Lawmakers in Washington have done what previously seemed unthinkable: They have allowed sequestration to mindlessly cut spending across the board rather than agree to a coherent deficit-reduction plan.
We expect that the coming days and weeks will be filled with conversation over how to deal with 2013 and how to come up with more small-ball solutions that mostly kick the can down the road a little while longer.
The sequestration can only be described as “stupid, stupid, stupid.” Its abrupt onset threatens the still-fragile economic recovery, its across-the-board nature is anathema to good budgeting, and its cuts to important investments could jeopardize future prosperity.
And, for all that pain, it does almost nothing to deal with the long-term drivers of our growing debt.
Yet simply waiving this sequester — or coming up with some agreement to spend partway between pre- and post-sequester levels — would represent a huge failure. It would send a message to creditors and citizens alike that Washington is not serious about the national debt and that even when lawmakers put in place mechanisms to force seriousness, they will simply vote later to evade them.
Deal with the deficit
President Barack Obama and Congress have a responsibility to put politics aside and work quickly to replace sequestration and put our fiscal house in order with targeted cuts and real reforms in both the entitlement programs and the tax code. This country also needs a comprehensive plan to bring its debt under control.
We recently released various principles and an overall framework for achieving bipartisan agreement on a deficit-reduction plan large enough to put our fiscal house in order. Our proposal calls for $2.4 trillion in additional savings beyond what has been enacted over the past two years. We don’t believe this is the ideal amount of deficit reduction; it is the minimum to ensure our debt is on a clear downward path toward sustainability.
In our framework, roughly one-quarter of that deficit reduction would come from health-care reform: realigning provider incentives, reforming cost-sharing rules, raising premiums for higher earners, reducing provider payments, bringing down drug prices and making adjustments to deal with an aging population.
Another quarter would come from comprehensive tax reform. We would repeal or reform various deductions, exclusions and credits in order to reduce rates and lower the deficit while maintaining the tax code’s progressivity.
The remaining savings would consist of a combination of cuts in mandatory programs, stronger caps on defense and nondefense discretionary spending, cross-cutting reforms such as moving to the chained CPI, and lower interest payments on the debt.
We also call for a parallel process to make Social Security sustainably solvent, take further actions to bring transportation spending and revenues in line, and limit the growing cost of health care to the rate of growth of the economy.
Find a ‘principled compromise’
There is no perfect solution, but any comprehensive deficit-reduction plan must promote growth in the economy with smart savings from targeted reforms, modernize federal entitlement programs to reflect an aging population, eliminate wasteful tax expenditures and protect benefits for the truly disadvantaged. A compromise built around these principles will ensure that America will be better off tomorrow than it is today.
It is possible to reach agreement on a plan if both sides are willing to go beyond their comfort zones and come to a principled compromise. Our proposal uses the progress made by President Obama and House Speaker John Boehner in December as a starting point and respects the key principles of both sides.
Democrats are going to have to go further than they want to in reforming entitlements, particularly health care, with the caveat that we can and must implement any reforms in a way that protects the most vulnerable in society.
And Republicans are going to have to accept more revenues — not through tax increases, but through tax reform that repeals or reforms various deductions, exclusions and credits, lowers rates, and ultimately reduces the deficit.
It is going to take real political courage on both sides to come together to find common ground for the good of the country. This plan can serve as a mark for those discussions moving forward.
We can’t be the first generation to leave our country worse off than we found it. The problem is real, the solutions are painful, and there is no easy way out.
But there is room for a solution if our leaders have the political will to calm down the talking points, table the hyperpartisan rhetoric, and get to work making the tough decisions necessary to put our great country on a fiscally sustainable path. It is time that we pull together, not apart. We must do it for our grandchildren; we must do it for ourselves; we must do it for our country.
– Alan Simpson, a Republican, and Erskine Bowles, a Democrat, co-chair the Moment of Truth Project, a nonprofit, nonpartisan effort that advocates honest discussion about the nation’s fiscal challenges. They formerly co-chaired the president’s bipartisan National Commission on Fiscal Responsibility and Reform. This blog was first published at MarketWatch.com and is republished with permission by BizTimes.com.