Looking beyond the pitched battles over specific spending cuts and tax measures to reduce future deficits, the Peterson-Pew Commission on Budget Reform urged Congress today to overhaul a budget process that it said runs largely on autopilot.
The group, made up of fiscal policy experts tied to both parties, is urging Congress to adopt new rules for setting public debt-reduction targets and then sticking to them. But with Congress torn by partisan warfare and leaders in both parties reluctant to give up power, it’s not clear whether the proposals will get traction in the new Congress.
In the report released this morning, Getting Back in the Black, the commission outlines a target-and-trigger method of reforming the process to make it “more farsighted, disciplined and transparent.”
The commission recommends a "Sustainable Debt Act" that would establish a medium-term debt target as well as annual savings targets, arguing that binding Congress and the president by law to those goals would result in a more orderly and accountable method of drawing up budgets. The installation of specific targets that hew to longer-term goals, it said, would be an improvement over what is now a haphazard system of "short-term appropriations or continuing resolutions, followed by huge omnibus spending bills, with occasional piecemeal enactment of changes in other spending or tax laws."
As part of the plan,the panel proposed that Congress create flexible budgets and set aside extra money in years when revenues are stronger than expected as a cushion for years with unexpected downturns. The preliminary objective would be to peg the debt at 60 percent of GDP by 2018. Without changes to current law, budget analysts predict, the government's publicly held debt will reach 100 percent of GDP by early in the next decade and climb faster after that.
Most importantly, the panel said, the president and Congress would be held to their budget targets by a slew of enforcement measures, including a stronger pay-as-you-go law and statutory multi-year discretionary spending caps.
Various automatic triggers would impose spending reductions and tax increases if the budget ran off course, but those enforcement measures are likely to be controversial. Longer-term goals for Social Security and health care would also be linked to automatic caps on spending -- a move that many politicians would oppose.
Furthermore, the group recommends that tax expenditures -- which have traditionally stayed under the radar -- be reclassified as entitlement spending in order to be “fully incorporated in the annual budget process.”
The report, which largely avoids the nitty-gritty of recommending specific cuts, does issue this warning: “The most important part of maintaining long-term sustainability will be reforming the drivers of budgetary imbalances: healthcare, Social Security, and tax expenditures. Without significant changes to those budget components, the overall imbalance between revenues and expenditures will grow -- even if the medium-term debt stabilization target is met.”
It goes on to recommend that a separate package of policy changes addressing entitlement spending in the long term be adopted soon, so legislators can phase in the changes gradually.