The New Deficit Panel Begins A Journey To Nowhere

The President has appointed an 18-member blue ribbon panel to analyze how the US budget deficit can be reduced. The panel is then to make recommendations meant to bring the deficit down to 3% of GDP. That figure will be 10.6% in the current government fiscal year, according to budget projections. Erskine Bowles, a former Democrat White House chief of staff, and Alan Simpson, a former Republican US Senator, will co-chair the group. The President made it clear that there are no sacred cows as the committee does its work. That includes potential tax increases for the middle class.

The committee has to face with the fact that it could make most of its recommendations immediately instead of by the December 1 deadline the President set. And, most of those recommendations will be rejected by Congress, at least as it is constituted today.The President has already suggested a freeze in discretionary spending for  three years, but that would produce savings of only $250 billion over the next decade which is very little when put alongside the $9 billion in federal deficits that are projected to be incurred over the same period. The new committee could suggest cuts in the same pool of spending, but it is clear that the entire pool is not large enough to offset a rise in other government spending due to the stimulus package costs and ongoing increases in Social Security, Medicare, and Medicaid expenditures.

The panel could suggest relatively sharp cuts to the Defense budget, but many members in Congress will say that the country cannot afford to cut military costs in the midst of the war on terror. The wars in Afghanistan and Iraq will continue to be particularly expensive. The panel could suggest rapid troop withdrawals. Congress may not favor that because it would mark another “defeat” for the American military and could set off bloody civil wars within both countries.

The only really large set of expenditures for the panel to recommend cutting is Medicare, Medicaid, and Social Security. The costs of these programs is rising more quickly than the balance of the budget. They are such large pools of expenditures that if they are not cut reductions in the deficits will be nearly impossible.

That leave the President’s new committee is a bind. It will almost have to recommend that the costs of the nation’s safety net be lowered during a period when the country’s aging population will rely on these services more with each passing year. That means the cuts are politically untenable.

The panel may as well recommend that it believes that cuts in the rate that the expenses of Medicare, Medicaid, and Social Security are growing is the only real way to improve the deficit, disband, and go home before the beginning of spring. The balance of any other recommendations they may have is not worth nine months of work.

Douglas A. McIntyre