The Deficit Commission is a dud. We always suspected it, now we know it. Co-chairs Erskine Bowles and Alan Simpson attempted a grand compromise on solving the deficit, and got nothing for their efforts--nothing, that is, but scorn.
The left hates the spending cuts, and the right hates the tax increases. Soon-to-be-ex-Speaker Nancy Pelosi calls the plan “simply unacceptable.” And Grover Norquist, president of Americans for Tax Reform, jibes that Bowles and Simpson “propose ‘giving our children a better life’ by spending, taxing more.” In other words, no better life at all.
Let’s consider some of the elements of the plan: Raising the retirement age? Tell that to a blue collar worker who has been lifting boxes all his life. Eliminating the mortgage interest deduction? Tell that to someone whose house is already “under water.” Eliminating the employer deduction for health insurance? Tell that to an employer who is already on the edge of dropping health coverage for employees.
The Bowles-Simpson plan is so unpopular, across the spectrum, that we shouldn’t be surprised if some waggish legislator introduces it as a bill in Congress--not to see it pass, but to see it fail. If so, we shouldn’t be surprised if the Bowles-Simpson plan gets precisely zero votes in Congress, except for maybe a lame-duck “aye” or two.
In this world, there are two kinds of fiscal compromises. The first kind is the “artful work” compromise, which acknowledges differences and yet still manages to synthesize them into something useful. A classic example is the 1983 compromise on Social Security, in which Republican President Ronald Reagan and Democratic Speaker of the House Tip O’Neill hammered out a deal on Social Security--a slight rise in payroll taxes in exchange for a slight reduction in future benefits. As a Republican Congressman who worked on the deal, Barber Conable, said at the time, “This was not a work of art, but it was artful work.”
The second kind of compromise is what we can call the “dead cat” compromise. That was the case in 1990, when Office of Management and Budget Director Richard Darman convinced his boss, President George H.W. “read my lips, no new taxes” Bush to open negotiations with Congressional Democrats on “tax revenue increases” in exchange for spending cuts.
Darman convinced Bush that it would be possible to achieve those “tax revenue increases” by various non-tax-increasing means, such as a rate-cut in the capital gains tax. But for their part, the Democrats, smelling Republican blood, would have none of that. Darman’s proffered compromise was thus a “dead cat.” It went nowhere, as Democrats ignored it and Republicans reviled it, knowing that the Bush administration was headed toward tax-increase city.
Indeed, as a grim coda to this failed compromise, we can finish the story of the 1990 budget deal--a deal that was not at all artful work, but simply a Republican disaster. As the price of opening negotiations with the White House, the Democrats demanded that Bush explicitly endorse the idea of a pledge-breaking tax increase. Bush did so, and then the roof caved in.
In five months of haggling over exactly what kind of tax increase to enact, Bush lost the battle for any spending cuts, even as the economy began sinking into recession. In the end, the 41st president signed a big tax increase, and lost not only the trust of the American people, but also his political base; in his 1992 re-election campaign, in a three-way race against Bill Clinton and Ross Perot, he suffered a humiliating defeat.
Bush received just 37 percent of the vote, a lower percentage of the vote than Herbert Hoover received when he unsuccessfully ran for re-election in 1932, at the bottom of the Depression. Bush was a good man, but he was done in by a too-clever-by-half-adviser. And for that, of course, it’s Bush, not Darman, who bears ultimate responsibility.
So back to Bowles and Simpson. It’s actually a very strange document that they released. Bowles and Simpson are the co-chairs of an 18-member commission, due to put out its final report on December 1. So why did just the two of them release their own rogue version of a final report three weeks early? Who, really, do they think they are? Simpson, a former senator from Wyoming, last won an election in 1990, and Bowles, a former chief of staff to Bill Clinton, ran twice for the US Senate in North Carolina and lost both times.
Moreover, the deficit commission itself is a fake. After Barack Obama launched the largest spending binge in U.S. history--indeed, in world history--in 2009, he then sensed the need to look more moderate, and so he asked Congress to create a deficit commission, as a sort of political fig leaf. But Congress, demonstrating an unwillingness to cooperate with ludicrous extremes of do-as-I-say-not-as-I-do hypocrisy, refused to go along with Obama’s idea for such a commission. And so in 2010, the president simply created his own deficit commission by executive order.
That’s the way things work these days: The president, by the stroke of a pen, can create a commission, hire staff, even put up a spiffy website.
But what Obama can’t do--and neither can Bowles and Simpson--is create a credible plan that brings the country together.
In the future, if we want to reduce the deficit, we will have to change the frame of the debate. We will have to widen the discussion from the deficit to the overall economy. We will have to shift from a bean-counting focus on cuts to a larger consideration of what the federal government does and how it goes about doing it. And we will have to shift, also, into a larger consideration of new and better ideas for our future.
For example, if the economy were to grow a point or two faster over the next few decades, the deficit would become manageable, and eventually disappear. The historic growth rate of the U.S. economy, over more than two centuries, has been three percent. But in the last decade, the growth rate has been less than two percent. If that growth gap continues, we will never balance the budget.
Or let’s take another issue: health care. Sure, Medicare is eating up the budget, but the elderly are sick.
Today we spend $170 billion a year on Alzheimer’s treatment--treatment defined as little more than ‘round-the-clock-care--and just $500 million on Alzheimer’s medical research at the National Institutes of Health.
Meanwhile, the regulators and the litigators have neutralized most of the private capital available for Alzheimer’s research, as well as for drug development in general. If we could cure Alzheimer’s, we could raise the retirement age. And, by the way, create a whole new job-creating industry built around that cure.
And we could also name a third area: energy development. If we liberated our energy sector-- developing offshore oil, onshore coal, and next-generation nuclear power, plus whatever else might make economic sense--we would not only enjoy more economic growth, but also rake in more tax revenue. If we could offer cheap or even free electricity to factories, for example, we might keep more plants from fleeing to China. But instead, the Bowles-Simpson report actually wants to cut R&D spending on fossil fuels--proof that even now, the Obama administration’s pro-Green agenda is quietly trumping the anti-red-ink agenda.
Unfortunately for all of us, those sorts of creative ideas--economic growth, medical cures, and energy development--are not mentioned in the Bowles-Simpson report. Nor did we get any innovative suggestions, for say, restructuring the federal government’s operating model.
All we got was a dead cat. And a not very smart dead cat at that.
James P. Pinkerton is a writer, Fox News contributor and the editor/founder of SeriousMedicineStrategy.