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This paper is part of an initiative from the Peterson Foundation to help illuminate and understand key fiscal and economic questions facing America. See more papers in the Expert Views: Fiscal Commission series.
The deficit has doubled in the last year and the national debt — some $33 trillion — is diminishing our standing in the world. It is also impacting our economy. It’s no coincidence that the recent surge in deficits and debt has been followed by a period of high inflation and rising interest rates. The recent decision by the rating agency Fitch to downgrade our debt and the threat by Moody’s to do the same risks locking us into even higher interest rates and deficit spending. Both agencies cited the inability of Washington to address the fiscal crisis.
The recent turmoil in the House, first over the debt limit vote and then the last-minute efforts to avoid a government shutdown, culminating in the Speaker losing his position, demonstrate the degree to which how these difficult budget issues are addressed can have political, as well as economic consequences.
Americans have overcome seemingly insurmountable policy problems in the past. When solutions have seemed too controversial and the politics in Washington too intractable, innovative structures, like outside commissions, have sometimes been used to break the gridlock. I believe we are at this point today as it relates to our unsustainable federal debt.
Having served in both houses of Congress and as the OMB Director, I am well aware that politics makes addressing the fiscal crisis very difficult. Members understandably focus on the next election, and no politician wants to face angry voters after supporting cutting benefits — making entitlement reform and spending cuts challenging. Similarly, politicians do not win popularity contests by supporting raising taxes on their constituents.
My experience has led me to the conclusion that it is time to try something different, time to give Congress and the American people a better tool to understand the fiscal situation we are in as a country and provide a balanced, bipartisan way forward. That is why I believe a commission with membership from the Congress and outside experts is timely and necessary. Having an objective, balanced outside group analyze and report on the fiscal facts and recommend solutions on a bipartisan basis makes sense.
Successful fiscal reform requires putting everything on the table, and creating a practical way to measure success. It requires a top to bottom review of all federal government spending, asking tough questions about the federal role, and rooting out parochial spending that does little for the national interest. It requires raising revenue in a way that minimizes the impact on economic growth and opportunity. And it requires reforming the currently unsustainable entitlement programs that otherwise would bankrupt the nation.
All of this is necessary.
But the first step is for the American people to be told the truth about the fiscal challenges we face and the consequences of not acting. Most Americans already know the current trajectory is unsustainable and are looking for an honest assessment and an honest dialogue about the way forward.
A commission can address all of this. It can make the case to the American people, who deserve honesty from their government. It can offer solutions in an objective, bipartisan manner. And a properly structured commission must be statutory and must force the hand of Congress to at least confront the debt crisis.
While there are many valid structures for commissions, I believe this challenge will be best met by including both external experts and members of Congress, selected by the congressional leadership. It needs buy-in from members of Congress, who will be looked to as leaders of the legislative process. In the interests of reducing some of the politics around the issue, the commission report should be during the likely lame-duck session of Congress after the presidential election in November 2024.
Among the non-members, the commission should have budget experts that include academics and respected thought leaders who understand the political realities. On a commission of 16 people, eight to twelve could be members of the House and Senate, chosen by leadership, and four to eight could be outside experts.
Some will suggest that the president should also appoint members as well. I understand the need to bring the Administration on board but I worry that the partisan balance would be skewed, and that the even-handed approach of having the commission report after the presidential election fits better with congressionally appointed members.
The staff must be bipartisan. This will make it more credible, and limit partisanship. And the funding must be adequate to hire senior staff.
It is important that the law authorizing this commission creates fast-track consideration of commission recommendations, culminating in a majority vote of members in the House and a 60-vote margin in the Senate. As the U.S. Trade Representative, I worked with such a system under the Trade Promotion Authority. I negotiated the best deal I could and presented it to Congress for an up or down vote. My negotiating partners gave me the best deal they could knowing members with parochial interests could not scuttle a larger deal, otherwise they would be hesitant to offer their best final offer. This has been successfully used for trade agreements at least 15 times since 1979.
BRAC provides a useful and successful example. Military bases provide significant economic benefit to communities where they are located. The loss of these bases can create economic challenges. Communities lose out on the pay from service members and their families. Civilian support jobs at the base also disappear. Of course, there are knock on effects from all of the money these workers spend in their community along with the contracts undertaken locally. Members with military presence in their states and districts often seek seats on the House and Senate Armed Services committees in order to protect these interests.
As a result, closing bases through the usual congressional process is incredibly challenging. Despite this, there have been 5 BRAC rounds, the most recent in 2005. It is estimated that each of these rounds created an average of $12 billion in savings.
These commissions were appointed by the president after consulting with congressional leadership. All members are Senate confirmed. After Base Closure Commission recommendations were made, Congress took up or down on the whole package of bases with no ability to amend them.
Members in impacted districts often opposed these reforms. However, they were unable to form the necessary coalition to keep these bases open. This saved the taxpayer significant money against parochial interests.
