Closing Budget Deficits: An Entitlements Commission is <i>Not </i>the Answer

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

June 24, 2008

Thank you for your invitation to testify today on H.R. 3654, which would establish a federal budget commission to ‘reform tax policy and entitlement benefit programs and ensure a sound fiscal future.’ My testimony will develop the following themes:

The premise of the bill is correct in part; the United States faces daunting projected fiscal deficits. Early action to prevent them, while not urgent, is desirable.

The bill mischaracterizes the source of these deficits. They derive entirely from projected increases in national health care spending, not from problems peculiar to government health care or entitlement spending.

Materially slowing the growth of Medicare and Medicaid apart from general health system reform is impossible, unless the nation reneges on its commitment to assure the elderly, disabled, and poor health care roughly comparable to that available to the rest of the nation.

The specification of ‘issues to address’ and ‘policy solutions’ in section 3 of H.R. 3654 is unbalanced. For example, the draft bill specifies as a ‘policy solution’ limits on entitlement spending, but does not mention as a ‘policy solution’ curbing in tax expenditures that putatively serve the same general objectives as direct spending, but benefit different groups.

The draft bill virtually invites ‘game playing,’ as policymakers could avoid hard choices by manipulating long-term projections with artful assumptions, scoring methods, or other tactics for avoiding hard choices. Such practices were used extensively to subvert the Gramm-Rudman-Hollings targets in the 1980s. H.R. 3654 could actually obstruct desirable action to address projected long-term budget deficits.

Commissions never solve complex problems unless members of Congress are prepared to address the underlying source of those problems.