The debt-ceiling debate increasingly looks as though it will focus on procedural reforms to the budget process, some of them sensible, some of them not so sensible. The Bipartisan Policy Center is pushing one of the sensible ones: SaveGo, which you can read all about here. But on the off chance you don?t feel like clicking the link, I asked one of the policy?s authors, former Congressional Budget Office director Alice Rivlin, to explain it for me.
Ezra Klein: Let?s start with the basics. How does SaveGo work?
Alice Rivlin: The idea is the Congress would agree to a path for deficit savings. So say they said they wanted to stabilize the debt at 60 percent of GDP over the next 10 years. Then they?d decide how much total money they?d need ? in both savings and revenues ? to get there. If they didn?t enact legislation over time to meet those targets, there?d be a set of automatic cuts to discretionary spending and entitlement spending, and automatic increases in revenues.
EK: This proposal seems to fit into an expanding group of procedural reforms that could become part of the debt-ceiling debate. The other obvious ones are the Senate Republicans? balanced budget amendment, the McCaskill-Corker spending cap and the president?s trigger. How does this fit in?
AR: Let me take them one by one. A balanced budget amendment has at least two difficulties. The first is that balancing the budget is not always appropriate. Temporary deficits necessitated by recession or war are not bad. A constitutional amendment can be written to allow for exceptions, but it becomes very complex. The second difficulty is it takes a long time to amend the Constitution. You need two-thirds of the Congress and three-quarters of the states. We haven?t got years. We need to do something quickly.
Another option is an overall spending target, but reducing spending isn?t the only way to reduce debt. Increasing revenues is another way, and in my opinion and in the opinion of the bipartisan deficit reduction task forces on which I?ve served, we need to do both. The president?s trigger seems to use the debt-to-GDP ratio, but the problem with using that measure is that it can change because debt went up or it can change because GDP dropped. The advantage of SaveGo is you?ve set a target in terms of dollar savings which can actually be voted on. It?s a variation on the pay-go process we had in the Budget Balance Act of 1990, which turned out to be very useful.
EK: Why not simply use pay-go?
AR: Because circumstances have changed. Pay-go was structured to prevent Congress from making future deficits worse. You had to offset tax cuts and entitlement increases that would increase deficits. But we?re now in a different situation, because even without enacting legislation, we will have a rapidly rising debt because of the demographic and middle-class entitlements, and that?s why we need a different mechanism, a stronger mechanism, that will force future savings, not just offsets.
EK: One thing I like about the SaveGo idea is that it seems to move the consequences for not agreeing on a deficit-reduction plan from causing an unnecessary financial crisis to automatic actions that reduce the deficit. That seems more sensible. But on the debt ceiling itself, you?re a veteran of these fights, so I?m curious: Is the debt ceiling worth having?
AR: Oh, no. I don?t think it?s a good thing. But we?ve got it and we?ve got it at a moment in which our debt is going to be rising rapidly, so the idea that you use it to force some sensible actions is not all wrong. But I wouldn?t have put it there in the first place.
Source: http://feeds.washingtonpost.com/click.phdo?i=9fb0686bf4a30d06271654585d6406d5
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