Illustration by Rand Renfrow
Voters Must See Candidate Plans for Avoiding Fiscal Cliff
“You wouldn’t hire a CEO to run a troubled company if they won’t tell you how they’re going to fix the major problem,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
Yet that’s exactly what’s occurring with the most important chief executive job in the world: U.S. president.
Either Barack Obama or his Republican challenger, Mitt Romney, will face a fiscal nightmare: a sluggish economy, a massive tax increase, meat-axe spending reductions, the expiration of extended jobless benefits, and a debt ceiling that imperils the faith and credit of the U.S.
Both candidates, though especially Romney, are calculating they can avoid specifics and focus on the other guy’s deficiencies.
This week, MacGuineas’s group will launch a “Fix the Debt” campaign with a bipartisan collection of politicians, business leaders, economists to focus on the need for a comprehensive debt deal. The co-chairmen will be former Democratic Governor Ed Rendell of Pennsylvania and former Republican Senator Judd Gregg of New Hampshire.
If Obama and Romney believe this is a big-stakes election, here’s how they could show it: Challenge their opponent to present, by Sept. 15, a broad-based, specific budget/tax deficit-reduction plan so Americans can compare and contrast and discuss and debate before they vote.
Simpson-Bowles
The starting point should be the Bowles-Simpson deficit- reduction plan of 2010. It commanded bipartisan support, and Obama and Romney, while eschewing the specifics, praise it conceptually.
It calls for a $4 trillion deficit reduction over 10 years, achieved through about $1 trillion in higher taxes, $2.5 trillion in spending cuts and a $500 billion savings in debt servicing.
A new proposal should target a $5 trillion reduction because by September, the plan will be almost two years old and it assumed the expiration of the Bush-era tax cuts for high- income earners.
Obama and Romney can offer any mix of spending or entitlement cuts or taxes as long as they’re specific.
One caveat: given the weakness of the economy, no provisions would take effect for a year, so the target decade is 2014-2023.
The president appointed the Bowles-Simpson commission and has yet to embrace its recommendations. He’s justifiably criticized by business leaders such as Wilbur Ross who said “it’s very sad” that Obama “totally backed away.” That’s the stuff of legitimate Republican ads in the fall.
As Obama administration officials note, the president has put out a long-term deficit-reduction plan. Yet this proposal contains gimmicks: Once, it roughly mirrored Bowles-Simpson numbers, but over 12 years, and with much less overall debt reduction. Another time, the administration included the $1 trillion savings from ending the wars in Iraq and Afghanistan, which already had been counted.
On the tax side, the president would get about halfway to his goal by eliminating cuts for the wealthy. He has been vague about other revenue raisers. “You can’t get enough money by just taxing corporate jets or millionaires,” MacGuineas says.
White House officials insist Obama is willing to curb long- term spending on Medicare and Social Security. They have provided few details.
The Romney arithmetic is more problematic. If Ross is “sad” about Obama’s evasion of Bowles-Simpson, he should be depressed about Romney’s praise for the concept of the debt- commission recommendations while rejecting most of the specifics.
Tax Cuts
Romney has promised to reduce federal spending to 20 percent of gross domestic product in 10 years -- from 24 percent now -- while raising defense spending by about $2 trillion. He advocates $5 trillion of tax cuts: lowering the top individual rate to 28 percent from 35 percent, eliminating the estate tax, cutting capital-gains and dividend taxes and lowering the corporate rate.
The numbers don’t add up. The candidate says he’d offset the tax cuts by closing loopholes that help the rich, and wouldn’t touch middle-class write offs such as the deductions for home-mortgage payments or charitable contributions.
There isn’t a tax expert who thinks that’s possible. The Romney campaign’s answer: We’re not going to say anything until after the election. Thus, it’s fair to run ads this fall asserting that Romney won’t say if he’s going to take away the home-mortgage deduction.
Even aside from a tax drain, the defense increase Romney proposes means he would need Draconian cuts in entitlements and domestic spending to meet his balanced-budget pledge.
Democrats say he would dismantle Medicare and Social Security. Obama says Romney would threaten millions of student loans, hundreds of thousands of kids might be denied early- education programs and there’d be thousands fewer grants for research on Alzheimer’s and cancer.
Republicans reply this is demagogy, while stonewalling any specifics. “Romney wants to cap spending at 20 percent of GDP,” MacGuineas says, “but he doesn’t want us to find out how he’s going to get there until after he’s elected.”
If both candidates lay out a broad budget there could be a debate over defense spending versus expenditures on health research or student loans, or tax cuts for investors and estates versus deeper cutbacks in Medicare. Listening to their rhetoric, both Obama and Romney should welcome that debate.
(Albert R. Hunt is Washington editor at Bloomberg News. The opinions expressed are his own.)
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To contact the writer of this column: Albert Hunt in Washington at ahunt1@bloomberg.net
To contact the editor responsible for this column: Max Berley at mberley@bloomberg.net.
About Albert R Hunt»
Albert R. Hunt is a Bloomberg View columnist appearing on Mondays. He was formerly the executive editor of Bloomberg ... MORE
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