Sometimes, overcoming parochial interests is not the hurdle to fiscal responsibility. Entitlement programs are not parochial: they typically impact broad swathes of the population. In these cases, balance and credibility are key, since constituents will be required to give up a benefit for the national good. This is where the Greenspan Commission of 1981 was successful.
The Greenspan Commission was packed with experts and well-respected members of Congress. It was originally deadlocked on a potential solution. However, then-White House Chief of Staff James Baker was able to broker with Congress. After this occurred, the Greenspan Commission voted to validate the agreement, which helped the negotiators earn the trust of the American public.
This legislation saved the federal government over $165 billion in the first seven years and extended the life of Social Security by over 30 years (though at the time, projections indicated it would have lasted longer). This commission had outside experts and members from both parties.
First, the Simpson-Bowles Commission was not the failure some allege. Although the comprehensive spending and revenue recommendations were not taken up, many of its budget proposals became law. By 2015, the Center for a Responsible Federal Budget had estimated that Congress had enacted around 60% of the value of the cuts proposed.
Second, none of these critiques I have seen are directed at the two patriotic individuals who led the commission — they just were not backed up by the political leaders of the time.
Congress had little buy-in. The commission was established by executive order. Without congressional approval, there was no forcing mechanism to ensure that a vote would occur if a qualified majority came up with the plans. This arguably made it even more difficult for a qualified majority to coalesce. Some sort of forcing mechanism is vital for any commission. Also, a qualified majority for a recommendation to be approved was a supermajority of 14 of 18 members. This supermajority was too high a bar in my view.
However, the commission had credibility (in no small part due to its leaders) which allowed many individual policies to be enacted over time.
The proposed fiscal commission should engage in a robust public comment period, engage with experts, and be open to various ideas. I believe at least four types of reforms are appropriate for the commission’s purview. First, domestic discretionary spending reforms, including a deep dive on Pentagon procurement and systems to find savings without reducing our national security posture. Second, entitlement reforms, including assessing the current sustainability of Medicare, Medicaid, and Social Security. Third, revenue reforms to ensure adequate revenue without harming economic growth. Fourth, reforms to the congressional budget process. We must return to a logical and accountable budget and appropriations process. And the commission should suggest reforms to stop budget gimmicks. If not also fixed, Congress could pass the spending reforms recommended while using gimmicks to avoid actual responsibility for enforcing them.
With regard to more specific reforms, I would not want to prejudge any commission analysis or reforms, but here are a few big ideas.
Among ideas to consider in mandatory spending, we should consider raising the Medicare retirement age, as has been done for Social Security, for those at least ten years away from potential retirement. The sooner this is done, the less likely this solution will need to fall upon more Americans and the less painful it will be upon the general populace. Those close to retirement deserve to retire as they had planned.
Senators Grassley and Wyden co-authored the Prescription Drug Pricing Reduction Act of 2020. The bill establishes a cap on out-of-pocket spending, eliminates the Medicare drug coverage gap, and redesigns Medicare Part D. It caps Part B and Part D drug annual price increases at inflation. The Congressional Budget Office analysis of the bill found that it would save taxpayers $95 billion over 2021-2030, reduce out-of-pocket spending by $72 billion, and reduce premiums by $1 billion.
There will be other specific reforms needed to meet the fiscal goals.
On the revenue side, a broad tax reform measure makes sense. By broadening the base of taxation and implementing measures to grow the economy, increased revenues would result.
It is easy to look at the state of American politics and feel despair. Instead, we should be motivated to solve big problems. None is bigger or tougher politically than our debt crisis. This is why it is time to give a bipartisan commission a try. This gives Congress a tool to do what is best for the American people.
Rob Portman's career in public service spanned three decades and included service in three presidential administrations as well as two terms in the United States Senate and six terms in the United States House of Representatives.
In the George W. Bush administration he served in two cabinet-level jobs, as Director of the Office of Management and Budget as well as United States Trade Representative. Under President George H.W. Bush, he served as Associate Counsel to the president and Director, White House Office of Legislative Affairs.
Known for his civility, successful bipartisan policymaking, work ethic, and grasp of a broad range of complex issues, over 220 of Portman’s bills were signed into law by Presidents Biden, Trump and Obama during his tenure in the Senate. He served as the lead Republican negotiator on the bipartisan infrastructure law that is making historic improvements to our nation’s roads, ports, rails, bridges, broadband and more.
He played a key role in U.S. foreign policy through his seat on the Senate Foreign Relations Committee and as co-chair and founder of the Senate Ukraine Caucus. He made ten trips to Ukraine since the Revolution of Dignity in 2014 and is a key advocate for congressional support of Ukraine against Russia’s unprovoked war of aggression.
Portman currently serves as the Founder of the Portman Center for Policy Solutions at the University of Cincinnati and a Distinguished Visiting Fellow in the Practice of Public Policy at the American Enterprise Institute.
Rob was born and raised in Cincinnati, Ohio, where he still lives today with his wife, Jane. Together they have three adult children: Jed, Will, and Sally.