Obama Fiscal Commission Already Treading Water

The Fiscal Commission (headed up by former Senator (R-WY) Alan Simpson and former Clinton White House staffer Erskine Bowles) is reporting a deep divide among their members and is calling into question their ability to unanimously agree to the measures needed to overcome the giant budget deficit we face as a country.

"The co-chairmen of President Obama's debt and deficit commission offered an ominous assessment of the nation's fiscal future here Sunday, calling current budgetary trends a cancer "that will destroy the country from within" unless checked by tough action in Washington.

"There are many who hope we fail," Simpson said at the closing session of the National Governors Association annual meeting. He called the 18-member commission "good people with deep, deep differences" who know the odds of success "are rather harrowing."

The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. "The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans -- the whole rest of the discretionary budget is being financed by China and other countries," Simpson said.

"We can't grow our way out of this," Bowles said. "We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. . . . The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that."

Bowles is dancing around what should be the primary mission of the Commission, which should be recommending spending cuts and not tax increases.

The federal government budget has expanded massively since 2000. Bringing federal spending back in line with the amount of spending undertaken in the year 2000 would go a long way towards reigning in the current budget deficit.

The Commission appointees and members of Congress know that tax increases will stifle investment and savings, and would not improve the outlook for jobs.

The choice for the Fiscal Commission is simple. Once they stop thinking of ways to provide cover for Congressional Democrats by proposing tax increases, they can get down to the real business of ending the budget deficit through spending cuts.

Obama's Fiscal Commission Starts Their Journey

President Obama's Fiscal Commission, chaired by former Senator Alan Simpson (R-WY) and former Clinton Administration official Erskine Bowles recently met for the first time, and made the predictable statement that "every option is on the table".

"The panel is examining ways to cut costs and boost revenues to produce a maximum deficit of $550 billion by 2015, an amount equal to about 3 percent of the total U.S. economy. That would require deficit savings of at least $250 billion, the Associated Press reported.

The commission will hold its first meeting on Tuesday, and President Obama said there are no restrictions on its recommendations: “Everything has to be on the table,” Obama said on Tuesday. That means tax hikes and entitlement cuts are possible."

If the goal of the commission is reduce the deficit to "only" $550 billion in five years, that's a very modest goal indeed. The ability of the U.S. government to successfully finance its deficits for years to come should not be assumed away, and consequently a much more aggressive approach by the Fiscal Commission (say, to eliminate all deficits within 3 years) would be appropriate.

What seems to be in the cards at this point though is a recommendation from the Commission to "fix" the deficit by cutting spending and raising taxes.

"Solutions – as spelled out by (Ben) Bernanke, White House budget director Peter Orzsag and other experts – entail some combination of changes to Medicare, Social Security and other entitlement programs, cuts in other spending and higher tax revenue."

Regarding the approach to be taken by the Fiscal Commission, it's clear that the government is living well beyond its means, and the solution to correcting that is to slash spending and not to heap yet more taxes on the backs of our already-burdened taxpayers.

America was founded a couple hundred years ago as the land of the free, and we cannot be free as a people if more and more of the fruits of our labor is stolen in order to fund economically and socially worthless government programs.

Excerpts from Interview with Bob Kerrey

Former two-term Nebraska Senator Bob Kerrey was recently interviewed by Tax Analysts (TA), and offered some interesting insights into the state of the recent Fiscal Commission established by President Obama.

"TA: What do you think the chances are that the current commission achieves its goals?

Kerrey: I think the president selected two really good people (subscription required). He started it off absolutely the way it needs to be started off, with a strong Republican [former Wyoming Sen. Alan Simpson] and a strong Democrat [former White House Chief of Staff Erskine Bowles] on the commission cochairing it."

Seriously, with a couple of has-been's or never-were's running it, this commission is dead before it even meets for the first time. The best that can be said about former Senator Alan Simpson is that he is now irrelevant. The best that can be said about former Clinton Chief of Staff Erskine Bowles is that he has never been relevant.

Next up, the interviewer from Tax Analysts attempts to gauge whether the commission will ultimately recommend tax hikes.

TA: A lot of people wonder whether Republicans on the commission would be able to accept the more Democratic view of how to solve the problem, perhaps through the tax code. Is Alan Simpson someone who you think could accept that?

Kerrey: I think the facts show that this is a problem that wasn't created by Republicans or Democrats. It's a demographic problem, and you can't blame the size of the baby-boom generation on Republicans or Democrats. It's their claim on Medicare and Social Security that's the challenge. You could say the Republican view is, well, no tax increases under any circumstances. But that was not their position in '83 when they participated in solving the cash flow problem of Social Security. So I don't know in this particular case whether there is a Democratic or Republican point of view when it comes to at least agreeing on the nature of the problem.

Kerrey's response is simply ridiculous.

First of all, the fact that the elected politicians in Washington DC are blowing the doors out with spending has nothing to do with demographics, and everything to do with a lack of fiscal discipline, and completely irrational overspending in hopes of winning the favor of various voter blocks.

Secondly, tax increases will not be supported by any Republican that has any hopes of staying in office beyond their current term.

Therefore, this commission is destined to ultimately split on party lines (Democratic "solution" = tax hikes, Republican "solution" = no tax hikes), with no realistic, growth-oriented solution recommended.