The fiscal cliff is nearing and nearly every day we hear a little encouraging news and some discouraging news about the negotiations between Congress and the White House and Democrats and Republicans.
The fiscal cliff situation we have now is "not textbook," as Senator Rob Portman (R-OH) noted during his opening remarks at this morning's conference "Fixing the Debt: Reforming the Tax Code and Federal Health Spending." It was encouraging to hear bipartisan discussion by individuals who all agree that something needs to be done.
The Campaign to Fix the Debt, the nonpartisan organization aimed at doing just that, was founded by former Senator Alan Simpson (R) and Clinton White House Chief of Staff Erskine Bowles. With notable CEOs, they have been visiting key lawmakers in an effort to breathe some sensibility and necessary action into the Capitol Hill stalemate on debt reduction and tax breaks. Joining with the Committee for a Responsible Federal Budget, they sponsored the conference in Washington, DC.
The conference featured two notable bipartisan roundtables of experts in tax and healthcare policy. Moderated by Bloomberg Chief Washington Correspondent Peter Cook, guests including Alice Rivlin, former vice chairman of the Federal Reserve, Edmund Haislmaier, senior research fellow at the Heritage Foundation, Neera Tanden, president of the Center for American Progress, Cindy Gillespie, senior managing director at McKenna Long & Aldridge, former Senator Judd Gregg (R), former Governor Phil Bredesen (D), Mark Zandi, chief economist at Moody's Analytics, former Senator Bob Packwood (R), Donald Marron, a financier, Will Marshall, a founder of the New Democrat movenement, Bill Gale of the Brookings Institution, John Podesta, chair of the Center for American Progress, Lawrence Lindsey, former director of the National Economic Council, former Senator Pete Domenici (R), and several others, that tackled the issues. They all agreed on one thing: something has to be done. Gene Sperling, Director of The National Economic Council and Assistant to the President for Economic Policy also gave opening remarks that were predictable and spoke of common ground.
Alice Rivlin spoke of reducing spending on health care as a key to fixing the debt. "I don't think the parties are very far apart on what to do," she said. During the discussion, former Senator Judd Gregg noted that "Washington has trouble with things that work." On entitlements, Edmund Haislmeyer from the Heritage Foundation indicated a need for reform since "we're spending more than anyone else in the world and we're not satisfied with the results."
Some backed the idea of short term fixes while working on the long term changes later. Short term would be returning tax breaks with some pain for those making more and making some cuts to the budget. Not all, but many, agreed that much can be done now, before January 1.
Reference was made to the ugly politics regardless of decisions. Former Senator Bob Packwood spoke about tax negotiations that started over a pitcher of beer at the Irish Times (a Capitol Hill pub) when relatively quickly they were able to get agreement on tax cuts in 1986. You could almost see in the faces of the participants the wonderment of such a thing ever happening in today's Capitol Hill.
Some of the key points and issues discussed included:
- Capping itemized deductions
- Corporate tax reform (increasing)
- Eliminating the distortions and loopholes in the tax code in the corporate and personal sides
- Imposing the lowest possible tax rates on the broadest possible base
- Reforming the budget
- Shifting from consumption to investment
- Giving our economy more flexibility to respond to a globally different place than we had 20 years ago
- Encouraging the President and congressional leaders to meet in private, no media, and get it done
- Delaying decisions will cost as much as not making any decisions
- Considering new revenue sources like a carbon tax
- Stop kicking the can down the road
- Growth is the best way to raise revenue
- Stabilizing the economy then work on longer term issues like social security, health care and tax code overhaul
- Reforming corporate taxes by "repatriating the profits corporations are sitting on and get it back into this country"
- All governments spend all the revenues they can get
Former Governor Phil Bredesen (D)
"The average person you come upon in WalMart does not understand what is going on and how it may impact them."
"Overall, people are willing to raise taxes to reduce the deficit but they don't trust it will be dedicated to that. The deficit plans and savings proposals need to stay on track and be used as intended."
Lawrence Lindsey, former director of the National Economic Council
"Simpson Bowles is a placeholder to get us to more comprehensive reform."
"If the average person knew we needed to borrow from China to build the roads, they might support a gas tax."
"Lots of people's taxes are going to have to go up in addition to those of the rich."
Michael Peterson, president and chief operating officer of the Peter G. Peterson Foundation
"The amount matters in 10 years but it'simportant to stabilize [the economy] not for a couple of years but 10 year."
Former Senator Bob Packwood (R)
"All governments spend all the revenues they can get."
"One thing that is clear is that the fight between the right and left over bigger and smaller government will continue regardless."
I applaud the Campaign to Fix the Debt and The Committee for a Responsible Federal Budget for their bipartisan efforts to get smart people together and discuss how to move America onto a better fiscal and economic path. These bipartisan groups are helping make people more aware by sponsoring programs such as this and offering excellent tools on their websites to help people understand the problem and the scope of the challenge. Their Online Budget Simulator allows the user to see how their series of budget choices affect the debt. Try it!
See this excellent infographic and consider taking action now.