Fiscal Commission Deja Vu
On Amazon (“gift wrap available”), you can purchase the 1995 “Final Report to the President” of the “Bipartisan Commission on Entitlement and Tax Reform”. During February, President Obama announced the creation of the National Commission on Fiscal Responsibility and Reform. The old and new commissions have a lot in common.
I actually have a copy of the 1995 report on my bookshelf and just read its 269 pages. My conclusion? Nothing has substantially changed. In 1995, they said that Social Security expenditures would exceed Social Security tax revenue in 2013. The current projection is 2014. They said the system would have no trust fund money left in 2029. The current projection is 2037. Even one of the names is the same. Senator Alan Simpson was on the original commission and now is a co-chair of the current one.
Because many of the facts have not changed, their solutions remain viable. Reflecting timeless political realities, the 32 members of the commission could not agree. Consequently, the report included general conclusions, policy suggestions, and reports from committee members. In addition, the staff presented 3 policy packages ((pp. 169-175). 1) “No Tax Changes” so benefits would decrease. 2) “Minimize Benefit Reductions” so taxes would rise. 3) A “Blended Approach” which combines benefit cuts and tax increases.
As was true 15 years ago, because discretionary items like education, space, and justice represent a small proportion of all federal spending, the 2010 commission will have to focus on mandatory spending which takes us to Social Security, Medicare, and Medicaid. Will the Congress and the President respond now as they did 15 years ago?
The Economic Lesson
Specifically defined, federal fiscal policy refers to taxing, spending, and borrowing. It involves the federal deficit which is the shortfall between annual spending and revenue. The federal debt is the total amount that the U.S. government owes.