Give the Presidential Deficit Commission a Chance

The Presidential Deficit Commission announced recently is the best remaining hope to restore fiscal sobriety to the U.S. government.

Many budget experts would have preferred a statutory commission. But, when the Gregg-Conrad proposal was defeated in the Senate, that means of restoring sound fiscal policy was lost. Continued reliance on the only other alternative, the normal legislative process, is unlikely to change our steady record of fiscal inebriation.

The legislative process, even in its kinder and gentler days, has produced little but increasing deficits and debt in the last four decades. The sole exception was a handful of surpluses in the Clinton era, now a dimly recollected memory.

In the current environment the wells of legislative comity have been poisoned. There is now even less chance that a reasonable fiscal policy can emerge. Where there is no trust, agreement on anything is difficult. Therefore, the presidential commission is not only the best remaining hope, but also it may be the last remaining hope before the credit markets impose their own crude fiscal discipline.

Although the president may have been slow to endorse the Gregg-Conrad Bill, he has moved promptly and well on his commission. He has received commitments from the majority leaders of House and Senate that the commission’s recommendations will be given an un-amended vote. Nothing can be guaranteed in the legislative arena, but the promises of “best efforts” is a good start.

Next, he has recruited two competent, highly-regarded co-chairmen. Erskine Bowles and Alan Simpson. Both have excellent records of consistent, first class public service. Neither needs any introduction to the Washington scene, but both have the advantage of having been removed from it for years. If the rest of commission matches the quality of the co-chairs, the commission has at least a chance for success.

But, does our government really need a belt tightening exercise? Have the “budget scolds” exaggerated the peril of our fiscal position? The strong preponderance of opinion of experienced “budget experts” is that the fiscal position of the U.S. is dangerous and worsening.

The U.S. has run up a monotonous string of deficits. Its debt to GDP ratio has risen steadily. The sky has not fallen yet, so why worry? Unfortunately, things are different now. Under the president’s budget, the debt to GDP ratio will rise to over 70% in ten years. That’s not armageddon, but its high enough to cause doubt that the U.S. will have the flexibility to manage future economic or security emergencies.

Worse, nearly half of that debt is now held off-shore. Imagine the U.S. in the position Greece is in today with foreigners dictating our economic policies. And the bond rating agencies talk of about downgrading U.S. debt may be premature, but it is a frightening warning.

Under current policies, the long term probabilities are the most terrifying. Our entitlements, social security, medicare and medicaid grow, automatically. So will our interest payments on the debt. Even at higher than current tax rates, other activities of government, even security, will, inexorably, be squeezed out.

We have had plenty of warnings. Inaction, the last refuge of politicians, is no longer an option. The fun stuff, hand-outs, earmarks and tax-cuts, must be sharply reduced. Reorienting fiscal policy back to the path of good sense and reason will require a process of many years.

And more than time, it will take leadership, and a good deal of followership, both scarce commodities in Washington today. It will also require a real understanding across the country that we will have to pay for what we want from our government.

The president, in what may be his best act of leadership, has taken the initial step forward. The odds, and the record, would indicate that the commission will probably not be successful. But it has a chance, and it is now our best chance.