher taxes, other politicians will see no reason to ask their constituents to endure lower benefits.

The only way out in the current Congress is for the Republican members to violate their no-new-taxes pledge en masse.


Chief economist at the Concord Coalition and blogger at EconomistMom.com

If a "serious" budget deal means making the tough choices required to take us off the unsustainable course the federal budget is on, the chances for such a deal this year are basically nil. No one in Washington is into the mutual-sacrifice type of compromise needed to reduce the budget deficit. They've been too busy blaming each other for our fiscal mess and seem to believe that moving first on the solution is like admitting guilt - when the truth is that they're all guilty, and we Americans are all guilty, of perpetuating fiscally irresponsible policies.

The Obama administration points to the tax cuts passed in the lame-duck session as evidence of its ability to lead on bipartisan compromise. But compromise is pretty easy when everyone gets everything they want rather than everyone having to give up something they want.

A truly serious bipartisan budget deal would require a willingness on the part of Democrats to consider (progressive) cuts to Social Security and Medicare and on the part of Republicans to accept (economically efficient) increases in tax revenue. As the president's fiscal commission suggested, tax reform that raises revenue progressively but efficiently by broadening the tax base seems a very promising area for bipartisan compromise. Yet Obama "leads" by proposing nearly the opposite in his budget - that the bulk of the inefficient, unfair and hugely revenue-losing then-Bush, now-Obama tax cuts be permanently extended even beyond their two-year "compromise."


Senior fellow at the Brookings Institution; member of the National Commission on Fiscal Responsibility and Reform; co-chair of the Bipartisan Debt Reduction Task Force

Here is an optimistic scenario that could result in a serious long-run budget agreement this year: First, a bipartisan group of senators crafts a long-run budget plan that slows the future growth of Medicare and Medicaid, puts Social Security on sound fiscal basis, simplifies the tax code to raise more revenue from broader base with lower rates, and caps discretionary spending (defense and domestic). This step doesn't take long, because the bipartisan group is already working and has the Simpson-Bowles and Domenici-Rivlin plans to build on. Next, the president and the House leadership join the negotiations. Political perceptions begin to shift. After the sharp world-market reaction to the brief battle over the debt-ceiling increase, all participants are scared of not acting. Fear of taking the first step to slow entitlement growth or raise additional revenue is replaced by fear of being blamed for blowing up the deal and throwing the economy into a new tailspin. The deal no one thought possible is signed in the Rose Garden in the October sunshine, markets react positively, business steps up hiring and economic growth accelerates.

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