How We Can Solve the Debt Crisis. Really. - Bloomberg

Here’s How We Can Solve U.S. Debt Crisis. Really: Tom Coburn
By Tom Coburn May 24, 2011 5:42 PM GMT+0100 15 Comments inShare7More
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Senator Tom Coburn of Oklahoma. Photographer: Chris Kleponis/Bloomberg
Leaders in Washington will soon have to decide whether to pursue a serious deficit-reduction agreement before the 2012 elections. Last month, Standard & Poor’s cut the outlook on the U.S.’s long-term credit rating from stable to negative for the first time since the bombing of Pearl Harbor. If we don’t change course soon, the next shot won’t be across our bow, but at our hull.

Congress’s lack of action is a major reason why I’ve spent several months meeting in an informal group called the Gang of Six with the hope of presenting a comprehensive deficit- reduction plan. We’ve made real progress, but we reached an impasse recently when it became clear the group wouldn’t agree to the kind of serious entitlement reform that would lead to a bipartisan deal.

While our impasse is frustrating, it is important for the American people to understand that the real hurdles are more political than philosophical. Neither party wants to compromise its political advantages or its brand heading into the next election. Republicans want to be able to say they have resisted revenue increases while Democrats want to be known as the champions of entitlement. What the American people want, however, is bravery, not branding.

Revenue Increases?

In practice, neither party needs to compromise its core values, just its political agenda. I’ve argued that Republicans should be willing to consider increases in revenue -- not through higher tax rates but through eliminating tax earmarks, such as that for ethanol, and other expenditure that misallocates capital. To create the conditions for putting revenue on the table, there must also be a commitment to spending cuts and entitlement reform. After all, America’s looming debt is the product of an entitlement crisis more than a revenue crisis.

Republicans who consider this offer to be a "tax increase" are mistaken and are unwittingly opening the door to genuine tax increases. Doing nothing and waiting for a debt crisis will probably result in accelerating inflation and higher interest rates as well as emergency austerity measures, which may include direct tax-rate increases. Worst of all, the U.S. would face financial repression through the debasement of the dollar, leading to a decrease in the purchasing power of every American. This would be the worst form of tax increase. Any of these outcomes would devastate the middle class and wipe out vast amounts of wealth. Republicans who say they are "holding the line" aren’t holding the line on anything but a talking point.

Averting Meltdown
Still, many Republicans believe they can secure additional spending cuts and help avert an economic meltdown without putting revenue on the table. I’m sympathetic to that argument. I’ve put holds on hundreds of bills that weren’t paid for, fought to eliminate countless earmarks sponsored by members of my own party, and proposed hundreds of amendments to cut spending.

However, having worked to expose and cut waste, I’m convinced we will never reform entitlements without putting revenue on the table. To attempt otherwise would require a Republican supermajority that will never happen in our democracy. We’re much more likely to enter a depression first.

Democrats have a similar problem. Many of them prefer to mislead the American people by claiming that Medicare, Medicaid and Social Security are fine, when they should be embracing the reforms that will protect those programs and the people who depend on them. By 2022, Medicare, Medicaid, Social Security and interest on the debt will consume the entire federal budget. Social Security, which Democrats say is secure until 2037, is already running deficits ($49 billion last year). These programs are "safe" only while the international financial community agrees to lend us money -- which may not be for long.

Political Games
What is really happening behind closed doors in Washington would both sicken and inspire the American people. Some in both parties continue to play political games. Yet, many elected officials on both sides are willing to make hard choices. More than 40 senators have come together to discuss the crisis; dozens have privately expressed their willingness to take bipartisan action. But, right now, the possibility of a win-win agreement for America is being turned into a lose-lose stalemate because too many self-serving politicians, special-interest groups and political consultants in Washington are invested in the status quo.

Accept Reality
The solution is obvious. Democrats have to accept the reality that structural entitlement reform is necessary. Republicans have to accept the reality that in order to get Democrats to make those changes we will have to agree to tax reform that will increase revenue but not rates. This solution isn’t a betrayal of either party’s values, but a defense of those values on behalf of future generations. Again, doing nothing would be the real act of betrayal that would lead to both higher taxes and the demise of entitlement programs for the poor and elderly.

If our leaders fail to make these choices before the next election, voters will have no choice but to replace them with leaders who will.

(Tom Coburn is a Republican Senator from Oklahoma. The opinions expressed are his own.)
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We obviously would have to see some number crunching to see if simply closing loopholes would be enough to generate the revenues that are needed - and reforming entitlement ought to be discussed as part of a wider "What kind of society do we want?" national discussion... but... it's heartening to see a Rep with a kind of "let's sort this thing, shall we?" attitude.

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... because on the other hand you got the Business-As-Usual mode of functioning...

The GOP's Real Budget Hatchet Man
— By Suzy Khimm

The GOP's Real Budget Hatchet Man | Mother Jones

May. 25, 2011

In the escalating fight over the budget and deficit in Washington, all eyes have been trained on GOP golden boy Rep. Paul Ryan. But though the Wisconsin Republican's controversial plan to gut Medicare has dominated the headlines, another House GOPer has been quietly doing the dirty work of making the budget cuts that actually have some chance of passing.

