Events

CED Statement to the Joint Select Committee on Deficit Reduction

On Tuesday, October 4, 2011, CED released a set of six standards it will apply to all proposals considered and approved by the Joint Select Committee on Deficit Reduction. CED is making it clear that the American business community will hold the Joint Select Committee responsible for doing more than the minimum required of it by the Budget Control Act. CED is also making it clear that the business community wants real deficit reductions rather than budget gimmicks; that all parts of the budget, including spending and tax provisions that benefit business, must be on the table; and that the business community will actively support those members of Congress who help make these things happen.

Six Standards for the Joint Select Committee

The creation of the Joint Select Committee on Deficit Reduction as part of the Budget Control Act is both an opportunity and a risk. It is an opportunity because this temporary Committee can broker compromises to achieve essential deficit reduction, and take them around the usual legislative hurdles for an up-or-down vote, without amendment. It is a risk because after the debt-limit melodrama, failure by this Committee could finally convince our nation's creditors, including the many from overseas, that Washington cannot or will not face up to fiscal reality. The result could be financial chaos and economic collapse. We dare not run this risk.

The business community - along with all other responsible Americans - must hold the Joint Select Committee to account, and must demand an honest, resolute response to this crisis. Time is running out.

If it is to succeed, the Committee must meet or exceed the following six standards established by the Committee for Economic Development:

First, the Committee must reach well beyond its enabling law's minimal goal of $1.2 trillion of deficit reduction (in addition to the $900 billion in savings already enacted). At least $4 trillion in total savings is needed merely to begin to stabilize the nation's debt burden, and the financial markets and the ratings agencies could well react adversely to a smaller agreement (or no agreement at all). The potential elements of such an agreement are well known; only political will and action are missing.

Second, Medicare and Social Security, the age-driven entitlement programs, must be made sustainable for the long term. Medicare is the largest contributor to the projected long-term explosion of public debt, and is driven by the same complex healthcare cost inflation that tears at household budgets and business job creation. Reforming these programs requires sensitivity to the needs of current retirees, and of future retirees with modest incomes.

Third, the agreement must include additional tax revenue. There simply is not enough achievable deficit reduction on the spending side of the budget. Both fairness and competitiveness in world markets will require fundamental tax reform to eliminate outdated and ineffective tax exclusions, deductions and credits, so that tax rates can go down while tax revenue goes up.

Fourth, the Committee must achieve substantial savings from non-Medicare, non-Social Security spending - defense and domestic - even though it is not the source of the long-term budget problem. The public debt already is too large and growing too rapidly. Medicare and Social Security reform cannot achieve budget savings soon enough - partly because they must protect current retirees, and also because the needed transformation of the healthcare system will take time.

Fifth, the struggling economic recovery needs a boost. The Committee must respond, but must keep this effort simple and clean. A one-part program would be best. The numerous slow-moving appropriations provisions weighed down the 2009 stimulus bill and limited its success.

And finally, the Committee must elicit genuine bipartisan commitment. Solving the debt problem will require years of effort. Appropriations are enacted one year at a time, and so long-term savings will require restraint in future years by future Congresses - which this Congress cannot bind. The Committee's short lifespan probably does not allow enough time to write detailed legislation for fundamental tax and healthcare reform. Future Congresses could derail needed future deficit reduction, or even repeal actual legislation enacted this year. So this budget agreement must be built upon solid bipartisan commitment that can withstand political challenge not just this year but for years to come.

The Committee for Economic Development standards are clear and unambiguous. CED will carefully monitor the actions of the Joint Select Committee and of the rest of the Congress as they attempt to comply with the provisions of the Budget Control Act. We will actively and enthusiastically support those actions that live up to CED's six standards and those representatives and senators we consider responsible for them. However, we will just as actively reveal and oppose those who prevent the CED standards from being met and will loudly call to account those who put narrow interests ahead of the future of our nation. We will speak up at every step as this process unfolds.

Deficit reduction today cannot be driven by political motives, to push the mood of the populace one way or another before a presidential election. The nation needs a budget agreement now because our fiscal and financial situation is critical, and delay or failure could have dire consequences that would know no political party.

Members of the business community understand the threat that a renewed debt crisis would pose to our customers, our employees, and our shareholders alike. All Americans are in this together. Members of Congress who refuse to negotiate in the name of party principle, however sincerely held, will find cold comfort if they cause a financial panic for the "right" reasons.

It is time for our elected leaders to lead, and to find common ground for the national interest that they have sworn to protect.