Yesterday afternoon, Sens. Dianne Feinstein (D-CA) and Pete Domenici (R-NM) announced plans to force Congress to consider changes to entitlement programs through the establishment of yet another commission. The Feinstein-Domenici plan would require a 15-member commission to deliver recommendations one year from the date it was established and would force, through specific deadlines, action by committees, debate on the floor or each chamber, and conference committee negotiations. Everything is scripted just so in the Feinstein/Domenici plan. It's almost as if we don't even need a Congress at all.

The Feinstein/Domenici announcement comes of the heels of two other proposals to establish entitlement commissions (or an entitlement task force), first by Sen. George Voinovich (R-OH) and Rep. Frank Wolf (R-VA), and more recently by Sens. Kent Conrad (D-ND) and Judd Gregg (R-NH). Proposing commissions, task forces, and working groups is all fine and good, but until someone actually starts to propose some vital solutions - solutions that will only work if they increase revenues and decrease benefits over time - these proposals are mostly smoke, and little fire.

The most interesting thing about the Feinstein/Domenici commission is that it would be permanent - making fast-tracked recommendations to Congress every five years about adjustments and changes to keep solutions to fiscal problems on track. Feinstein and Domenici are apparently so confident in the commission model and potential recommendations it would submit, they think it should stick around, just in case it needs to fix its mistakes. While it is true it is a great challenge to tackle fiscal issues involving projections and estimation over many years and decades, and nobody can predict the future, a permanent commission would seem to take over the role of Congress, permanently. Only time will tell, but something tells me I'm not the only person who thinks that is just a little bit weird.

Posted by Adam Hughes, 10:29:21 PM



PayGo on TPM Cafe

An interesting discussion on PayGo has popped up on TPM Cafe. Amitai Etzioni wrote we shouldn't go by PayGo because it'll only lead to surpluses that Republicans will squander on their well-heeled constituents. Point well taken. Paul Krugman recently made a similar point, though less in terms of PayGo and more in terms of the deficit.

But that's not the end of the story. Greg Anrig at TPM Cafe has an interesting response to Etzioni's post. He thinks PayGo is a good way to define Democrats as responsible and competent and Republicans as crazy.

I'd go farther and say PayGo is plain old good policy. And it doesn't, as Etzioni seems to claim, necessarily lead to deficit-reduction. All it does is help keep Congress from making the deficit worse. If Democrats want to invest more in social priorities, they can certainly do so as long as they pay for it.

Perhaps Etzioni is worried that tax receipts will go way up on their own this session, and PayGo will keep the Dems from spending these new revenues. In that unlikely event, which I haven't heard anyone say they expect, maybe Dems should go ahead and spend some of it. But let's cross that bridge when we come to it.

Plus, PayGo doesn't have anything to do with discretionary spending; Dems could spend as much as they want through the appropriations process. Discretionary programs, after all, could use more funding. Why not concentrate on that?

But the bottom line is that PayGo mostly puts up a (surmountable) obstacle for massive legislated increases in entitlement spending or decreases in revenues. If any party wants to do either of those things, they should abide by PayGo and budget for it. Otherwise, it's too easy for present Congresses to reduce future revenues, which makes it harder for future Congresses to pass important policy. Isn't having Congress in such a weakened position all too familiar by now?

EJ Dionne's column today, as usual, is good, but one thing kinda bugged me:

No. 1: Extending President Bush's tax cuts to eternity will make the long-term problem much worse. Hint No. 2: The hardest part will be how -- simultaneously -- to meet the fiscal need to rein in health costs and the social need to get health insurance to everyone. Hint No. 3: Most Democrats don't like to talk about it, but somebody's taxes are going to have to go up.

He sets up the "social need" for universal health insurance in tension to the "fiscal need" to rein in health costs, but I'm not so sure that's the right relationship. As I tried to write yesterday, there's some evidence that a greater role for the government would help bring down health care costs across all sectors in the long term.

Anyway, I confess my ignorance of the mechanisms involved here. But doesn't this seem like the perfect silo-crossing issue? It'd be nice if health care wonks helped us ignorant budget wonks understand this aspect of universal coverage better.

The best I can do is put Jacob Hacker's summary of the argument for cost-containment after the jump.

Ben Bernanke gave testimony on increasing entitlement program costs today. There was one key point I wanted to discuss:

Addressing the country's fiscal problems will take persistence and a willingness to make difficult choices. In the end, the fundamental decision that the Congress, the Administration, and the American people must confront is how large a share of the nation's economic resources to devote to federal government programs, including transfer programs such as Social Security, Medicare, and Medicaid.

I think the most fundamental decision is different. This country needs to make a decision about how it wants to organize the social insurance system. Do we want the public/private hybrid we have now, or something more like the public/private hybrid that almost all other industrialized countries have?

The foreign model tends to be much cheaper (not to mention more generous and inclusive). They're organized better.

Social insurance in this country is really, really expensive. We should talk about how to organize ours better.

Jacob Hacker's proposal gets us started in that direction. Why not talk about it as a way to keep down costs?

We can fix this long-term fiscal imbalance, but it's going to take something that goes much deeper than the decision Bernanke claims is most fundamental. We need to reorganize, step by step, the way social insurance is provided in this country. It would be nice if Bernanke at least acknowledged that this was an option.

