Proposal: A National Commission on Fiscal Responsibility and Reform

Most prominent economists and the sensible political middle ground in Washington agree that the federal government must eventually address its long run fiscal problem; but they also know that it is not possible to begin to eliminate the budget deficit if tax increases and entitlements cuts are ruled out. The Bowles-Simpson Commission in December made specific proposals, many of which are the sort that we are going to need — all of them highly unpopular….proposals like raising the retirement age, limiting tax expenditures, and raising the gas tax. Many reasonable-sounding editorialists and commentators have said recently that President Obama ought to be brave enough to lead, by coming out in favor of unpopular measures such as those in the Commission’s report. Supposedly the American public is mature enough to rally around such a candid position. read more

The only way to achieve true fiscal discipline: Learn arithmetic

Arithmetic and history. Two of my favorite subjects in school. I covered some history two posts ago (the Whisky Rebellion). Let’s do some arithmetic now.

Attention is currently focused on threats of a government shut-down, either when a continuing resolution is required from Congress in March in order to keep the government operating, or a few months later, when an increase in the national debt ceiling is required. The common description of this showdown as a high-stakes game of chicken has it right. But some of the Tea Partiers say that their goal is literally to avoid an increase in the debt ceiling – not just as a bargaining ploy nor as an abstract goal, but in the sense that they want to cut spending so sharply that there is no need to borrow any more after this spring. Similarly, Senators Mike Lee (Utah) and John Kyl (Ariz.) have revived the proposal for a constitutional amendment requiring a balanced budget. And of course they all want to do it without raising taxes, and in most cases without cutting defense, Social Security or Medicare. Oh, and don’t cut farm subsidies either. read more

Democrats should not rise to the bait of “fiscal conservatives”

I never cease to be frustrated that the current public policy debate is described as a contest of ideas: fiscal conservatives versus liberals. It is not just Republicans or Tea Partiers who believe that they are fiscal conservatives, no doubt sincerely. Democrats and liberals seem to accept this characterization at face value, as does most of the media.

The problem is that a heavy majority of the supposed fiscally conservative congressmen, although passionate about cutting government spending in the abstract, are in truth no better able to find specific dollars of budget cuts that they can support or defend to their constituents than are the Democrats. Factoring in their immutable desire to cut taxes, I believe that if the Republicans were in full control, we would have larger budget deficits in the coming years than if the Obama crowd retained power. This is what happened in a big way when Presidents Reagan and GW Bush took office promising to cut the debt while also cutting taxes. Spending, deficits, and debt soared during their terms, relative to their respective Democratic predecessors. There is no reason to think anything has changed. read more

Jeffrey Frankel's Blog

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Proposal: A National Commission on Fiscal Responsibility and Reform

Democrats should not rise to the bait of “fiscal conservatives”