No Brakes on This Train

Things are so bad in Congress these days that it can’t even outsource the tough decisions.

The Senate today rejected a proposal to create a bipartisan commission to come up with a plan to address the federal government’s mountain of debt. Under the legislation, the commission would come up with a plan to reduce future deficits—some combination of spending cuts and tax increases—and submit it to Congress for an up-or-down vote after this year’s congressional elections.

Only 53 senators voted for the commission—seven short of the 60 needed to create it. Many Democrats feared the commission’s plan would lead to cuts in entitlements like Social Security and Medicare, while many Republicans didn’t want to open the door to tax increases.

Senator George LeMieux, Republican from Florida, said too many senators “won’t stand up and face the hard truth.” The federal government’s ongoing budget deficits—projected to hit $1.35 trillion this year—are “like a cancer, and this chamber refuses to seek any treatment.”

How bad is this cancer? The Congressional Budget Office today estimated that current policies would lead to $6 trillion in total deficits over the next 10 years. By 2020, publicly held national debt would climb to $15 trillion, two thirds of the nation’s gross domestic product.

“We are pushing our ways to debt levels that we don’t have experience with in this country,” said CBO director Douglas Elmendorf.

These debt levels could cause “large shocks to the economy,” he said. Investors may no longer want to buy Treasury bonds. Interest rates could soar. There could be a “precipitous withdrawal of capital” from the U.S., Elmendorf said. Productivity and incomes would decline, he said.

President Barack Obama, who supported creation of the independent fiscal commission, will take a small step toward deficit reduction in his State of the Union address Wednesday night. He will propose a three-year freeze on discretionary spending not related to national security, starting with next year’s budget.

This spending freeze is projected to save the federal government $250 billion over the next decade, compared with what spending would be, with increases for inflation, if the freeze isn’t enacted.

With this $250 billion in savings, the federal government’s accumulated deficit over the next 10 years would be only $5.75 trillion, if you plug the president’s numbers into CBO’s numbers. The president’s freeze would do little to address the nation’s fiscal crisis because it would apply to only 17 percent of the federal budget.

Plus, as LeMieux pointed out, it’s not enough to freeze spending, the federal government needs to actually cut spending if it wants to get the deficit under control.

Rob Nabors, deputy director of the Office of Management and Budget, said the Obama administration wants to end funding for programs that don’t work and cut funding for low-priority programs. Other programs, such as education-end energy research, would get more funding under Obama’s proposal.

“This is not an across-the-board cut,” Nabors said.

That creates a political problem. Instead of everyone sharing the pain, Obama’s freeze will create winners and losers. Even inefficient or low-priority programs have constituencies, and they will howl with protest at the president’s proposed cuts. They’ll probably find a sympathetic ear with congressional appropriators, whose job, after all, is to spend the public’s money. If history is any guide, many of these cuts will be restored, and they won’t be offset by cuts elsewhere.

Even Obama’s freeze, as modest as it is, will likely melt away.