A na­tional mo­ment of truth

The Washington Post - - POWER POST - BY ALAN SIMP­SON AND ERSK­INE BOWLES Alan Simp­son is a for­mer Repub­li­can se­na­tor from Wy­oming. Ersk­ine Bowles served as chief of staff to Pres­i­dent Bill Clin­ton from 1997 to 1998. They co-chaired the Na­tional Com­mis­sion on Fis­cal Re­spon­si­bil­ity and Re­form.

Seven years and al­most $7 tril­lion in new debt ago, we re­leased a bi­par­ti­san pack­age of tax and spend­ing re­forms as co-chairs of the Na­tional Com­mis­sion on Fis­cal Re­spon­si­bil­ity and Re­form. At the time, we de­clared that the era of deficit de­nial was over. Sadly, the de­bate on tax re­form in the House and Se­nate sug­gests deficit de­nial is not only back but also stronger than ever. Yet the fun­da­men­tal fis­cal chal­lenges we iden­ti­fied in 2010 re­main.

We said then and be­lieve now that Congress and the pres­i­dent should come to­gether on a bal­anced plan that re­duces deficits and pro­motes growth. We called for fun­da­men­tal tax re­form that would cut tax breaks to re­duce tax rates and — rather than add to the debt — gen­er­ate new rev­enue.

We called for a more in­ter­na­tion­ally com­pet­i­tive cor­po­rate tax code but also pressed for con­tin­ued in­vest­ment in ed­u­ca­tion, in­fra­struc­ture and high­val­uere­search so that the United States can com­pete ef­fec­tively in the knowl­edge-based global econ­omy. We also said tax re­form should raise $1 tril­lion in rev­enue for debt re­duc­tion and be paired with spend­ing cuts and re­forms of en­ti­tle­ment pro­grams to bring spend­ing growth un­der con­trol.

Un­for­tu­nately, the tax plan un­der dis­cus­sion in Congress ig­nores nearly all the hard choices we pro­posed — in­cor­po­rat­ing only the “good­ies.” It reads as if it were de­vel­oped for a coun­try whose debt prob­lems have been solved, when in re­al­ity debt is the high­est it has ever been other than around World War II.

When this tax re­form dis­cus­sion started, House Speaker Paul D. Ryan (R-Wis.) and Se­nate Ma­jor­ity Leader Mitch McCon­nell (R-Ky.) called for rev­enue-neu­tral tax re­form. While ul­ti­mately more rev­enue is needed, deficit neu­tral­ity is likely the best that can be ex­pected in the cur­rent po­lit­i­cal en­vi­ron­ment.

Yet Congress aban­doned even this min­i­mum stan­dard of fis­cal re­spon­si­bil­ity and de­cided to pro­ceed with a $1.5 tril­lion tax cut in­stead. With debt al­ready twice as high as its his­tor­i­cal av­er­age, fi­nanc­ing tax cuts with even more bor­row­ing is reck­less.

And the ac­tual bills in the House and Se­nate are even worse than the $1.5 tril­lion sticker price — be­cause both in­clude about a half-tril­lion dol­lars in phony sav­ings from ar­ti­fi­cial “sun­sets” and other gim­micks. With in­ter­est, that means th­ese tax cuts could add $2.2 tril­lion to the debt.

When we re­leased our fis­cal com­mis­sion re­port, we were wor­ried about keep­ing deficits be­low $500 bil­lion per year and debt be­low 70 per­cent of gross do­mes­tic prod­uct. But if the tax cuts in the cur­rent bill are adopted, deficits would ex­ceed $1 tril­lion by 2020 and debt would ex­ceed 99 per­cent of GDP by 2027.

Eco­nomic growth isn’t go­ing to wash away this debt. Real tax re­form can pro­vide a boost to the econ­omy, but higher debt works in the op­po­site di­rec­tion. Ac­cord­ing to the dy­namic mod­els from the Whar­ton School at the Univer­sity of Penn­syl­va­nia, the House and Se­nate tax bills will in­crease the growth rate by only 0.03 to 0.09 per­cent­age points per year — and that growth will cut their costs by only one-eighth or less.

This coun­try can­not af­ford an­other debt-bust­ing tax cut. Luck­ily, there is an­other way. The cur­rent tax code will give away roughly $18 tril­lion of tax breaks over the next decade. Our com­mis­sion called for re­peal­ing most of them to pay for lower rates and re­duce deficits, adding back only the most­needed ones and only in the most ef­fi­cient way. By com­par­i­son, the lat­est Se­nate bill cuts only $3.7 tril­lion of tax breaks. Most of the largest tax ex­pen­di­tures — in­clud­ing the tax-free treat­ment of em­ployer-spon­sored health care, the mort­gage-in­ter­est de­duc­tion and taxfree bonds — are vir­tu­ally un­touched.

This coun­try crit­i­cally needs tax re­form to im­prove eco­nomic growth. But higher lev­els of debt will crowd out pro­duc­tive in­vest­ment, slow wage growth and ul­ti­mately undo any gains from re­form.

Bring­ing our debt un­der con­trol will re­quire re­form­ing and slow­ing the growth of health and re­tire­ment en­ti­tle­ments. En­act­ing debt-fi­nanced tax cuts will make that harder, both sub­stan­tively and po­lit­i­cally. Sub­stan­tively, be­cause by wors­en­ing the debt sit­u­a­tion, it will en­tail more painful changes; po­lit­i­cally, be­cause Democrats will be less likely to agree to en­ti­tle­ment re­forms if Repub­li­cans won’t al­low for suf­fi­cient rev­enue.

Many mem­bers of Congress have pri­vately told us they would be will­ing to make the tough votes for am­bi­tious tax and spend­ing re­forms as part of a sub­stan­tive fis­cal plan but only if mem­bers on the other side jump in the ca­noe at the same time.

This is the mo­ment of truth for law­mak­ers who share our concern about our na­tion’s fis­cal fu­ture. They can re­turn to the era of deficit de­nial, or they can stand up for fu­ture gen­er­a­tions.


Pres­i­dent Trump ar­rives at the U.S. Capitol for a lunch meet­ing with con­gres­sional lead­ers on Tues­day.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.