Admitting you have a problem is the first step. And Houston, we have a problem. America’s fiscal health is in grave danger. Host Steve Ellis is joined by Josh Sewell and Mike Surrusco to consider the creation of a bipartisan, bicameral fiscal commission to address our nation’s unsustainable national debt and the pending insolvency of critical government programs.

Transcript

Announcer:

Welcome to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget spending and tax issues facing the nation. Cut through the partisan rhetoric and talking points for the facts about what’s being talked about, bandied about and pushed to Washington. Brought to you by taxpayers for Common Sense. And now the host of Budget Watchdog AF TCS President Steve Ellis.

Steve Ellis:

Welcome to All American Taxpayers Seeking Common Sense. You’ve made it to the right place. For over 25 years, TCS, that’s Taxpayers for Common Sense, has served as an independent nonpartisan budget watchdog group based in Washington DC. We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are in the political spectrum, no one wants to see their tax dollars wasted. Today, dear podcast listeners, we are going to have a really tough conversation. In moments like this one, admitting you have a problem, is the first step. And Houston, we have a problem. America’s fiscal health is in grave danger and to put a fine point on it. The way things are headed, it’s the ER or well, I don’t want to know.

The ER in this case is the creation of a bipartisan, bicameral fiscal commission to address our nation’s unsustainable national debt and the pending insolvency of critical government programs. Joining me to help explain the pros and the cons of this type of intervention and how we got here are Joshua Sewell, TCS Director of Research and Policy, and Mike Surrusco, TCS Director of Campaigns. Gentlemen, thanks for being here.

Mike Surrusco:

Thanks, Dave.

Josh Sewell:

Always happy to be here.

Steve Ellis:

I don’t know if I’m glad to be here. Certainly not that glad to be in this debt situation. So the House Budget Committee convened a hearing this week to consider legislation to create just such a commission. Here’s how Chairman Jodey Arrington, a Republican from Texas, opened the hearing.

Rep Arrington (R-TX):

If that’s not enough to wake all of us up and give us the sense of urgency to act, I don’t know what will. No responsible leader can look at the rapid deterioration of our balance sheet, the CBO projection of these unsustainable deficits and the long-term, unfunded liabilities of our nation and not feel compelled to intervene and change course. No responsible leader can do that. As I said from the outset, this is the 21st century challenge for America. I believe this is our generation’s World War and the cost of losing this war will be catastrophic and irreparable. And I have three children, I imagine many of you have children, grandchildren, and they’re counting on us to step up and be leaders and work together to solve the problem. If we don’t have this sense of urgency, we don’t have a plan. If we don’t exercise the political courage to execute the plan, we will be the first generation of leaders to fail to leave the country better than we found it.

Steve Ellis:

Mike, I think the chairman made it quite clear. We have a problem. $33.851 trillion of debt. $7 trillion in intergovernmental debt is part of that. Listeners, you might think it interesting that I went down to 0.001 on the debt, but when you’re talking trillions that 0.001 is a billion dollars. Let’s give our Budget Watchdog A F faithful some perspective. A trillion is a hard thing to get your head around. Most of us will never see a trillion of anything in our lives. A trillion is a one with 12 zeros after it. A thousand billions, a million millions.

Mike Surrusco:

Yes, we want to talk about what a trillion is. It’s certainly a number that stretches your mind. And to put it in perspective, if you received a dollar every second, it would take 31 years before you got to a billion dollars. About a trillion, it would take 31,709 years to get to a trillion dollars. So it is a massive amount of money and we talk about it a lot and a lot of times people just can’t understand or don’t have a perspective for how much that is.

Steve Ellis:

Head blown. 31,000 years of getting a dollar every second to get to a trillion dollars. Okay, now that we’ve established what a trillion is, how did we get to 33 trillion in debt, Mike?

Mike Surrusco:

Well, that’s a good question. I think that’s the $33 trillion question. Over time obviously there’s no great mystery. We spent more than we took in and we’ve been on an unsustainable path for many years. This has come up before and we’ve continued down that path and now we’ve gotten to a point where our debt to GDP, so the size of the debt is larger than the size of the output of our economy in a year. That’s a pretty significant amount, obviously. We spent, in 2023, we spent about $650 billion just on interest, servicing that debt. And according to the Congressional Budget Office, by 2051, the amount that we spend will be larger than what we spend on Defense, Social Security or Medicare. So it’s a pocketbook issue, you might say.

