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Deficit Commission Runs Up Against Unreality

First, a shout-out to two of the great heroes of public service in the country, Alan Simpson and Erskine Bowles.

Simpson takes a lot of heat for his sometimes outrageous interjections, a lifelong habit for a blunt-speaking, passionate man. I won’t even begin to justify his bone-headed statements (for that matter, neither would his wife, Ann.) But I can say, from years of working with him when he was in the Senate and in the time since he left, that no one cares more about the future of the country, has more respect for our institutions of governance and can always be counted on to saddle up for the often-thankless tasks of trying to improve the country’s political system. Bowles does not make outrageous statements, and is much less colorful than Simpson. But he is also someone who can be counted on to step up for the country.

The “chairman’s mark” from these two leaders of the president’s fiscal commission is not going to be adopted in toto; indeed, many parts of it will never make it beyond their first cut. There is a whole lot to criticize in it. But that would be true of any serious effort to cut future deficits. What makes it valuable is that by making clear that solving or ameliorating the problem means taking on revenues and spending, and every single category of spending, it changes the dialogue at least a bit away from the unreality that otherwise has dominated the campaign and Congress on fiscal issues for months, indeed years, and that threatens to get even worse.

One part of that unreality is the tax issue, and the absurdity that the only two core proposals on the table to deal with the Bush tax cuts would mean either a $3 trillion additional debt hole (the Democrats’ alternative) or the Republicans’ favored $4 trillion hole. Both sides favor making huge tax cuts permanent, which means that any future adjustments, including serious reform proposals, would be much more difficult. This is what passes for fiscal discipline.

The second part of the unreality is the obsessive focus on earmarks. I share the disdain of Jeff Flake (R-Ariz.) for an earmarking process that careened out of control, operating like a bazaar where Members could trade earmarks for favors like campaign contributions, and in many cases use them for personal enrichment (not just direct bribes, but manipulation of roads or highway entrances and ramps to enhance the real estate investments of Members or their relatives or friends.) The earmarking process, if it is not disciplined and transparent, is a potential hothouse for corruption.

But the idea that eliminating earmarks has anything meaningful to do with the debt problem is fanciful. Eliminate Congress’s ability to manipulate $15 billion yearly in earmarks and you will not eliminate $15 billion in spending — or $5 billion or $2 billion. You will change the way it is allocated; some of the allocation power will go to bureaucrats, some will stay with Congress through more subtle methods of influencing bureaucratic decisions. I would not lose a minute’s sleep if earmarks disappeared, and I would applaud any efforts that reduced the corrosive allure that too damn much money in Washington brings. But the debate over earmarks is raising public expectations that it is meaningful spending discipline. It is not.

Third in unreality is the near-universal focus on spending freezes and spending caps. It is so much easier to pass the buck by saying you will freeze spending than it is to specify where the priorities should be for spending cuts, and where the country needs or would benefit from more spending. Even more outrageous is when the freeze debate focuses only on discretionary domestic spending. Imagine if Congress did pass a statutory freeze on such spending at 2008 levels. What happens after the next terrorist attack, the next hurricane, the next epidemic, the next food crisis? Will Congress continue mindlessly to cut DHS, FEMA, CDC, FDA, Animal and Plant Inspection? What happens when real-world conditions change? But let’s make the leap of faith and imagine it works. That saves $100 billion, which is more than a drop in the yearly bucket, but not much more.

Fourth, and perhaps topping the unreality list, is the blizzard of proposals to pass a constitutional amendment requiring a balanced federal budget. This, of course, is even more the refuge of wusses than the freeze — an easy cop-out instead of doing the hard work like Simpson and Bowles. But it is worse than that — much worse.

When economies slow or collapse, government needs to step in with counter-cyclical fiscal policies. But one of the core elements of our political economy is that we have a federal system in which 46 of the 50 states have their own constitutional balanced budget amendments. That means when there is a serious downturn, the states all have to raise taxes and/or slash spending. And that means in turn that our states create an enormous fiscal drag at just the time that we need to provide stimulus.

It is up to the federal government to counter the states and get the economy moving. Indeed, the problem with the 2009 stimulus package was that it only provided enough money to offset the states’ fiscal drag, not enough to provide the real stimulus that was needed to jumpstart the economy. Pass a federal constitutional amendment to balance the budget and you take away the most potent weapon in our arsenal to combat recession and depression — and we could count on more and deeper recessions and depressions, and policy driven not by the real forces on the ground but by inflexible and reflexive boundaries.

Simpson and Bowles have at least forced us to move away from empty gestures and false panaceas to understand the real stakes, the excruciating challenges, the long slog to a containable deficit and debt situation. Maybe, given our divided and dysfunctional politics and shallow media, that is all we can hope for.

Norman Ornstein is a resident scholar at the American Enterprise Institute.

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