Boskin Proposes Another Way Out

Today begins week three of the government shutdown, and we are now just days away from when the Treasury will exhaust its borrowing authority and risk a default. So far, lawmakers have yet to agree on a fiscally responsible way out of this dilemma. However, former chairman of the Council of Economic Advisors Michael Boskin chimes in today with several suggestions.

Boskin writes in The Wall Street Journal about a possible proposal that could replace part of sequestration and contain "smart" deficit reduction. From Boskin:

First, appoint a commission to propose by, say, next May 15 specific reforms to reduce and eliminate waste, inefficiency and fraud in government programs—with a minimum target of $1 trillion in the next decade. Yes, "government commission" has often been a synonym for inaction—witness the Simpson-Bowles commission on fiscal reform created by President Obama, who ignored its report. Yet several rounds of Defense Base Realignment and Closure Commissions since the 1990s have led to the closure of hundreds of military installations, most recently in 2005.

This time a commission to fix wasteful spending might work. The commission must consist of highly respected, high-ranking officials from both parties—the likes of Paul Volcker, Alice Rivlin, George Shultz and James A. Baker III who have no recent policy to defend. Then make Congress vote up or down on the recommendations (as they do on base closings), so voters can hold their officials accountable.

Second, for every $2 of savings from reducing waste and inefficiency, ease up to $1 of the sequester spending caps. Lest projected savings evaporate before they occur, the 2-for-1 rule would apply only after the fact. In other words, for every $2 of verified savings from the past year, a maximum $1 of sequester relief would be granted this year. The procedure is similar to the look-back provisions many states employ to enforce balanced budgets.

Boskin believe that both parties might accept the proposal: Democrats for reducing the size of sequestration and Republicans for sequester relief and less spending. Boskin argues that finding these savings won't be a problem, there are many good ideas out there. In particular, lawmakers could:

  • Consolidate and reform duplicative programs that are not achieving their goals
  • Curtail improper payments and fraud, improve collection of vast unpaid loans and penalties
  • Modernize and upgrade personnel and technology
  • Move government programs closer to their original intent, such as reforming Social Security's disability program and adopting the chained CPI for government programs

There are many ideas of this type in the Government Accountability Office's annual report on duplication and overlap. These ideas and others should be considered in the current debate, but Boskin acknowledges that this plan would not eliminate the need for entitlement and tax reform. Boskin's idea is worth considering and might be a helpful part of a comprehensive plan, but it's worth remembering that solving our debt problem will not be easy. Unless lawmakers are willing to look at all parts of the budget, we will have difficulty getting our fiscal house in order and undoing the sequester with more targeted reforms.