Steve Ellis:

I mean, when I got to TCS in 1999, the nation’s debt was basically five and a half trillion dollars, which that’s 1999 dollars. So there’s obviously the inflation impacts, but since then we’ve had two long wars that were unpaid for, several rounds of tax cuts, a few rounds of stimulus, major infrastructure spending and a pandemic, and all of that was, policymakers were putting off tough choices. And as you said, I mean, it led to large deficits and sustained deficits and some of that was, we had low interest rates, so there was less consideration of that debt service. But now that the interest rates are coming home to roost, are boosting, and as you said, Mike, we got $650 billion just to pay interest on the debt that we’ve already racked up the spending.

Mike Surrusco:

And that is exactly why we need to talk about a commission that is focused on trying to correct that problem that’s been going on for years.

Steve Ellis:

So we have seen this rise in Congressional interest towards a debt reduction committee. I mean, there were actual legislation that was discussed at this hearing and it’s bipartisan and bicameral legislation. I’m guessing that our podcast listeners didn’t tune into the hearing yesterday. So let’s go and dig into the pros, the cons and the mechanics of such an entity. Okay, Mike, what are some of the arguments in favor of having a commission?

Mike Surrusco:

Well, it wouldn’t surprise anyone to hear that we at TCS are supportive of the idea and a lot of the members in Congress from both parties are also supportive of it. The general idea is that this is an opportunity or a venue to have some public discussions from people who are in position, whether it’s on the appropriations committee or the ways and means committee to look at our budget process, our trust funds, the state of Social Security and Medicare and the Highway Trust Fund, how we allocate money for all of these different needs that we have over time against the tax revenue that’s coming in to pay for it. So, the arguments in favor of it are that this is a problem and unless we dig in, then it’s not going to go away. And this is one way that Congress deals with these types of problems is they create a task force to go out and come up with solutions. This has happened before and we need to continue to do it until we find a solution.

Steve Ellis:

So Josh, let’s bring you in here. What is the proposed, we mentioned this is bipartisan. What’s the proposed membership of this commission? How is it supposed to be structured?

Josh Sewell:

So this latest commission proposal would have 16 members, 16 people on the commission, and 12 of them would be elected members of the House or Senate, and four would be outside experts. So it’s some elected members, but also some folks who have proven credibility and knowledge in budgets and how the government works. And interestingly, to ensure that it’s truly bipartisan, those 16 people would be chosen, four each from the leaders in each chamber. So the majority leader would get four. The minority leader in the Senate would choose four and the same thing in the House. So it doesn’t matter who’s in charge of Congress, if this was passed and it happened next month or if it happened in two years from now when you might have a different majority, you would still get eight people chosen by Democrats and eight people chosen by Republicans. So it gets seated at the table for hopefully every perspective.

Steve Ellis:

So we got bipartisan, bicameral. It also keeps it in the legislative branch. There’s no administration membership and these outside experts. So what does this hopefully get you, Josh?

Josh Sewell:

Well, like I mentioned, it should be more inclusive. And I don’t mean that from just a happy, let’s keep everyone involved, but it actually gets all those potential solutions on the table. So as we’ve seen in the past sometimes, and actually, well by the past we mean probably today if you’re watching Congress, you’ll see that Republicans usually don’t want to talk about revenue. They don’t want to, oftentimes they don’t have any sort of revenue increase, so no tax increases or even consideration of eliminating existing tax breaks. But at the same time, depending on which policy you’re talking about, folks don’t want to touch so-called third rail programs. So anything that a politician is loathed to touch under “normal” budget and spending processes. So those big ticket, Social Security, Medicare, Medicaid and, all of our favorite, farm spending. Those are all types of entitlements that many folks don’t want to touch.

Steve Ellis:

Okay. They come up with these recommendations and deal with these politically unpopular sort of things. And so all of a sudden whoever’s in charge of the House or the Senate is like, “Wow, this is really ugly. It’s going to cost us a majority. We don’t want to touch it.” So what is the commission able to do then?

