Printed from the News & Observer –
Published Thu, Aug 04, 2011
Bowles and Simpson: Now the hard work must begin

Last month, President Barack Obama and congressional leaders came close to an agreement that could have set our nation on a sound fiscal path, only to see deal after deal, compromise after compromise, collapse.

The debt deal that Congress finally approved on Tuesday, however, is a start. It calls for at least $2.1 trillion in deficit reduction, including, starting in the fall, caps on discretionary spending worth around $900 billion in savings over 10 years, which is not chump change in anyone’s book. It represents an important first step toward fiscal sanity, and by taking it we have avoided default and thus a potential financial crisis. We hope to avoid a costly downgrade to our debt as well.

The problem with the plan is that it’s just a step forward; it isn’t a solution. It leaves more than half of its work – finding at least $1.2 trillion in savings to avert an automatic set of cuts – to a new bipartisan congressional committee. Even if that committee is successful, more tough work will be necessary to avoid, a few years down the road, another crisis over the deficit.

This country needs a plan to reduce our deficits by no less than $4 trillion in the next decade. It needs a plan to cut more wasteful spending in the defense and nondefense budgets than this deal does. In addition, we must address the unsustainable growth of our entitlement programs and reform the tax code to make it more competitive and more efficient.

The bipartisan committee must take on these challenges. It should find savings of far more than $1.2 trillion to get the deficit on track toward sustainability and to reassure markets, maintain our credibility, keep interest rates down and restore Americans’ faith in the political system. To do this, it cannot avoid addressing the “big ticket” items – Medicare, Medicaid, Social Security solvency and tax reform.

If we can’t find a way to slow the rapid rise of health care costs, they will drive this country to bankruptcy. We should ask more of health care providers and drug companies through adjustments in payment formulas and increased drug rebates for Medicaid and Medicare, more from beneficiaries through more rational cost-sharing rules that discourage the overutilization of care and more from lawyers through tort reform. And we need to cap growth in the long run.

If we don’t reform Social Security to achieve sustainable solvency, we will not only place an undue burden on future generations, we will leave all beneficiaries with a 23 percent across-the-board benefit cut in 2036. To avoid drastic changes later, we need to make modest changes now – like gradually increasing the retirement age, slowing the growth of benefits for higher earners and asking them to contribute a little more in payroll taxes. These changes can and should be made in a way that actually improves retirement security for the most vulnerable.

And we must address the tax code. We need new revenue to finance the increasing costs of our health care system and an aging population – but it should come from reducing or eliminating tax breaks, not from higher rates.

The tax code is riddled with annual tax breaks amounting to $1 trillion – most of which are just government spending in disguise. By reforming them, we can reduce individual and corporate tax rates in a way that keeps the tax code progressive while promoting economic growth and reducing the deficit at the same time.

To do all this, the new committee must be bipartisan and bold. It must resist the temptation to simply recommend the bare minimum necessary to avert the next crisis instead of truly dealing with our long-term fiscal problem. The leaders of Congress must appoint members who will come to the committee with a willingness to reach a principled compromise that puts national interests ahead of partisan ones.

We were co-chairmen of a similar bipartisan group on debt reduction last year, and titled our final report “The Moment of Truth.” Of all our prescriptions, the most pertinent today is the one alluded to in the title: We must act now.

If our government cannot address these terribly tough issues at a time when the public’s attention is fully on them, when will we ever be able to?

The committee must begin its work immediately. We can reform our budget gradually without disrupting a very fragile economic recovery, but reform it we must.

Erskine Bowles, the former UNC system president, and former Wyoming Sen. Alan Simpson were co-chairmen of the National Commission on Fiscal Responsibility and Reform.

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