Two weeks ago, Rep. Hal Rogers (R-Ky.), chairman of the House Appropriations Committee, made the GOP's next big move to slash spending for social programs. In a little-noticed proposal, Rogers detailed how the GOP wants to inflict the pain of more than $1 trillion in unspecified discretionary spending cuts contained in Ryan's 2012 budget, which passed the House in April. Rogers has now divided up the cuts into 12 different areas, each of which will be considered as its own spending bill. Under his proposal, the poor and the working class will be hardest-hit.

On Tuesday, Rogers kicked off the GOP's budget-cutting party in the House, deciding which programs should pay the price. Rogers has focused on capping labor, health, and education spending at $139 billion—$18 billion less than the 2011 budget and $41 billion below what President Obama proposed in his own 2012 budget. Big cuts to transportation and housing are another top priority for the GOP—which, per Rogers' proposal, wants to slash spending by $7.7 billion from the 2011 budget and $27 billion from the president's budget. By contrast, there's only one area where Republicans want to increase outlays: defense spending, where they propose a $17 billion hike in 2012.

Ironically enough, Rogers himself was once an infamous big spender. Dubbed the "Prince of Pork" by his Democratic opponents, the veteran Republican has secured so many earmarks for his home district that his hometown is known as "Mr. Rogers' Neighborhood." But, along with the rest of the Republican leadership, Rogers has swiftly reinvented himself as a scalpel-wielding conservative in the face of the tea party-fueled pressure to reduce spending. His plan will now form the roadmap for where the Republicans stand on the big budget negotiations this summer—and his cuts are significantly likelier to be implemented than other aspects of the Ryan plan.

Despite the controversy surrounding Ryan's proposal to voucherize Medicare, it's a nonstarter on Capitol Hill. It doesn't have a chance of passing the Democratic-controlled Senate, and Republicans have slowly backed away from the plan. Also sacrosanct is Social Security, which Senate Democrats have vowed not to touch. Meanwhile, Republicans have refused to make tax increases a part of any deal. "No Medicare, no Social Security, no defense, no tax [increases]—there's not going to be a deal of any magnitude," notes Stan Collender, a former top Democratic congressional budget aide.

Leaving aside these budget-busting items, much of what's left are cuts to discretionary spending and mandatory spending programs for low-income families, including food stamps and welfare—programs that have far less political currency and fewer advocates to defend them.

Democrats and progressive advocates have already taken Rogers' early moves as a clear signal that Republicans intend to pare back money for Pell Grants—federal funds given to needy college students—and low-income families. "Pell Grants—that's a big piece of the cut right there," says George Behan, chief of staff for Rep. Norm Dicks (D-Wash.), the ranking Democratic member on the House Appropriations Committee. "We're going to have trouble with [that] and other priority items for the Democratic caucus." Behan also pointed to large proposed cuts to spending on the interior and environment—$2 billion less than the 2011 budget—which he predicted would affect the Environmental Protection Agency, National Park Service, and wildlife refuges.

Rogers' appropriations bills are unlikely to make their way through the Democratic Senate resembling the form in which they pass through the lower chamber. But they'll help move the goalposts in a spending debate that's been mired in political gridlock. "The House has basically staked out its position, at least for 2012—they’re moving ahead," says James Horney, vice president for federal fiscal policy at the left-leaning Center for Budget and Policy Priorities.

Lawmakers don't necessarily need to pass a budget this year—they failed to do so in 2010, which resulted in a painful, protracted series of temporary budget extensions. And compared with big changes to entitlement programs or taxes, reductions to discretionary spending barely put a dent in the long-term budget and deficit picture. But Congress will be forced to come to some kind of agreement on the debt ceiling this summer. In the coming weeks of wheeling and dealing, social programs could end up falling victim as Democrats are forced to make concessions to avert an economic disaster if no compromise is reached.

To be sure, the House Democrats could have some influence over how spending cuts are divvied up. The right flank of the House GOP revolted against Speaker John Boehner (R-Ohio) last month, voting against the budget to fund the government for the remainder of 2011, because it didn't go far enough, in their view. As a result, Boehner was forced to rely on Democratic votes to get the budget passed and avoid a shutdown, and the most draconian cuts were avoided. This time around, Democrats will again fight cuts "we can't live with," Behan asserts, perhaps staving off the most extreme spending reductions to the vulnerable. That fight begins this week as the spending bills are hammered out, one by one, and legislators hash out which programs will be targeted.

Just the same, Boehner's failure to deliver on his promises to cut spending by tens of billions of dollars earlier this year may embolden more Republicans to insist that real budget blood be drawn this time around. And Rogers will be the one wielding the ax, as he shepherds the GOP spending bills through the House in the upcoming weeks.

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I think the GOP really shot themselves in the foot politically and budget-wise when they decided to argue that closing loopholes and cancelling tax deductions amounted to a tax rise.

I mean, effectively, they are in the sense that some people will see their tax bill go up but since when a tax break given for a specific industry and/or for a specific reason need to be permanent? After all, unemployment benefits are limited in time. Why not tax breaks for big companies?

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