Josh Sewell:

So the commission is able to basically force the issue. As long as the commission comes up with recommendations, those recommendations will have to be brought to the floor of the House and the Senate without waiting on leadership to do it. And the details for each chamber are slightly different because of the rules, but in the end it’s essentially like a privileged motion. It’s actually stated exactly how it happens, but think of the privileged motion to, let’s say, vacate the chair, which is how they toppled the speaker. The speaker could not stop that vote from happening. It had to happen once it was put out there. You can still win the vote or lose the vote, but the vote has to happen and there’s a similar mechanism in here in that commission comes up with some recommendations, and then it has to be voted on. And so it makes it harder for either leadership or a small minority in either chamber to, in the case of the Senate, one member to come up the works.

Steve Ellis:

Gotcha. And so Mike mentioned that not surprisingly TCS is supportive of having this commission. Now, in reality, we would normally want Congress to do their job, but we’re kind of at the point of throwing our hands up in the air. And so what are some of the arguments against the cons? What are some of the arguments against having this commission?

Josh Sewell:

Well, they haven’t always worked, and I think they have failed spectacularly in the past. And I think most recently, if you may remember the super committee, so to speak, it was formed after what was my first real debt ceiling crisis debate back in 2010. It came out of the Budget Control Act. And so that’s where you had a mandate as part of an agreement to increase the debt ceiling with a Republican Congress. And then President Obama, there was an agreement that they would find a trillion dollars in cuts, and if they didn’t find a trillion dollars in, I should say deficit reduction, either cuts in spending or increases in revenue, then you had automatic cuts across the board and the dreaded sequester that we all have been talking about for 13 years now. And, the fact is, it didn’t work. So they got together, they formed what is essentially a commission made up of all elected members, and they couldn’t internally come up with enough agreement to actually propose a package because at this time it was, they didn’t want to consider revenue basically.

Steve Ellis:

Right. So they came up, they were asked to come up with a trillion dollars in deficit reduction. They came up with zero. That was Congressman Jeb Hensarling and Senator Patty Murray were the co-chairs of that. And that came right on the heels of Simpson Bowls, the fiscal commission. And so Josh, what are some of the things that, and that also, it produced a product, but it didn’t get endorsed by enough members to be pushed forward and President Obama walked away from it. So what is it that makes some of these past commissions, because some have worked, what are some of the things that are in their DNA that actually makes this happen?

Josh Sewell:

It’s a few things, and I think one of the big things is deadlines. I think we talk about the Greenspan Commission back from 1981 to ’83 was led by, who was Chairman Greenspan. Basically that was to look at Social Security because there was a crisis back then of Social Security was going to become insolvent. And what really pushed that to be successful and actually make some reforms was the fact that they started to run up against the actual deadline. So coming in ’83, if they didn’t come up with solutions, there were going to be benefit cuts because their money wasn’t there. And the formula, just under the formula, there was no money. You were going to see benefit cuts and so you have a real deadline. So that’s a big part of it.

So the political times matters as well, but I think a lot of it has to do with the deadline and people actually becoming serious about the debt and deficits and seeing that there has to be a change. And I think frankly, I mean we are at a point where we are seeing both sides of the aisle become a little more concerned with the ramifications of deficits and debt, in part because of the rising interest rates and because of all the pressing needs. I just think it’s there.

Steve Ellis:

Well, I know that Congressman McGovern, a Democrat from Massachusetts, a very senior member, I think he’s the Ranking Member on the Rules Committee, was skeptical because people, or I guess lawmakers specifically are the problem. But I also heard this …

Rep Smucker (R-PA):

I believe our debt and our fiscal trajectory pose an existential threat to America’s future. And I think establishing a commission is our best chance of addressing it. Fiscal commission must be willing to consider all options. Democrats and Republicans alike are responsible for where we are. The debt has increased under the watch of both. So we all share responsibility and must consider options that we may not like.

Steve Ellis:

And that was Representative Smucker, a Republican from Pennsylvania. So I guess it’s really, nothing else has worked, so why not try this.

All right. Let’s say, Josh, you and Mike, maybe even me, are some of those outside experts that are selected to be on the commission. What are some of the recommendations that this commission would need to produce?

Mike Surrusco:

Well, I think one of the things that we need to keep in mind, that Congress needs to keep in mind is that they don’t have to answer every question in this commission. I think part of the plan is to direct federal agencies to go out and find savings and come back with what they consider to be potential savings. The commission can also look at the discretionary budget overall and see if, I think we at TCS have certainly found ways that we could trim the discretionary spending top line numbers, especially from specific buckets of money. The tax code is littered with various credits and deductions for things that have been put on autopilot for decades that need to be reassessed in a meaningful way.

