As Congress debates extending tax cuts for America's richest households, a folly that would add another $700 billion to the deficit, President Barack Obama's bipartisan deficit commission has unveiled its sobering assessment of the country's fiscal future and a plan with a lot to chew on. Many ideas are laudatory; some sound unpalatable. But the commission's report, endorsed by both conservative Republicans and liberal Democrats, makes one thing clear: There is no way to restore fiscal health without both cutting government spending and raising tax revenues. Any politician who claims the federal government can cut its way out of deficit spending is fooling himself and the American public.
The work of the National Commission on Fiscal Responsibility and Reform, co-chaired by Alan Simpson, a former Republican senator from Wyoming, and Erskine Bowles, former chief of staff under President Bill Clinton, is generally commendable. It has focused the nation's attention and conversation on deficit reduction and the painful trade-offs it will entail. The plan, which Bowles called "the first step," offers a road map to deficit reduction of about $4 trillion by 2020. It was endorsed by a respectable showing of 11 members of the 18-person panel — three votes short of the 14 votes necessary to send the plan to Congress but still a healthy 60 percent.
The $1.3 trillion deficit for the current fiscal year is not going to be reduced overnight, and any deep cuts in federal spending now could disrupt the fragile economic recovery. That is why the commission proposed delaying most spending cuts until 2012. But pencils will need to be sharpened soon, because delay will only worsen the pain to come. To cut the deficit in half by 2015, the commission presumes that nothing is sacrosanct. Every kind of government program, including military spending, gets a whack, including entitlements such as Medicare, Medicaid and Social Security. On taxes, the commission recommends a simplification of the tax code, eliminating most deductions and tax credits while reducing the rates. For example, no longer would second homes qualify for any beneficial tax treatment. That is a reasonable approach, even though it would bring pain to Florida snowbirds.
The plan falls short is in its efforts to find new revenue from parts of the economy that have most benefited over the last 10 years. There is a suggested 15-cents per gallon increase in the federal gas tax to help pay for new transportation projects. But the commission doesn't embrace a financial transaction tax to be levied on transactions such as stock trades. If a tax at a rate of, say, 0.1 percent to 0.25 percent of the value of the trade were imposed, it could bring in as much as $100 billion to $150 billion a year.
But considering that the report won the support of a number of Republican and Democratic panelists, whatever horse-trading was done proves that a bipartisan plan is possible. Still, it was a tough sell for the House members, where partisan rancor is loudest. Rep. John Spratt Jr., D-S.C., was the only House member on the panel to support the plan, and he lost his re-election bid in November. That attitude will have to change if an adult conversation and action on the nation's looming fiscal crisis is to take place. The commission's work is a good starting point to begin that conversation, and President Barack Obama and congressional leaders should build on it.