In less than two weeks, the Joint Select Committee on Deficit Reduction will release its long awaited deficit reduction recommendation. There isn’t a lot of public awareness of the Committee, but it is America’s last best chance at real deficit reduction before the 2012 elections.
If the 12 members on the Super Committee fail to produce an agreement, or if Congress cannot pass the recommendation through a simple majority vote, the consequences are designed to be painful.
An automatic trigger or “sequester” will slash $1.2 trillion from both the defense budget and the discretionary domestic budget. But of course there are ways for Congress to do away with the trigger.
We need the Super Committee to go big so that America doesn’t go the way of Greece. It is unclear where the path forward is, but even if the Super Committee produces an agreement, and even if Congress passes it, it might not be large enough.
At minimum per statute, the Committee must produce $1.3 trillion to $1.5 trillion in deficit reduction over ten years; however, many experts agree that that would be too small. Republican budget experts such as former Senators Pete Domenici and Alan Simpson, as well as Democrats such as former Office of Management and Budget (OMB) Director Alice Rivlin and former Clinton Chief of Staff Erskine Bowles have urged the committee to go for the “big deal,” or at least $4 trillion in deficit reduction.
$4 trillion in savings over ten years brings the level of debt to GDP down from 67 percent at the end of 2011 to 50 percent by 2021, roughly the ratio during the mid 1990s. If nothing changes, then by 2035, the national debt will be almost twice as large as the U.S. economy, and there won’t be any money left to pay for anything except the interest on the debt in spite of really high taxes and really low spending. That said, $1.2 trillion over 10 years, let alone $4 trillion, would be an unprecedented amount of savings.
To put it into perspective, the two past largest deals, the 1990 Budget Enforcement Act and the 1993 Omnibus Budget Reconciliation Act, saved respectively $496 billion and $490 billion over a five-year period. These deals were vital to the prosperity we experienced during the ’90s, however they were politically costly.
In the eyes of many observers, the 1990 deal cost President George H.W. Bush his job and the 1993 deal cost the Democrats control over both the House and the Senate for the rest of the Clinton Presidency.
Former Republican OMB Director Richard Darman, one of the main architects of the 1990 deal and the man who convinced President George H.W. Bush to renege on his no new taxes promise, became a political pariah and never again served in government.
The members of the Super Committee must bite the proverbial bullet and forge the bargain that the President and Congress weren’t able to this past summer. In order to get to $4 trillion in savings, in order to save this country from fiscal Armageddon, taxes must go up and entitlement spending must come down. The math simply doesn’t add up any other way.
As college students, it is in our self interest that the Super Committee produces a large deal. As young people entering the workforce during a recession, we will generally make less over the course of a lifetime.
We will receive lower benefits from entitlement programs such as social security and to cap it all off, our taxes will be higher.
The generation that created this mess, mainly the baby boomers, should pay their share now. If our leaders continue to defer and delay on the deficit, our generation will inevitably be stuck with an even bigger share of the bill.
Contact Alan He at [email protected]