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Recommendations for the Special Joint Committee on Deficit Reduction

Recommendations for the Special Joint Committee on Deficit Reduction

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Michael Ettlinger and Michael Linden offer guidance to the super committee on how to achieve deficit reduction.
Michael Ettlinger and Michael Linden offer guidance to the super committee on how to achieve deficit reduction.

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Published by: Center for American Progress on Sep 06, 2011
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1Center for American Progress | Recommendations for the Special Joint Committee on Deficit Reduction
Recommendations or the Special JointCommittee on Deicit Reduction
 The Criteria Any Deicit Plan Must Meet and a Recommendation that Does So
By Michael Ettlinger and Michael LindenSeptember 2011
Introduction
Te Budge Conrol Ac o 2011, more commonly known as he deb ceiling deal, seup a Special Join Commitee made up o six senaors and six members o he House o Represenaives asked wih nding $1.5 rillion in deci reducion. Te commitee mus reachagreemen by Tanksgiving, aer which Congress has unil Chrismas o enac or rejec he pro-posal by a simple majoriy. No amendmens will be allowed. I he commitee does no come oan agreemen ha reduces he deci over he nex 10 years by a leas $1.2 rillion, or i Congressdoes no pass i, a series o auomaic spending cus will be riggered. Tose auomaic cus willcome on op o he nearly $1 rillion in cus already enaced as par o he Budge Conrol Ac.ypically, debaes over deci reducion revolve around quesions o “how much in new rev-enue” versus “how much in spending cus.” We saw his dynamic clearly over he course o hedeb ceiling negoiaions. Bu ha is he wrong approach. Wha maters is no he raio o rev-enue o spending cus in any paricular plan. Wha really maters is wha he plan achieves or ourcounry—or he srengh o our economy, job creaion, and our sociey.In heir negoiaions, he Special Join Commitee should keep is eye on his bigger picure. Indeveloping our guidance o he commitee, we se several crieria, which we deail below. Wehen presen our se o recommendaions based on hese crieria.
Criterion No. 1
Achieve at least $1.2 trillion in defcit reduction but not more than $1.5 trillion in order to avoidthe triggered cuts
Tis sandard is simple, clear, and obvious, given he commitee’s legal mandae. Te commiteeis ocially asked wih nding $1.5 rillion, bu so long as hey ge o $1.2 rillion, he auomaiccus won’ be riggered. Tis should be he botom-line deci reducion arge.
 
2Center for American Progress | Recommendations for the Special Joint Committee on Deficit Reduction
oal deci reducion o $2.5 rillion, including he original $1 rillion worh o spend-ing cus, is an impressive amoun. By 2021 i will cu he annual deci by a ull per-cenage poin o our naion’s gross domesic produc, he broades measure o naionaleconomic aciviy. No, i won’ resul in a balanced budge, bu deci reducion o hismagniude will pu he budge on much more susainable ooing.Moreover, given he deep divisions in Congress, he more deci reducion he commi-ee ries o achieve, he less likely hey are o succeed. Boh paries have already agreedha $1.5 rillion, on op o he rs $1 rillion, is a reasonable arge, and ha’s wha hecommitee should aim or.
Criterion No. 2
Include signiicant job creation as part o the total package
Te economy needs help. Tere is litle debae on ha poin. As he Recovery andReinvesmen Ac o 2009 winds down, economic growh is beginning o sall, and healready weak labor marke is under siege. Over he pas several weeks, a broad consensushas developed ha he ederal governmen mus increase is eors o spur job creaion.O course, he commitees mandae is abou deci reducion, no spurring eco-nomic growh and job creaion, bu in ac he wo are inimaely conneced. HarvardUniversiy economis and ormer Naional Economic Advisor Larry Summers esimaesha each addiional 1 percen o economic growh willclose he deci by $400 billion.Policies ha spur growh and creae jobs oday will help close he budge gap omorrow.In addiion, he measures ha are required o spur he economy will cos somehing, which means hey will need o be deal wih in he conex o he ax and spending issuesha he commitee will ake on. Tus, he commitee needs o keep jobs a he orerono is deliberaions.Tere is nohing in he Budge Conrol Ac prevening he Special Join Commiteerom including job creaion measures in heir overall package o deci reducion—eveni hose measures increase he deci in he near erm. Te commitee can and shouldrecommend he exension o he 2 percen payroll ax cu (or somehing similar), heconinuaion o exended unemploymen insurance benes, as well as oher policiesha he Congressional Budge Oce says would spark addiional growh and jobs.
 
3Center for American Progress | Recommendations for the Special Joint Committee on Deficit Reduction
Criterion No. 3
Protect Medicare, Medicaid, and Social Security beneiciaries
One o he bigges drivers o our long-erm budge deci is he rising cos o healhcare naionwide. As a resul o his rend, he coss o he wo bigges ederal healh careprograms, Medicare and Medicaid, are projeced o rise much aser han everyhing elsein he ederal budge. Bu i would be wrong o punish senior ciizens, he disabled, andhe poor or somehing ha is ar rom heir aul.I is rue ha in he long run we are going o have o nd ways o conrol he growh o healh care coss all across he economy. Bu cuting Medicare and Medicaid in waysha merely shi hose coss ono beneciaries does nohing o achieve ha goal. Inhe inermediae erm, we can reduce ederal spending on healh care by improvingeciency and in some cases by asking healh care providers o pich in a litle more.Te botom line is ha cus o hese programs mus no increase coss or Medicare andMedicaid beneciaries, and mus no undermine heir access o qualiy care. As or Social Securiy, he commitee should leave he srenghening and reorm o hisprogram or anoher process. Social Securiy aces a long-run nancing problem, oo, bu over he nex 10 years, i does no conribue signicanly o he ederal budgedeci. More imporanly, any opion o reduce Social Securiy benes ha would haveany impac by 2021 is one ha would reduce he benes o curren reirees or hose jusabou o ener reiremen. Ta is boh unair, unnecessary, and poliically unwise.
Criterion No. 4
Avoid dangerous cuts to discretionary spending, both nondeense and deense
Te Budge Conrol Ac already cu discreionary spending by nearly $1 rillion. Te bulk o hese cus ell heavies on a caegory o spending known as “non-deense discre-ionary.” Tough he bland and nebulous name does i no avors, his caegory acually includes some very imporan and popular programs and services.For insance, he single-larges program in he caegory is he Veerans Healh Adminisraion, which provides healh care services o our naion’s veerans. Also in hiscaegory are nearly all o he counrys vial invesmens, including educaion, inrasruc-ure, energy, and science and echnology research.Nondeense discreionary spending also encompasses mos o he day-o-day operaionso he ederal governmen, such as ood and drug saey inspecions, airpor and high- way saey, law enorcemen, and border conrol. Te Budge Conrol Ac cu his enire

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