Zen deficit reduction?(Read article summary)
The American public may have just convinced Congress to do a better job in negotiating deficit reduction the next time around
Joshua Roberts / Reuters / File
Sundayâ€™s Washington Post had this very hopeful front page story, with several quotes that give me optimism about the willingness of members of Congress to just do better in their deficit reduction negotiations the next time around. See, it turns out that the great peer pressure of the American public actually works. Skeptics may ask why the next round should be any different from the last roundâ€“itâ€™s not like we were lacking bipartisan policy ideas the last time aroundâ€“but as the story and in particular Alice Rivlin explain, this time around really is different, politically, just because weâ€™ve already lived through the last time around:
Committee members might be eager to have their deliberations at least appear less rancorous than the negotiations over raising the debt ceiling that resulted in the panelâ€™s creation.
But the tone of comments also suggests that after that hard-fought battle there might be a brief moment of opportunity to do what has eluded other bipartisan panels and special fiscal commissions.
â€śThereâ€™s a potential for a bipartisan deal here. There has been for a while,â€ť said Alice Rivlin, a former White House budget director who chaired the Bipartisan Policy Centerâ€™s Debt Reduction Task Force. â€śThe new element is the revulsion of the country and the world at the spectacle that we have just lived through.â€ť
And despite being labeled by some (based on his overall voting record) as the â€śmost liberalâ€ť of the super committee members, congressman Xavier Becerra doesnâ€™t seem at all stuck in any ideological bunker when he puts it this way:
Rep. Xavier Becerra (D-Calif.) pledged to â€śbe as open as possible, check my ego and my preconditions at the door and let the work of the committee drive us to a conclusion.â€ť
Itâ€™s consistent with my column in todayâ€™s Tax Notes (subscription-only access to my column here), where I put on my yogi hat (while sitting at my budget analyst desk) and explain the tremendous potential, still, for base-broadening, deficit-reducing tax reform to come out of the super-committee round of the debt limit deal:
Having spent the past weekend in a yoga workshop where I was encouraged to look at the positive, let me try an â€śisnâ€™t it great that . . .â€ť perspective on this debt limit deal. Isnâ€™t it great that policymakers on both sides of the aisle and both ends of Pennsylvania Avenue didnâ€™t solve the whole problem this time around? They clearly werenâ€™t ready to, and if they had committed to policies anyway, they surely wouldnâ€™t have been well thought out. Importantly, taxes probably would have been off the table for good.
It turns out that our still-dysfunctional political process did something pretty good in coming to the debt limit deal (besides avoiding default, I mean). They opened up a lot of space to increase tax policyâ€™s role in the second phase. There is a lot of wiggle room for revenues between the current-law baseline and the policy-extended baseline.
I then call for a commitment to stick to strict pay-as-you-go rules on the extension of any expiring tax cuts (especially the then-Bush-now-Obama ones), and specific recommendations for reductions in tax expendituresâ€“i.e., revenue increases gained by broadening the income tax base from its current definition. Now, there are a lot of technicalities to work out between now and November in terms of how a paygo commitment on the Bush tax cuts could be scored, but no matter what the official baseline, base-broadening tax reform would always â€ścountâ€ť as deficit reduction relative to current law (and not just current policy). And under the baseline that really matters in all this, the â€śbaseline of public expectations,â€ť letting the Bush tax cuts expire, or paying for any extension of any part of them, would also surely â€ścountâ€ť as deficit reduction.
So I am very hopeful that real progress will be made the next time around, especially with members having come out of their past awful behavior with some remorse and now facing some scolding and â€śtherapy workâ€ť back home with their constituents. I conclude my Tax Notes column this way, still in yogic bliss (but really, not on any drugs!), about this potential â€śzen momentâ€ť for tax policyâ€™s role in deficit reduction:
The members of Congress chosen for the special committee have reputations as moderates with experience in working toward bipartisan consensus on budget and financial issues. Public opinion no doubt had great influence over these picks, as recent polls indicate that Americans are quickly losing respect for politicians perceived as unduly catering to extremist views. That same public opinion is likely to keep pressure on the committee to follow through and come up with major policy solutions that can earn bipartisan support.
So donâ€™t count tax policy out of the debt limit deal. It may turn out just fine. Letâ€™s harness the power of positive thinking and seek a better path to deficit reduction. Promoting the possible in this fiscal policy present moment is far more likely to lead to success than continuing to dwell on past mistakes. Iâ€™m convinced that this is the secret to getting our fiscal house in order while best promoting a civilized society.
Yes, itâ€™s corny and incredibly optimistic, but whatâ€™s the alternative, and where would that attitude get us?
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