One Cheer (Net) for Senator Corker

Senator Bob Corker (R-TN) presented his own budget plan in an opinion column in the November 26 Washington Post.

Three cheers (gross) for Senator Corker.  His plan is balanced, in that it includes both spending reduction and revenue increases, and therefore takes on the most recalcitrant members of the two political extremes in Washington. Two boos (gross) for the specific content of his plan, and for how he proposes to make it happen. So one cheer (net), and a hope that others follow along and, in the fullness of time, achieve three cheers (net) and make a solution happen.

Here is the scorecard:

Effort and courage: Three cheers. As the press documents daily, extremists on both sides threaten the fiscal health and prosperity of the United States with my-way-or-the-highway demands. Grover Norquist continues to insist that Republicans resist any tax increase as part of a deficit-reduction deal.  Meanwhile, any number of congressional Democrats equally resolutely reject any reduction in the major entitlement programs, including Social Security and Medicare. The intersection of these two positions is the null set, at least as far as the nation’s economic future is concerned.

Senator Corker both defies the extreme of his own party, and gives cover to moderates on the other side. On the former point, he advocates genuine increases in tax revenue – not just the “let’s pretend” version in which tax cuts increase economic growth. He would cap itemized deductions at $50,000, which would have a disproportionate impact on upper-income taxpayers (not many people with incomes of $50,000 have itemized deductions of over $50,000).

Meanwhile, Democrats who recognize that the growing cost of health care is the long-term source of rising deficits and debt can feel more secure in acting to solve that problem, because a Republican went first and therefore weakened potential partisan attacks.  The key point, from CED’s perspective, is that Senator Corker recommends competition between existing Medicare and private plans, so people who wish to continue with the current system can do so, but others who choose potentially more efficient plans can save money through that choice – and by so doing, they will drive the healthcare delivery system toward greater efficiency, and “bend the cost curve.”

Elsewhere on the spending side, Senator Corker counts the already required cuts to annual appropriations, recognizing that they are enough.  (Those cuts approximately meet the targets set in the Domenici-Rivlin and Simpson-Bowles plans for both defense and non-defense spending.)  The Senator asks for a cut in federal employee compensation – which is an easy and possibly ill-chosen target – but otherwise leaves annual appropriations on their current, already historically low path. This gives at least some hope that well chosen future appropriations would adequately support infrastructure, education, and other necessary public services.

That is the good news. And it is a lot of good news. But here is the negative side:

Content: One boo.  Some of Senator Corker’s policy choices arguably could have been better.  The aforementioned individual income tax cap on itemized deductions may not be the best choice (see “Capping Itemized Deductions to Pay for Rate Cuts” on this blog), and certainly will elicit fierce reaction from home builders, charities, and state and local governments.  President Obama’s proposal to cap the value per dollar of itemized deductions rather than their amount (see the Treasury’s “Green Book,” which explains the proposal on pages 73-74) would be both more acceptable politically and more efficient as tax policy.

Senator Corker would restrain Social Security and Medicare costs in part by increasing the eligibility ages for those programs.  Seeking savings in those programs is not only acceptable, but necessary; but again, there are better ways to do so.  One big concern is that people who do physical work can be unemployable well below the current Medicare eligibility age of 65 and the Social Security normal retirement age of 67 (effective soon), much less still higher ages.  Yes, a smaller share of the workforce than in the past does physical work, and the nation cannot make policy to suit exceptions; but there still are millions of people who would be so affected.  Social Security disability coverage is a poor backstop for physical workers, because the administrative barriers are high, and raising the retirement eligibility age can create enormous incentives to retire early and apply for disability benefits.  A higher Medicare eligibility age will put a heavy burden on the new insurance exchanges created under the 2010 Patient Protection and Affordable Care Act, and many states claim that they will refuse to create exchanges at all. The Domenici-Rivlin plan arguably does a better job by adjusting benefits without changing the eligibility ages, and strengthening the current minimum Social Security benefit so that those who must retire after a short but wearing career at low wages (but not those who choose to retire after a short career at high earnings) are protected.

Timing: One boo. These issues of content highlight the need to engage a number of minds and consider all perspectives to make big budget choices. That takes time. And that is why it is unfortunate that Senator Corker in his op-ed seems to make it an issue of manhood (“personhood?”) to finish the entire budget fix in less than one month.

“I hear Washington watchers and people in the hallways of Congress saying there is not enough time to get this done this year.  I disagree…  No Congress is better suited to address these issues than this one. It is our responsibility to solve these problems now… Kicking the can down the road — setting up a process for token deficit reduction today with the promise of more reforms later — is misguided and irresponsible and shows a total lack of courage.”

There surely are Washington ways born of lethargy, self-satisfaction, or the like.  But there are also some born of experience.  And one oft-repeated phrase in the basement corridor of House of Representatives Legislative Counsel (the unsung people who draft the bills) is, “If you want it bad, that’s how you’ll get it.”  In complex matters, it can take time to do it right.

In his op-ed, Senator Corker justifies his hurry with some seemingly logical concerns:

“At best, a ‘small’ deal will leave us facing another cliff, selecting down the line from the same menu of policy options before us today. The only difference will be that the hole we’re digging out from will be even deeper. Instead of debating a process to employ during future negotiations, let’s choose from the options before us, which are more plentiful and less draconian than they will be down the road.”

The problem with this view is that the economy cannot withstand big budget savings today, which is why economic forecasters fear the fiscal cliff (and the potential gridlock that could take us there). Replacing the current poorly designed $500-billion hit on the economy with a better-designed $500-billion hit on the economy would leave us with the same recession.  Experienced economists want a budget plan that takes action only after the economic recovery has blossomed into a sustained expansion – which will be at least one year from now.  So there is much less rush to enact a budget plan than there is to show genuine bipartisanship, and thereby reassure the financial markets.  The congressional leadership can do that by cooperating sincerely on a firm plan and process for action next year, when they will have the time to do the job right.  So…

Overall: One cheer (net; i.e., three cheers minus two boos). If everyone approaches the issue the way Senator Corker has, we can get a deal.  I hope that Senator Corker starts a trend.  If he does, extending the work into next year to perfect the plan will be kicking the can not down the road, but rather through the uprights.

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