WASHINGTON — As discussion of the fiscal cliff and the ongoing financial crisis heats up, many Americans may be wondering how the country got to this point. A problem of this magnitude was not amassed overnight and the current administration is certainly not the first to take on budget reform, yet discussions about the national debt and the yearly deficit have reached a fever pitch.
In recent years many groups have been tasked with finding viable solutions to reducing the the nations’s debt, all the money the government owes, and the deficit, the amount the government borrows each year to meet its obligations. Things got even more serious when Congress and President Barack Obama failed to reach a deal and automatic spending cuts were introduced. Those cuts are scheduled to go into effect on Jan. 3 unless Congress acts when it returns to work after the fall election.
Several high-profile task forces have tried to tackle the issue. The National Commission on Fiscal Responsibility and Reform led by Republican Alan Simpson and Democrat Erskine Bowles, the Gang of Six and the Domenici-Rivlin Debt Reduction Task Force have all made attempts at solving the deficit problem in the past three years. So far none of them have made it too far.
All proposals come with hard-to-swallow changes, tax increases to generate revenue and budget cuts to government programs to quell spending. According to many, the most promising proposals have been those put forth by the so-called Simpson Bowles Commission and the Domenici-Rivlin plan.
The Simpson-Bowles proposal included “The Zero Plan,” which calls for changes such as the elimination of corporate tax expenditures and the alternative minimum tax, a new three-bracket tax schedule and the taxing of capital gains and dividends as ordinary income. The plan would eliminate almost all income and payroll tax expenditures with the earned income tax credit, child credit and foreign credit remaining. The proposal also included cuts to Social Security and Medicare that made some politicians uneasy. The commission ultimately failed to get the votes needed to move forward in Congress
The Domenici-Rivlin plan built upon Simpson-Bowles but provided what many considered a more palatable balance between spending cuts and revenue generation. The plan called for a simplification of the tax schedule to two rates, less drastic Social Security cuts and spending freezes for both defense and domestic discretionary spending. While many hailed the plan as an improvement to Simpson-Bowles, critics found the Domenici-Rivlin version of health care reform to be a step backward with over $750 billion in health care cuts and the introduction of a Medicare voucher system, which could impose greater restrictions on the neediest Americans.
While there are many moving part to budget reform, coming up with viable resolutions is not the most difficult part of the process according to Bill Frenzel, a former member of Congress and the co-chair of the Committee for a Responsible Federal Budget, “There are only a certain number of things you can do. Most of the plans are not rocket science, it’s just making choices.”
Instead the real challenge is each party’s ability to compromise in order to enact legislation. While congressional competition is nothing new, the intensity of the squabbling and refusal to cede any ground has developed over the past two decades. In Congress they, “used to think of the opposition as being misguided, now they think of them as being evil,” said Frenzel.
During the first presidential debate, Republican nominee Mitt Romney painted the deficit as a moral issue and condemned President Barack Obama for the failure of the Simpson-Bowles commission.
While Frenzel agrees that failure to pass the legislation proposed by the commission may have been a grave error, he’s unsure that the president could have ultimately avoided our current dilemma. “The president did miss a wonderful opportunity,” he said, “All the president had to do was to say something nice about it to generate some activity in congress but he didn’t.”
With the fiscal cliff looming, there is much work to be done during the lame duck session that will start after the Nov. 7 election. “That is the time when sensible people have to understand that it’s time to make a compromise,” Frenzel said.