Time for a Budget Summit

Bill Frenzel and
Bill Frenzel
Bill Frenzel Former Brookings Expert
Leon Panetta
Leon Panetta U.S. Secretary of Defense

November 5, 2006

Deficits of hundreds of billions of dollars a year are projected to last for decades; efforts to reform Social Security have fallen flat; and no one is talking about the elephant in the room—how to fix the nation’s health-care system. We do not know what the makeup of Congress will be following the November elections, but there is one thing we know for sure: the state of fiscal affairs will still be a disaster.

Leaders of both major parties should agree that no matter how Congress is divided, they will tackle these pressing issues on a bipartisan basis. While disappointing, it is not surprising that there has been bipartisan foot-dragging in confronting the realistic solutions to the nation’s budget problems—the fixes are difficult. Even the suggestion of the real choices—increasing taxes and cutting spending—is met with outrage, accusations and political attack ads. Few candidates in this election cycle are running on a platform of fiscal responsibility and, as they try to outdo each other, the unaffordable promises continue to mount.

Nobody likes the options for rebalancing the books, but the alternative of waiting until external events such as a currency or financial market crisis forces our hand is something everyone should like even less. The most promising plan of attack is to convene a bipartisan summit such as the Andrews Air Force Base Summit of 1990 that laid the foundation for the switch from deficits to surpluses that followed in the next decade. Both of us participated in that summit, and it worked.

What is needed now is for members of both houses, both parties, and the president to roll up their sleeves and grapple with these issues. No more denial. No more happy talk. No more delay. An equal number of Republicans and Democrats, along with the president, should participate, no matter how Congress is divided following the election, no matter which party is the majority, so that no single party will dominate the discussions or bear sole accountability for the choices.

The purpose of a summit should be to close the gap between spending and revenues in this country. In the short term, that means returning the budget to balance or at least, reducing the deficit significantly. In the longer term, it means finding a way to deal with the trillions of dollars in unfunded promises in Social Security and Medicare. In order to accomplish these tasks, the starting point will have to be that everything is on the table. This includes farm subsidies, defense, programs for the poor, programs for the rich and taxes. Everything.

Budget rules, such as spending caps that limit how much can be appropriated each year, and pay-as-you-go rules that require new tax cuts or entitlement programs be fully paid for, have been helpful in the past in enforcing budget deals and should be used again. However beware of politicians promising new rules that will fix the problems; no budget rule can serve as replacement for the real policy choices that are required.

A bipartisan summit will have the significant advantage of lending both parties cover as they make tough choices. If Republicans or Democrats alone were left with the task of cleaning up this fiscal mess, they would undoubtedly be pummeled by the other party. Fear of these attacks means the job will remain undone. Neither party wants the responsibility of having the country’s fiscal imbalances land in their lap. Nor does any candidate who is considering a run in 2008 want these issues pushed farther into the future.

An additional advantage of a summit is that there is such a low level of trust between the two parties that face-to-face negotiations will be necessary just to get key decision makers in the same room talking. We know many of the politicians who will have to lead these discussions; we served with them during our tenures in Congress. We know that the pressure to put politics and self-preservation first is strong. But we also know that if we continue to delay, the price that future generations will pay will be a dear one.

Americans are increasingly concerned about the size of the debt that we are passing on to our children. As we learned in the past, deficits will never be controlled by painless solutions, wishful thinking or partisan rhetoric. It is only through leadership, tough choices and compromise that deficits will be reduced. A summit has worked before; it is time to try it again.