July 30, 2010

Column #1,509

Maya MacGuineas: Today’s Ross Perot

By Mike McManus

                “The problem with fiscal responsibility is that it is much less fun than fiscal irresponsibility,” said Maya MacGuineas, President of the Committee for a Responsible Federal Budget. She was speaking to the National Commission on Fiscal Responsibility and Reform, which held a meeting open to the public on Wednesday.

                She testified, “If we don’t make changes to our fiscal future, we – and future generations – will pay the price through a weaker economy, a lower standard of living, less growth potential, a less flexible budget and a loss of leadership in the world.”

                President George W. Bush began his term with the first budget surplus of a generation, thanks to a Republican Congress and a moderate Democrat as President, Bill Clinton. They were  responding to pressure by Ross Perot’s call for a balanced budget that resonated with the public.

                Bush squandered the surplus with tax cuts in 2001 and 2003 which he claimed would stimulate economic growth that never really happened. At the end of his term, family income actually declined.  His unnecessary war in Iraq wasted a trillion dollars and more lost American lives than in the 9/11 attacks. 

                Bush’s term ended with half trillion dollar deficits and a Great Recession that has lost 8 million jobs. Obama championed a $1 trillion recovery plan that saved banks, but created few jobs. We are now in the second year of a $1.5 trillion dollar deficit.

                Where is Ross Perot to call America to account?  Maya MacGuineas, comes closest to this generation’s Ross Perot. She speaks refreshing but tough economic truth. 

In a June CNN commentary, she proposed paying for extending jobless benefits “by instituting a short-term freeze on federal pay – something that would be reasonable given that as wages have fallen in most of the economy, federal workers have continued to see their salaries rise faster than inflation.”

                Her testimony this week contained similar nuggets of wisdom about “America’s dangerous debt spiral” that is projected to grow from 60 percent of the Gross Domestic Product to an unsustainable 90 percent in a decade.  She called for many ways to “reassure credit markets and keep interest rates low,” producing these savings in 2018:

1.      Reduce weapons and troop levels and reform procurement, saving $70 billion.

2.      Increase Social Security retirement age to 68 and slow the growth of SS benefits for middle and upper earners, saving $60 billion.

3.      Increase retirement age for Medicare to 67, increase Medicare premiums, reform malpractice policies and reduce Medicaid funding to states to save $120 billion.

4.      Eliminate agricultural subsidies, freeze government salaries for two years, and cut other mandatory spending, saving $60 billion.

5.      Gradually tax health care benefits as income, phase down home mortgage deduction from $1 million to $500,000, eliminate state and local tax deductions, implement a carbon tax, and extend the 2001/2003 tax cuts for two years at most until a debt reduction package is in place – painful changes to save $300 billion in 2018.

Ms. MacGuineas says these changes would “balance the budget, excluding interest payments on the debt, by 2015,” and stabilize the debt at 60 percent of GDP.

Half of her budget balancing comes from cutting spending, and up to 75 percent over the long term, noting that “the most successful turnarounds in other countries have emphasized spending cuts over tax increases.” For example, pushing up the age for Medicare and Social Security “reflects growing life expectancies and the fiscal reality that we cannot afford to provide such generous benefits for those who do not need them,” she stated.

However, “taxes will have to go up.”  If the Bush tax cuts remain in place for most people, the cost is $2.3 trillion over a decade.  “Pledges to not raise taxes or not to raise taxes for families making less than $250,000 are unrealistic and should not be made by anyone unwilling to show specifically how they would achieve the goal of getting the budget under control without additional revenues,” she tartly asserted.

How were her comments received by the bi-partisan National Commission?  Surprisingly, no one made a substantive criticism. And Co-Chair Alan Simpson, a retired Republican Senator, kissed her on the cheek and called her a “treasure.”

How would YOU balance the budget?  Maya MacGuineas has created an online simulation for you to consider various ways to cut spending or raise taxes. I did so, reducing the debt to 48 percent of GDP by 2018!

 Go to this link, and become a budget hawk! http://crfb.org/stabilizethedebt/