Deficit Reduction Basics

Posted July 26, 2011, at 7:02 p.m.

Days after a flawed, but reasonable effort at a bipartisan agreement to raise the debt limit and reduce federal government spending, there is more grandstanding, more accusation, but no progress toward a solution. Here’s a clue for the president and congressional leadership: Every bipartisan group that has looked at ways to reduce the federal debt has come up with plans with two basic components — cut spending and raise taxes.

The chances of Congress and the White House coming up with a different way to fix the problem are nonexistent. So, negotiations should focus on how much spending can realistically be cut — in both the short and long terms — and what tax loopholes can be eliminated and what rates can be raised. Anything else is just noise.

The best answers were in hand months ago. The National Commission on Fiscal Responsbility and Reform laid out the situation pretty clearly in its December report titled “ Moment of Truth.”

Cuts were high on the group’s list, but they were smart cuts. Don’t harm the economy they warned. “Budget cuts should start gradually so they don’t interfere with the ongoing economic recovery,” the report says. “Growth is essential to restoring fiscal strength and balance.”

Don’t harm the disadvantaged. “We must ensure that our nation has a robust, affordable, fair and sustainable safety net. Benefits should be focused on those who need them the most.”

This left the door open to cuts that Americans strongly oppose — to Social Security, Medicare and Medicaid. Without reducing spending in these entitlement programs, any debt reduction will be transitory. As the commission says, benefits must be focused on those who need them most. Cuts to others — even if they’ve paid into the system — must be made in the long term.

Under the heading “Reform and simplify the tax code,” the commission notes the many loopholes and tax earmarks. Eliminating some of these must be part of the work to align government spending with resources.

When former Sen. Alan Simpson, a Republican from Wyoming, and Erskine Bowles, who was President Bill Clinton’s chief of staff, released their report, it got a little attention and then was put on a shelf. Eight months later, lawmakers should reread it.

More recently, the much maligned Gang of Six plan, called for spending reductions — including among entitlement programs — and tax changes. The plan, by three Republicans and three Democrats in the Senate didn’t get much traction.

While both plans were far from perfect, they offered reasonable approaches. With time ticking away, attention must return to the obvious solutions — real cuts coupled with targeted tax increases.

http://bangordailynews.com/2011/07/26/opinion/editorials/deficit-reduction-basics/ printed on December 22, 2014