Why The Deficit Commision Doesn't Matter

Remember when Mary Poppins sung that it  “takes a spoon full of sugar to make the medicine go down?”  Well, President Obama’s fiscal commission told the American people nothing could spare them from the fiscal pain that lies ahead.

The 18-member task force released its draft report detailing recommendations to bring federal deficit under control.  It’s imperative that the government act now otherwise America could spend $1 trillion a year in interest alone by 2020.   However, the cuts should not begin until the 2012 fiscal year in order not to stymie the fragile economic recovery.

“America cannot be great if we go broke,” the report says. “Our economy will not grow and our country will not be able to compete without a plan to get this crushing debt burden off our back.”

Some of the commission’s recommendations are not surprising.  Here are the highlights:

• Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015;

• Simplify the tax code by broadening the tax base and lowering rates;
• Lower health care costs through savings from payment reforms, cost-sharing, and malpractice reform;
• Award less generous cost of living adjustments for social security entitlements and raise the retirement age from 67 to 68 by 205o and to 69 by 2075.

“American families have spent the past 2 years making tough choices in their own lives. They expect us to do the same,’ the commission says. “The American people are counting on us to put politics aside, pull together not pull apart, and agree on a plan to live within our means and make America strong for the long haul.”

Blah, blah, blah.

Experts have given these warnings since the 1980s and they have been ignored.  These recommendations are which will be widely discussed, dissected and then ignored, just similar efforts in the past. There are infinite reasons why.

Though the Tea Party movement has made tackling the deficit a core issue, odds are against it being successful.  Activists have underestimated the strength of entrenched interests in Washington. Federal spending programs have a million friends.  Defense contractors keep a close eye on the Pentagon budget.  They can always argue that defense spending brings jobs, a compelling argument for many politicians. AARP monitors social security and health care companies keep taps on health care policy.  Touching Social Security by even a tiny bit invites a torrent of protests from senior citizens.

For every proposal to cut spending, there are 20 reasons to leave the program alone.  Supporters also argue that “We don’t want to sacrafice (insert pet project here).”   Members of Congress head these calls and add the money back into the project that its supporters want.  There are some perverse consequences to these actions.  At times, the Pentagon budget has includeded money for weapons the Secretary of Defense neither ask for nor wanted.

Moreover, it’s incredibly difficult to tackle  the deficit without raising taxes.  The Europeans, who are in the midst of the same economic slowdown as the U.S., have figured this out.  American politicians and the so-called fiscal conservatives don’t see this reality.  Instead, they advocate for extending the Bush Tax Cuts which will add trillions to the deficit in the coming years.  The shortfall, they say, will be made up by trimming the fat in Washington.  Sure, there may be lots of waste but is there $1 trillion?  Of course not.

Solving the deficit problem will require a herculean bipartisan effort that probably will not  happen in the current hyper-partisan political climate.

–Jonathan Berr