And then something else quickly that we’ve talked a lot about at TCS is the way that disaster spending is budgeted or not budgeted. Every year we seem to forget that we’re going to have to spend supplemental emergency spending bills. Notwithstanding whatever happens overseas, right here in our country we have all kinds of needs for disaster spending that in many ways is just simply reacting to what we know is going to happen year after year. So those are a couple of possibilities.

Steve Ellis:

Commissioner Josh?

Josh Sewell:

Mike hit on a good point is that they don’t have to solve every problem at the first pass. You’re not trying to get a package that fixes everything. But they do need to look at every corner of the budget. And that’s one of the biggest advantages of a commission is that they are not beholden to a political party. They’re not beholden to, in theory, a particular ideology. And so you got to look at everything. And I think it’s not just looking at revenue, which we do need to make sure we have adequate revenue. You do need to take a hard look at these big entitlement programs because Social Security, Medicare, Medicaid, you put those together and not even talking about the “smaller entitlements” like farm subsidies and some of the disaster programs, which are actually entitlements as well. That’s two thirds of the budget, basically.

You can’t solve this issue only looking at one third of your spending. You have to say, are all these programs actually needed? And if they are needed, are they being implemented in a way that they’re solving the problem? And if they aren’t, how can we change them? And even if they are, some of them just have to be modernized to 2023. I mean, Social Security was created before any of us were born. So you got to make sure it’s modernized to current standards of living, but also living life expectancy and just the reality that we see now.

Steve Ellis:

Well, it’s not just Social Security. Medicare was created before any of us were born, as well, although a little closer to my birthday. But, and I think that you’re talking about spending, and Mike makes a good point about it’s not just revenue, it’s also foregone revenue. And there’s trillions of dollars in tax expenditures and some that even in the last tax cut they did tinker with. So the home mortgage interest deduction, they capped some of that. They obviously capped state and local tax deductions, but then you can start looking at the tax deduction for employer provided healthcare and things along those, which is clearly income to people. And so trying to think about some of these big, big issues, especially the ones that are on, a lot of these provisions in the tax code are on autopilot. They don’t come up for review and you don’t actually renew them.

And so, certainly, you have a commission, it can take on some of these very difficult issues, package them together, and hopefully everybody just decides, okay, we’re going to jump together and get this thing through and get the country on a more sustainable fiscal trajectory. Because as Mike was pointing out with the debt to GDP ratio, it’s not about running surpluses. That’s not even the goal here. It’s about reducing the debt to GDP ratio so that as the economy grows it slowly but continuously edges out and reduces that overall size of the debt to get it to a more reasonable amount, particularly considering we’re spending probably by the end of this decade, we’re going to be spending nearly a trillion dollars a year just on net interest.

Mike Surrusco:

Steve, I wanted to just quickly circle back to the issue of taxes. And this is a criticism of the proposal is that, well, we’ve done this before and it’s failed and we were just going to do that again. But we have had success in the past and it’s been bipartisan. And that was the Tax Reform Act in 1986. And I think that is a good lesson in how a fiscal commission can get in a room and lock the doors and keep out all of the different interests that have a dog in this fight. And that’s really the only way. And then move it quickly before it has a chance to start taking on water. So I mean, there are examples of bipartisan sweeping reform efforts. That is what we should be looking to try and get something like this done.

Steve Ellis:

And Budget Watchdog AF faithful, here’s a snippet book review for you. Showdown at Gucci Gulch, which is about the 1986 tax reform is still one of the best books about how the sausage gets made and how that legislative package came through with the Democratic Speaker of the House, a Republican Senate majority, and a Republican President Reagan in the White House. Josh?

Josh Sewell:

I’d say, and let’s be clear that we’re not pretending that this is going to be easy. Even with a commission, you’re going to have some hard decisions to make, and ultimately lawmakers would be elected members of Congress and the Senate would have to put their stamp of approval on these changes. But, I mean, this is doable and almost $34 trillion, that’s a lot of money. That’s a lot of money, and annual trillion dollar deficits. But we have a big economy, we have a lot of people, we have a lot of opportunities to make investments. And I think that, to me, is, I don’t know if it’s the most frustrating thing, but it’s, I’m going to say it is the most frustrating thing about working is that when we try to make reforms and whatever we’re working on, it’s what is possible. There’s a lot of upside.

