The Fiscal Responsibility Act of 2023 (H.R. 3746) is a done deal. The federal government avoided a debt default, at least for now.
Shortly before President Biden signed the legislation, House Speaker Kevin McCarthy, R-Calif., made an interesting remark. Acknowledging that the new law was a stopgap measure, he proposed a bipartisan commission to explore the kind of broader reforms that will be necessary to address the country’s long-term fiscal problems.
I’m not opposed to that idea. It might be just what Washington needs — an opportunity to discuss fundamental budgetary changes in a politically safe environment, where everything is on the table. A genuine tabula rasa.
But before anyone gets too excited, let’s note that we’ve already been down that road — twice in recent memory. Each time, an impressive commission of experts assessed the situation and identified possible solutions. And each time, our political parties experienced convulsions when they saw the details. From their perspectives, the offered cures were worse than the disease.
For the sake of cutting to the chase, I suggest we forgo another well-intended commission on the national debt and revive the findings of previous commissions. They’re not so stale that they’ve lost relevance.
In a 2010 executive order, President Obama created the National Commission on Fiscal Responsibility and Reform to take on the task that McCarthy now envisions. The commission consisted of 18 policy experts: 12 members of Congress (split evenly between Republicans and Democrats) and six private citizens. It was chaired by former Sen. Alan Simpson, a Republican, and former White House chief of staff Erskine Bowles, a Democrat; the group’s findings are known as the Bowles-Simpson report.
Also in 2010, a bipartisan think tank convened a debt reduction task force of 19 policy experts with diverse backgrounds and charged it with the same job. The task force was chaired by former Sen. Pete Domenici, a Republican, and former Federal Reserve Vice Chair Alice Rivlin, a Democrat. The task force’s initial report was updated (Domenici-Rivlin 2.0) in 2012.
Which debt reduction plan is better: Bowles-Simpson or Domenici-Rivlin? It’s hard to answer that question because I’ve always regarded the two as being essentially the same in spirit, if not in detail. They’re loaded with bold ideas that go against orthodoxy.
The plans are guaranteed political enemies in perpetuity because both threaten the sacred tenets of our tax-and-spend system. Progressives detest that they’d cut entitlement programs; conservatives loathe that they’d raise income taxes. For example, consider the following snippets from the tax reform discussion of the Domenici-Rivlin plan:
- The individual income tax would consist of two brackets, with rates of 15 and 28 percent.
- The standard deduction would be eliminated.
- Capital gains and dividends would be taxed as ordinary income.
- The itemized deduction for charitable donations would be replaced by a 15 percent refundable credit.
- The itemized deduction for home mortgage interest expense would be replaced by a 15 percent refundable credit and capped at $25,000 per year.
- The itemized deduction for state and local taxes would be eliminated.
- The income exclusion for employer-provided health insurance benefits would be phased out over 10 years.
Each proposal has intellectual merit but wouldn’t be popular. Sure, we could empanel another commission to solve the national debt — but how would we respond when it presented us with proposals like these?
Our next experience with a debt reduction commission will play out exactly like the last two. Washington will do the same thing it did a decade ago: It will ignore the recommendations and return to business as usual. We like to think we’re serious about debt reduction, but all the evidence suggests we’re not.
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