We last left the subject of budget and entitlement reform in 2006 (here and here) amid muted congressional response to bids by OMB Director Rob Portman and Treasury Secretary Henry Paulson to discuss concrete solutions.

But the 2007 cycle of the long-term fiscal policy and entitlement reform merry-go-round opened with a bang yesterday, as Senate Budget Chairman Kent Conrad (D-ND) and ranking member Judd Gregg (R-NH) announced the goal of forming a bipartsan group to look at procedural and substantive ways to address the nation's long-term fiscal challenges, chiefly, the cost of providing benefits to the roughly 80 million baby boomers who are beginning to retire.

Senate Majority Leader Harry Reid also called for a bipartisan approach to overhauling Social Security and Medicare. But he poo-pooed the notion that divided government is a more favorable environment for reform, noting in choice words that President Bush persists in calling for personal accounts as part of Social Security reform, saying, in an interview with Congress Daily:

"There's no chance this will happen in the foreseeable future. He couldn't do it when they had the majority. How in the world does he expect to do that in the minority? It's as if he wants to fail. "Maybe it means something to him to stand on his principles no matter how flawed they are."

Steven Pearlstein, the business columnists for the Washington Post, has a blistering expose on Sen. Finance Committee Chairman Max Baucus (D-MT) in today's paper. Pearlstein wonders how (or perhaps why?) Sen. Baucus was able to work his way to the top of the Democrats' list to lead the Finance Committee when many if not all of his views on committee business are essentially contrary to the Democratic Party platform. A few excerpts:

But while Baucus is surely entitled to his opinions, and entitled to do what is necessary to assure his own political survival, he is not entitled to be chairman of the Senate Finance Committee, which handles such key Democratic issues as health care, trade and tax policy. That position ought to be reserved for a statesman with enough political confidence and backbone that he isn't constantly sacrificing the interests of his party and his country to the narrow interests of his subsidy-addicted constituents.

You'd think Baucus would have learned his lesson in 2001, when he won the enmity of Democrats everywhere by striking the deal that led to passage of the Bush tax cuts, including the phase-out of the estate tax. Apparently not. For on the very day the new Democratic House is set to push through a long-overdue minimum-wage increase, over in the Senate, Baucus has called a hearing on how to offset the "economic hardship" caused by the higher minimum wage with yet another round of business tax breaks.

[...]

Real Democrats know that raising the minimum wage is the right thing to do -- economically, politically, morally. The question is why they have chosen a Senate Finance chairman who can't articulate that position without equivocation or apology even before the first vote is cast.

That's pretty hard hitting stuff, and Pearlstein makes a convincing argument in the full article. It's definitely worth a read.

Robert Samuelson bashes his generation in today’s Washington Post:

Shame on us [baby boomers]. We are trying to rob our children and grandchildren, putting the country's future at risk in the process. On one of the great issues of our time, the social and economic costs of our retirement, we have adopted a policy of selfish silence.

*Sigh* What is Samuelson so exercised about? He’s huffing and puffing over something that may or may not happen 33 years from now.

Here’s the thing about Social Security: There’s nothing wrong with Social Security; it does not need to be fixed. The 2006 Social Security Trustees report indicates that in 2040, Social Security benefit payouts may have to be reduced by 26%. That’s it. That’s the "great issue of our time."

Here’s the text from the report:

Despite these cash-flow deficits, beginning in 2017, redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2040, when the trust funds will become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury. Pressures on the Federal Budget will thus emerge well before 2040. Even if a trust fund’s assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates would be sufficient to pay 74 percent of scheduled benefits after trust fund exhaustion in 2040 and 70 percent of scheduled benefits in 2080.

Samuelson also engages in the classic scare tactics of Social Security haters - lumping Medicare in with Social Security to create the illusion that there’s one really big program that costs unimaginable sums, hand-waving about soul-crushing tax increases, and citing population and budget figures without context or caveat.

Shame on Samuelson for using precious column inches to raise holy hell about such a non-problem when he could be addressing real issues.

President Bush has fired the opening shot of the 2007 budget battle, writing an op-ed in today's WSJ. The piece is mostly PR, which is an encouraging sign that the President is more interested in repairing his image than pursuing harmful policy. Substance-wise, the President is not asking for much more than the continuation of the status quo.

Some notable budgetary policies and goals mentioned in the op-ed:

• No new taxes:
  "Now is not the time to raise taxes on the American people."
• A balanced budget by 2012:
  "By continuing these policies, we can balance the federal budget by 2012 while funding our priorities and making the tax cuts permanent. In early February, I will submit a budget that does exactly that."
• An vague reference to entitlement cuts as a way to balance the budget:
  "By balancing the budget through pro-growth economic policies and spending restraint, we are better positioned to tackle the longer term fiscal challenge facing our country: reforming entitlements -- Social Security, Medicare and Medicaid -- so future generations can benefit from these vital programs without bankrupting our country."
• Legislative process changes and a line-item veto:
  "It's time Congress give the president a line-item veto. And today I will announce my own proposal to end this dead-of-the-night process and substantially cut the earmarks passed each year."