Tea Leaf: Debt commission could provide political 'cover,' may be best road to follow
The Republicans will focus on slowing the future growth rate of entitlement and other programs. They will begrudgingly accept some modest revenue enhancements as the price of getting a deal done.
The Democrats will fight to maintain spending levels of most programs, especially in the entitlement area. They will push for tax hikes on all those "rich" people making more than $200,000 annually. As before, discussions will get largely nowhere.
I would suggest that the real opportunity to achieve solid and required progress would emerge from the creation of a congressional committee to study all aspects of federal revenues and spending, make tough choices and report back to the Congress for an "up or down" vote, perhaps early next year.
Wait a minute — didn't we do this when the president's deficit reduction commission reported its findings on Dec. 1, 2010? The simple answer is "yes" and "no."
The president's deficit reduction commission (aka The National Commission on Fiscal Responsibility and Reform), chaired by former Clinton administration Chief of Staff Erskine Bowles and former Republican Sen. Alan Simpson, had limited teeth.
In fact, 14 of the 18 committee members had to agree on its recommendations in order for the Congress to be required to vote on it. Only 11 votes were affirmative. Therefore, the recommendations — in my mind, the most comprehensive of all recent deficit reduction proposals — simply languished on the vine.
The better alternative is similar to the National Commission on Social Security Reform of 1983 (informally known as the Greenspan Commission) and the five BRAC (Base Realignment and Closure) commissions between 1989 and 2005, all creations of the U.S. Congress. Such recommendations to strengthen Social Security and to close excess military bases required an "up or down" vote from the Congress, with NO changes to the recommendations.
Given difficult decision making, the congressional committee process has worked before. Perhaps most importantly in the eyes of congressional members highly focused on getting re-elected, it provided political cover — a political "scapegoat" — someone or something to blame for difficult decisions that had to be made, without the chance to change commission recommendations.
It might just be the best road to follow.
Jeff Thredgold is the chief economist for Zions Bank and founder of Thredgold Economic Associates, a professional speaking and economic consulting firm. Visit www.thredgold.com.