Senator Murray, Representative Hensarling and Members of the Joint Select Committee on Deficit Reduction, thank you for inviting us to testify on the enormous fiscal and economic challenges confronting our nation.
The testimony we have submitted summarizes more than one and a half years of deliberation by nineteen former senior policy makers ranging from former Democratic mayors of large cities to former governors, to former members of presidential cabinets. The Task Force represented a very diverse cross-section of the nation’s economic and political interests.
The United States faces two huge challenges: (1) accelerating growth and job creation and (2) reducing future deficits to stabilize the debt so that it is no longer growing faster than the economy. These objectives reinforce each other. Faster growth will reduce deficits, and stabilizing the debt will cut future interest rates, reduce uncertainty and enhance growth. This Committee, with its extraordinary powers, has both the opportunity and the obligation to address both challenges.
The Bipartisan Policy Center’s Debt Reduction Task Force urges you put ideology aside, cooperate across partisan lines, and craft a Long term budget plan that will put the country on a path to sustainable prosperity and responsible budgeting. To achieve success, the Committee will have go well beyond the minimum charge of identifying at least $1.2-$1.5 trillion in savings over the next ten years, because even savings of this magnitude would still leave the debt rising faster than economic growth. We believe you should craft a grand bargain involving structural entitlement and tax reform that would save at least $4 trillion over ten years. In order to do so, the Committee should take full advantage of the authority given to it by the Budget Control Act (BCA) in Section 404, and write instructions to compel authorizing committees to produce fundamental tax and entitlement reform and provide for “fast-track” consideration of those reforms.
We believe that a grand bargain would have enormous economic benefits and would also reassure citizens and markets that our political process is functioning in the public interest, not stuck in partisan gridlock or overwhelmed by special interests. Failure to reach agreement (or even settling for the minimal $1.2 trillion savings) would increase the chances of continuing weakness in the economy, high joblessness, and deep distrust of the ability of elected leaders to govern.
The BPC recommends a three-step process in order to spur our economy, achieve savings and stabilize our debt:
- Step 1 was passage of the BCA, which provided $900 billion in discretionary savings, similar to the amount recommended by the BPC’s Task Force.
- Step 2 – in progress – calls on the Committee to identify a down-payment of $1.2-$1.5 trillion in net deficit reduction over ten years, which should be accompanied by a full payroll tax holiday to spur the economy. The deficit reduction should utilize the many bipartisan plans that have been released, combining spending cuts from all parts of the budget with revenues. These savings also must be real – no budgetary gimmicks. Many of these policies will not be overly popular, but a comprehensive plan – one that addresses every aspect of the budget – is the most politically palatable approach.
- Step 3 requires the Committee to take full advantage of Section 404 of the BCA and instruct the relevant authorizing committees to legislate further reform. The two primary areas of focus should be fundamental, pro-growth tax reform that raises revenue, and structural Medicare reform to ensure the future sustainability and efficiency of the program, as explained in the Domenici-Rivlin Protect Medicare Act.
Should the Committee fail to reach agreement on major reforms that will encourage growth and stabilize our fiscal situation, you will have missed an historic opportunity to set the country on the right track, and the consequences both to the economy and to public confidence could be dire. A sequester would produce mindless, possibly harmful cuts in spending, and even avoiding the sequester by finding $1.2 trillion would only kick the biggest part of the rising debt problem down the road. We urge you to seize the opportunity to get the job done.
The central elements of any grand bargain to stabilize our debt are clear:
- Policies to promote growth and create jobs now;
- Savings from discretionary accounts (which have already been enacted in the Budget Control Act);
- Fundamental health care reform, especially Medicare; and
- Fundamental tax reform that raises revenue.
The Bipartisan Policy Center’s Debt Reduction Task Force, which we co-chaired, only was able to achieve consensus by addressing all four.