For the past several months, talk has been heating up about the imminent creation of a bipartisan debt commission, seeking to reduce the deficit and national debt. Pretty much everyone is in agreement that Washington's tab is like a runaway train. But almost everyone with any sense also agrees that trying to force that train a sudden, grinding halt right now would throw the economy into chaos. But some concrete plans of how to tackle the problem once the economy can handle it would be nice, and that's why a debt commission sounds like a pretty good idea. But several challenges lie ahead.
The first is fundamental: who should create it? The Obama administration is ready to do so with an executive order. But some fiscal responsibility advocates in Congress don't think that's such a good idea. The Wall Street Journal's Real Time Economics blog reports that a group, including Sen. George Voinovich (R-OH), is urging the President not to go the executive order route. RTE explains the worry:
The commission is expected to be the centerpiece of a fiscal 2011 budget blueprint, out Feb. 1, that will be swimming in red ink. Voinovich, along with more than a dozen other senators, wants to create the commission with legislation, not the stroke of a presidential pen. That way, the commission's mandate would have the force of law, and that mandate can force an up-or-down vote on the commission's recommendations in Congress. An executive order cannot force a vote, and therefore, the senator believes, will be toothless.
I think that's right. There are a few ways to make this commission worthless. One way would be for it to be seen as having no Congressional authority. Why does President Obama want to go this route? If giving him the benefit of the doubt that he actually wants an effective commission, then the reason must be that an executive order is the only thing that he feels will work.
The article goes on to say that the White House believes Democratic leaders Nancy Pelosi, David Obey and Charles Rangel will fight such a commission, because they won't want their power watered down. After all, such a commission might actually (gasp!) force them to spend responsibly. Naturally, without a commission, they would exert little effort in striving to reduce the deficit.
And I don't mean to single out the Democrats: the Republicans aren't any better on the deficit front. They've developed deficit reduction as a major platform position -- recently. You might remember that the Republican-controlled Congress under George W. Bush squandered the Clinton budget surpluses through tax cuts. They could have used that money to pay down the debt, but declined to do so. Then the U.S. became embroiled in a war in the Middle East and even more was spent, with less tax revenue to pay for it. That was all before the Great Recession added even more to Congress's tab.
The problem is that Congress is a subprime borrower. They don't make enough money (tax revenue) to pay for their spending, but continue to incur additional debt nonetheless. Unfortunately, the bankruptcy code for sovereigns isn't quite as forgiving as it is for Americans.
I don't mean to be melodramatic. The U.S. isn't going bankrupt anytime soon, or probably ever. But the current path is unsustainable. Congress needs to see this unmistakable reality, authorize a debt commission and give it broad powers.
That commission should focus on a debt reduction plan that utilizes economic triggers. It should institute a mix of spending cuts and tax increases once the economy has certain characteristics. For example, it could say something like, "Once unemployment declines to 7 percent, increase taxes by x amount on y band of the population. At that time, also decrease all federal budgets by z percent." When unemployment hits 6 percent, another trigger can hit, with more drastic debt reduction tactics. And by the way, the commission needs to figure out a way to prevent future Congresses from undoing its work here.
Instead, as Derek noted about a month ago, the commission is likely to take the opposite form: there's talk that it would require a supermajority to pass the commission's guidelines. Of course, getting those votes is a completely unreasonable expectation. So the commission's findings and plans would probably end up collecting dust in the Congressional archives and would largely be ignored. So this is the sort of a constraint that would render a commission essentially useless.
Congress needs to show a little restraint when it comes to its usual love of spending and tax breaks and establish a commission that will produce a real, tangible plan to reduce the nation's debt burden. If it doesn't, then eventually its creditors will choose to stop providing the country with any more debt and will force its hand anyway. And that will be a very, very bad day.