This opinion piece was originally published in Spotlight on Poverty and Opportunity under the title “What Happens to the Poor If the U.S. Reduces Its Debt Ratio and Its Deficits?”
Advocates for “the poor” worry what will happen to those at the bottom of the economic ladder should the U.S. put some discipline into its budgeting system. Will they be automatically protected against sequestration and held harmless from the effects of other across-the-board deficit reduction measures?
With three or four private commissions pushing for increased budget discipline, and the President’s National Commission for Fiscal Responsibility and Reform bent on the same mission, people with strong interests in any part of the budget have good reason for concern.
Real budget discipline means reduced expenditures and increased taxes. Everybody’s in it—many will be hurt. A lot of oxen have to be gored deeply to get the debt ratio down to the internationally favored target of 60 percent, even if it takes 10 years to do so.
Special interests great and small, noble and less so, rich and poor, are working overtime to protect their little slices of the budget. That is normal and natural. Unfortunately, if they are all successful, budget reform and debt ratio reduction will fail once more. That may be good for these interests temporarily, but it’s not so good for the Republic.
The President’s Commission is the one to watch. In the unlikely event that it can muster the necessary 14 votes (out of a total of 18 members) to actually propose a fiscal sobriety plan, the majority leaders in both houses of Congress have promised floor votes.
Whether or not a Commission plan receives an immediate floor vote, any plan that garners majority support on the Commission itself is likely to form the basis for budget negotiations in the next Congress.
After the failure of the 1985 Gramm-Rudman plan (and other similar plans), budget reformers today are not relying on across-the-board reductions, except as death threats. The more modern version of discipline calls for intolerable spending cuts and tax increases when budget targets are not met. That is hoped to force Congress to make annual or biennial priority choices or to face an unacceptable alternative.
If budget reform occurs – and it is only possible, not probable – advocates’ jobs won’t change much, except to get more difficult. Everybody’s preferences will regularly be on the table, including entitlements, national security, tax expenditures, education, highways, and, yes, even the poor.
Old programs will get new scrutiny. Free passes will be scarce. There will be no points awarded merely for good intentions. New programs, or expansions, will be difficult. Outcomes and productivity will count more heavily. Ideally, priorities will have to be earned every day. They probably won’t be embedded in the process.
For the interests, this means early intervention at the commission level, including the private commissions. It also means development of a wider base among the policymakers. A few highly placed friends, or one active subcommittee, probably won’t be able to keep programs afloat anymore. And it means frequent program enhancement. Merely serving a demonstrated need won’t do. It will have to be the very best way to serve the need.
Budget reform and fiscal discipline won’t come overnight. A downgrading of U.S. bonds, or a big inflation spike, soaring interest rates, or some other signal that our fiscal position is perilous may have to come first. But, the longer it takes the more severe the disruptions will be.
But reform will come, and, when it does, those who have only been prepared to defend the status quo will find it both sudden and severe.