U.S. needs two-part $4 trillion gimmick-free deficit deal

The Congressional Budget Office’s latest report on this nation’s long-term budget outlook tells an all too familiar and all too grim story. If we continue down our current path, debt will eclipse the size of the entire economy just a decade from now, and by the mid-2030s will be so high that CBO doesn’t bother measuring it. The consequences of this path are grave: Slower economic growth, more taxpayer money going to pay for interest on the debt, less flexibility to address important needs or future emergencies, and — sooner or later — the most predictable financial, fiscal and economic crisis we have ever faced.

But it doesn’t have to end this way; we do control our own destiny. We spent many months studying this issue as co-chairs of the National Commission on Fiscal Responsibility and Reform, and found that it is indeed still possible to get Democrats and Republicans to agree on a plan to put this country back on track. But that plan must be ambitious, it must be pro-growth, and it must address all areas of the budget.

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With the debt ceiling looming, policymakers from both parties now obviously have a renewed sense of urgency in dealing with this issue. To be sure, we must raise the debt ceiling to avoid a government default and the turmoil that would follow. But we must also address our mounting debt, and we must do it soon.

What this country needs — and what the American people deserve — is a $4 trillion-plus, gimmick-free fiscal consolidation package that stabilizes and then reduces our debt as a share of the economy. Such a plan need not look exactly like the Fiscal Commission plan we produced, but it must cut wasteful or low-priority spending everywhere — in both the domestic and defense budgets, as well as the tax code where actual spending is dressed up as deductions, credits and other preferences. More importantly, this package must tackle the biggest source of our burgeoning debt — growing entitlement spending. That means it must slow the growth of healthcare and make Social Security sustainably solvent.

All this is a tall order, and not one that can be easily agreed to, let alone written into legislation, before the debt ceiling is hit at the beginning of August.

Given that, a two-part approach seems sensible, where policymakers agree to a large down payment now and follow it with more significant and structural reforms in the near future. For this to work, though, the down payment must be large — in the vicinity of $2 trillion — and it must at least begin to address entitlement growth.

And policy makers must agree — including with an honest process and strict enforcement mechanisms — to address the remainder of the problem before the next election. Elections take all options off the table, instead of setting the table for reform. There can be no more kicking the can down the road or handing the baton to the next guy — the markets won’t allow it and the American people should not tolerate it.

We hope that President Obama and Speaker John Boehner (R-Ohio) can overcome the impasse in the negotiations to reach a principled agreement that meets the parameters. Such an agreement on the debt ceiling and on a serious down payment would send a powerful message that our leaders are willing to put national interest ahead of petty partisan interests in order to tackle the terribly tough choices that will be necessary to set our nation on a sustainable fiscal path.

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But the buck doesn’t stop there. Before the ink even has time to dry on a down payment they might agree upon, our leaders must begin the work to make Social Security solvent, reduce the long-term growth of Medicare and Medicaid, and reform the tax code so it promotes growth and reduces the deficit at the same time.

Recent turmoil in the so-called Biden discussions and Gang of Six seem to call into question whether our politicians can agree to any such a package. The truth is, we have no choice but to do it.

Whether all at once or in parts, we need a comprehensive plan, based on the principle of shared sacrifice, to truly get our fiscal house in order. We know, from numerous discussions, just how many members of Congress understand this — and just how much the public is disgusted by it all and demands the crafting of that plan. The problem is real and the solutions are painful, but if Washington can lead then there is a way out. So long as we act now and work together, the future can look bright.

Bowles and Simpson served as co-chairmen of the National Commission on Fiscal Responsibility and Reform.