OPINION: Putting our fiscal house in order

Earlier this month, the president signed an executive order establishing a new, bipartisan National Commission on Fiscal Responsibility and Reform.

Flanked by the commission’s co-chairmen, former Clinton White House Chief of Staff Erskine Bowles and former Republican Senate Whip Alan Simpson, the president emphasized that we must bring Republicans and Democrats together to tackle one of our most difficult, looming challenges — our fiscal situation.

With members appointed by the leaders from both political parties in both houses of Congress as well as the president, this commission will be tasked with balancing the budget excluding interest payments on the debt by 2015 and with meaningfully improving the long-term fiscal outlook. The result would mean that by the middle of this decade, we will be paying for the operations and programs of the federal government and reduce total deficits to about 3 percent of GDP. Under current projections, this would stabilize our debt relative to the size of the economy.

To report out a recommendation, the commission would need 14 out of 18 votes, ensuring that any report would carry bipartisan support. The commission will issue its recommendations by Dec. 1, 2010, and the leaders of both the Senate and the House have assured us that they will bring these recommendations to a vote before the end of the current Congress.

In the past, our nation’s leaders used special processes — much like this fiscal commission — to construct solutions that, for example, helped avoid a looming problem in Social Security in the early 1980s. We believe that the National Commission on Fiscal Responsibility and Reform can be just as successful.

And it’s critical that this commission is given the best chance it can to be successful in its work. Although we have had to increase deficits in the short term to help rescue the economy from the worst recession since the Great Depression, we will not be able to promote sustained economic growth in the years ahead if we allow the medium- and long-term deficits the administration has faced from its first day in office to linger and even grow.

In the 2011 budget released on Feb. 1, we laid out a plan to put the country back on a sustainable fiscal path.

First, we don’t make the hole any deeper. The president has signed pay-as-you-go legislation, a bill that forces us to live by a simple but important principle: Congress can only spend a dollar on an entitlement increase or tax cut if it saves a dollar elsewhere. In the 1990s, statutory pay-go encouraged the tough choices that helped move the government from large deficits to surpluses, and it can do the same today.

Second, economic recovery — on its own — would take our deficits from 10 percent of GDP to 5 percent of GDP. To take them down further to about 4 percent of GDP, the budget proposes a series of policies including: a three-year non-security discretionary freeze; restoring some balance to the tax code by allowing the 2001 and 2003 tax cuts to expire for those making more than $250,000 a year and reducing the rate at which these same households write off itemized deductions; ending subsidies for oil, gas, and coal companies and closing other loopholes; and putting in place a responsibility fee on the largest banks to compensate taxpayers for the extraordinary direct and indirect help they provided, while also discouraging excessive leverage.

All together, these policies will generate $1.2 trillion in deficit reduction excluding war savings — the most deficit reduction as a share of the economy proposed by any president in more than a decade.

But that is still not enough, and that’s where the commission comes in: to bring Republicans and Democrats together to address problems before financial markets force us to do so.

This may be a tall order in today’s Washington, but we are off to a good start. The two commission chairmen have proven records of working across party lines on difficult issues and have the commitment and skills to do this hard work. The president’s other selections — Andy Stern, Alice Rivlin, David Cote and Ann Fudge — represent a wide range of experiences, skills and views. Our belief that the commission can play a constructive role in putting the nation back on a stable fiscal trajectory is underscored by the involvement of these distinguished leaders.

Orszag is the director of the White House’s Office of Management and Budget.

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