By David M. Walker
Americans continue to watch with increasing concern and growing disgust the inability of Washington to come to a reasonable agreement to raise the debt ceiling limit. While we all hope reason will ultimately prevail, we must recognize that no matter what our elected leaders decide to do before the August 2 deadline, it will just be the first step on a long road to restore fiscal sanity.
The truth is Washington has become a dysfunctional place where partisan battles and ideological divides have created a stalemate in connection with a range of large, known and growing challenges that threaten America's future position in the world and its citizens' standard of living. The current debt ceiling debate is simply the most recent, visible and dangerous examples of this condition.
What should be done to break the current debt ceiling stalemate?
─ First, Congress and the president should agree on a level of discretionary spending for 2012 that is less than fiscal year 2011.
─ Second, all parties should agree to at least $3 trillion in deficit reduction over the next 10 years that focuses on reducing spending and does not involve increasing taxes.
─ Finally and most importantly, they should agree to re-impose tough statutory budget controls, including specific debt/GDP ratio or deficit-reduction targets beginning at the end of fiscal year 2013. Failure to hit the applicable target would trigger automatic spending cuts and revenue adjustments with at least a 3:1 default ratio of spending to revenue for any shortfalls.
The $3 trillion in deficit reduction ─ which my Comeback America Initiative has detailed and presented to congressional leaders ─ can be achieved through about $1 trillion in defense cuts (including a phased reduction in our presence in Southwest Asia), $1 trillion in healthcare cost reduction (including more means testing of premium subsidies for wealthier beneficiaries), and $1 trillion in other discretionary and mandatory spending reductions.
Contrary to the assertions of some conservatives, the revenue requirement in the default mechanism is not a tax increase. After all, the objective is to avoid hitting the default mechanism. Therefore, conservatives can take their case to the people in 2012 regarding how they plan to solve our fiscal challenge without additional revenue above historical levels. If they can achieve such a goal in a socially equitable and politically feasible manner, then so be it. However, if they can't, we need a failsafe mechanism to keep our country from going over a fiscal cliff.
Irrespective of the nature of the final debt ceiling deal, we need to start exploring the types of dramatic and fundamental reforms that can forestall a U.S. debt crisis and put our finances in order. We must also take steps to ensure that we can create more jobs and a better future.
I have suggested two plans Congress should implement.
The first is a Preemptive (Prudent) Framework designed to avoid a U.S. debt crisis and reduce the debt/GDP ratio to a reasonable and sustainable level by 2035 while allowing for some short-term investments to help the economy and generate jobs. It would also result in balancing the primary budget (federal spending excluding interest) in 2014 and for every year thereafter.
The second is a Reactive (Crisis Management) Framework with more dramatic reforms that may become necessary in the event of a U.S. debt crisis. It would result in a total balanced budget by 2015 and for most years thereafter, as well as much lower debt/GDP ratios in 2035.
Both plans put everything on the table and propose specific, illustrative transformational reforms in all major areas that need to be addressed, including budget controls and process reforms, Social Security, health care, defense, other spending and taxes/revenues. The report also suggests a number of other potential actions, such as fiscally related constitutional amendments.
The time has come to promote progress over partisanship and the interests of the country over special interests. Hopefully, members of Congress can agree upon some bipartisan solutions that can garner bipartisan support.
David M. Walker is founder and CEO of the Comeback America Initiative and former U.S. comptroller general.
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