About the author: maya mcguineas He chairs the Bipartisan Commission for a Responsible Federal Budget.
With Congress locked in a siege over whether to fund the federal government or shut it down, a welcome dose of sanity has entered an otherwise dangerous and childish standoff. The idea is to create a bipartisan, bicameral Finance Committee to deal with national issues. debt.
Congress is fighting over the overall level of funding. This makes little sense, given that this level was already set during the debt ceiling debate as part of the Fiscal Responsibility Act. The cap on overall discretionary spending for next fiscal year is set at $1.59 trillion, with $886 billion for defense and $704 billion for non-defense. But members of both parties in the Senate are pushing for spending above the cap, and a group of Republicans in the House are pushing for spending below the cap. While it is true that FRA did not save nearly the amount needed to fully address its fiscal challenges, it was a solid first start. Moreover, a transaction is a transaction.
Sadly, governing by crisis has become the norm. Our nation’s leaders now seem unable to avoid rushing headlong into another confrontation, giving the media a clock of yet another disaster and ramping up the news.
Advertisement – SCROLL TO CONTINUE
We have to improve more.
Sadly, even if the government funding problem were resolved, our nation’s fiscal trajectory would still be unsustainable. The United States has borrowed about $2 trillion in the past year and is on track to rack up another $19 trillion in debt over the next decade. Interest costs on debt are the fastest growing part of the budget. Just four years from now, the federal government is expected to spend more on debt service than on national defense. The proportion of debt in our economy will soon be the highest in our nation’s history. Our major programs, Social Security and Medicare, are headed for bankruptcy within a decade. And there have been signs over the past week that Congress is considering additional borrowing.
Balancing the budget would require nearly $15 trillion in savings over the next 10 years, a goal clearly out of reach. But even just stabilizing debt at less than 100% of gross domestic product, or keeping it below the size of the economy, would have a big effect. Achieving this goal will require $6 trillion in difficult but doable savings over 10 years that will meaningfully grow our nation’s economy, improve our preparedness for future emergencies, and Enough to strengthen national security.
Advertisement – SCROLL TO CONTINUE
That’s why, in the midst of fighting the government shutdown, a bipartisan group of lawmakers led by Rep. Bill Huizenga (R-Mich.) and Rep. Scott Peters (D-Calif.) created a new Finance Committee.
The Fiscal Commission Act will focus on reducing medium- to long-term debt. We are learning the lessons of past committees (some that worked, some that didn’t) to maximize our chances of success. This skillfully includes both current members and outside experts. It has an ambitious but achievable goal of stabilizing its debt. Requires bipartisan recommendations and provides an expedited decision-making process.
Perhaps most importantly, everything will be up for debate, including revenue and mandatory spending. As any serious person knows, that’s the only way to truly get out of debt. The bill also requires reporting to the committee before the next debt ceiling is reached, but given the risk of default, we cannot afford to go through this showdown again.
Advertisement – SCROLL TO CONTINUE
Some may criticize the committee as a pursuit of tax increases. The truth is, there is no way to resolve fiscal imbalances without increasing revenue, and those who promise otherwise are simply reckless. And there will be accusations that this is a ploy to cut social security. The truth is that Social Security will go bankrupt within 10 years, at which point it is legally required to limit benefits to income and cut benefits across the board. This equates to a reduction of approximately 23% for everyone, whether they need it or not.
This kind of baseless demagogy shows exactly why we need a Finance Commission. Fees are not a solution to your financial outlook, but they are a way to facilitate necessary adult conversations about your financial future.
Historically, committees have shaped both fiscal and non-fiscal policy with equal importance. In the 2010s, the Simpson-Bowles Commission proposed recommendations that, although not fully adopted, seeded other fiscal improvements, such as spending caps, which were enacted in 2011 and updated by FRA. In the 1980s, President Ronald Reagan and Chairman Tip O’Neill used the Greenspan Commission’s recommendations to negotiate measures to save Social Security from exhaustion. And the 9/11 Commission and several Base Realignment and Closure Commissions kept us safe and protected our national security at home and abroad through sometimes controversial but ultimately successful efforts. It has been used to improve.
Our financial challenges may be daunting, but they are not insurmountable. A finance committee can not only help correct the fiscal trajectory, but also be an important step in finding ways for lawmakers to work together to solve big problems with courage, cooperation, and compromise. . This is something we desperately need.
These guest comments are written by authors outside of Barron’s and MarketWatch’s newsrooms. They reflect the views and opinions of the author. Send commentary suggestions or other feedback to ideas@barrons.com.