But the thing that prevents us from having better investments in the farm economy, the better investments in energy, is oftentimes an unwillingness to let go of something that clearly isn’t solving the problem the way we want it to. And so, you got to look at these legacy entitlements, but also that the legacy program. So in Defense, just because we spent money on a weapon in the past, it doesn’t mean we need to do it now. We don’t build battleships anymore, right? Because we don’t need battleships, they don’t work for what we have now. So maybe we don’t need to do the same thing for some of these airframes. Maybe we don’t need to do some of the same things for, I don’t know, tanks in the Marines or whatever we were focused on the other day. And so it’s the same thing in farms. Just because you spent it in the past doesn’t mean you need to spend it tomorrow.

And a commission gives you the chance to say, all right, sure, maybe 12 of those people are going to run for reelection, but four of them won’t be, especially if I’m on there. Clearly we’re never going to run for election for anything, because we’re unelectable. But it gives you a chance to really say, “Is this working for this problem? And if not, how can we do it differently?” And I am an optimist on this. Partly because, what else are we going to do? Something has to work. I honestly think something has to work and this is a great opportunity.

Steve Ellis:

I think you’re right. We’re at an inflection point and there was a lot of positive energy, I would say, that was coming out of that hearing. And it is bipartisan and bicameral. And one of the things that I heard in some of the criticisms is that this is just going to be a tool to cut Social Security and Medicare. And the reality is, and you described how the commission’s set up, I mean clearly the Minority Leader, Jeffries, the leading Democrat in the House and Majority Leader Schumer, the leading Democrat in the Senate, are not going to appoint people that are going to go along with gutting, as people talked about, Social Security and Medicare. And it has to be more than just a simple majority vote of this commission to actually make those recommendations.

Josh Sewell:

Absolutely. And I think people are more reasonable than politicians are on a lot of these issues. And if we can get structures and processes that get some of that common sense into the process instead of the partisanship, then I truly believe that’ll help cool things down a little and get us focused on at least taking some steps to solve the problem. Don’t expect everything to be fixed, but clearly, in my opinion, trying to pass partisan bills, trying to just legislate when you control the Presidency and the Congress, that’s what brought us to where we are. And so that’s not the solution. So the solution isn’t just to get Republicans in charge so we can finally cut Social Security or get Democrats in charge so you can increase taxes. That’s not going to work. I mean, it hasn’t worked so far.

Mike Surrusco:

You mentioned also the process, too, and I think that’s an important point that we need to take a moment to consider. That the commission is going to look at the substance of the policies on the tax side and on the spending side and the mandatory entitlement side, and ideally give us a roadmap for what we might do to fix it. But the same is true for the process that the Congress goes through each year to pass the Appropriations Bills that fund our government, which has been as much of a train wreck as our overall fiscal picture every year. A lot of times it gets rolled up into an omnibus so that the leadership is effectively writing the bill and members of Congress have no time to even read something that’s thousands of pages long and they need to vote on it. I mean, we talk about this over and over, but clearly the process that has been in place for decades has not produced the outcomes that it was intended to. And maybe it’s time to scrap it and rethink it from the ground up.

Steve Ellis:

Certainly considering they’ve only done regular order, passing all the bills individually and on time, or even just passing them on time a few times since 1974, clearly indicates that something needs to change in the budget process. And certainly that’s something that can come out of this commission as well. And that’s what the budget control and Impoundment Act of 1974, that created the process. I mean, that certainly was coming out of that same frustration by Congress actually at the administration, also created the Congressional Budget Office. Josh Sewell, Mike Surrusco, great to have you on the pod today.

Mike Surrusco:

Thanks, Steve.

Josh Sewell:

Truly happy to be here.

Steve Ellis:

Well, there you have at podcast listeners. A commission has its flaws, but it appears to be the tool with the greatest likelihood of success. This is the frequency. Mark it on your dial, subscribe and share, and know this. Taxpayers for Common Sense has your back America. We read the bills, monitor the earmarks, and highlight those wasteful programs that poorly spend our money and shift long-term risk to taxpayers. We’ll be back with a new episode soon. I hope you’ll meet us right here to learn more.