Posted Dec. 3, 2012
In late 2010, the Bipartisan Policy Center’s Debt Reduction Task Force, co-chaired by former Sen. Pete Domenici and former Congressional Budget Office (CBO) Director Dr. Alice Rivlin, released a comprehensive, very detailed fiscal plan that would have promoted economic growth and stabilized America’s federal debt trajectory.
Since then, a weaker than anticipated economy, as well as political events, have prompted an update of the Domenici-Rivlin Plan, which we call Domenici-Rivlin (D-R) 2.0.
In addition, we propose a framework that Congress could enact now, in light of the rapidly-approaching fiscal cliff and the still-hesitant recovery. This framework would include a down-payment, an accelerated process, and a backstop, all of which would facilitate the adoption of a comprehensive fiscal plan – such as D-R 2.0 – during 2013.
Major Themes of Both D-R 1.0 and D-R 2.0
Where Do We Stand?
Since the release of the original Task Force report, Congress passed the Budget Control Act of 2011, which cut and capped defense and non-defense discretionary accounts at approximately the levels recommended by D-R. Conversely, there has been no comprehensive reform of taxes and entitlement spending, the primary drivers of U.S. debt.
Now, the fiscal cliff demands that policymakers pass a law** in the coming weeks to avoid dramatic tax increases and mindless across-the-board spending cuts that would take discretionary spending to levels far below those that we recommended. CBO and other analysts have projected that if these measures take effect, they could choke off the nascent recovery, increase joblessness and send us back into recession. There is too little time remaining in the 112th Congress, however, to draft and pass legislation to fundamentally reform taxes and entitlements.
Therefore, we propose a “stepping stone” approach – a “Framework for the Grand Bargain” – that will sustain near-term support for the economy, demonstrate a commitment to deficit reduction, and set the stage for the necessary broader agreement along the lines of D-R 2.0 in the 113th Congress.
“The Framework for a Grand Bargain”: D-R 2.0’s Recommendations for the Fiscal Cliff and Debt Stabilization
Pass a law in the lame duck session of Congress that does the following:
** Action by the lame duck Congress to avoid the fiscal cliff must consist of a bill subsequently signed into law by the President. All elements of the fiscal cliff are current law. Only a new law can vitiate any or all of these elements.