Event Recap: National Journal Fiscal Fallout Summit
Yesterday, National Journal hosted "Fiscal Fallout: What is 'Responsible' in Today's Fiscal Reality," a policy summit convening experts to discuss soultions for the long-term debt problem. The event was headlined by Senator Orrin Hatch (R-UT), and included remarks from Robert Greenstein as well as a panel discussion with Center for American Progress's Michael Linden and CRFB board members Bill Hoagland and Rudolph Penner.
Senator Hatch stressed the unsustainability of the long-term fiscal picture, pointing to the upward trajectory of debt as a percentage of GDP. He warned that rising debt would lead to increased interest rates, crowding out of private economic activity, and an inability to respond to pressing fiscal issues. Senator Hatch's speech focused on addressing fiscal issues through spending cuts, even more than those enacted through sequestration, particularly through entitlement reforms. Senator Hatch, who released a clean slate approach to tax reform this summer, will pursue tax reform as a way to grow our economy. Senator Hatch said he supports revenue-neutral tax reform that lowers rates, broadens the tax base, and simplifies the tax system.
Robert Greenstein countered that the Republican unwillingness to consider revenue is the main barrier to a deal, since revenues are necessary to stabilize our long-term debt. Greenstein worried that tax reform could increase income inequality and make the long-term fiscal situation worse by relying on timing gimmicks to appear revenue-neutral in the ten-year window. He expressed support for a medium-sized deal to replace sequestration with a balanced package that phases in savings but sees such an agreement as unattainable in the current political climate.
Hoagland and Penner doubted that legislators could reach a fiscal agreement before the debt ceiling is reached sometime in October. Linden strongly urged that the White House does not need to negotiate with the debt limit, as it must be raised, but added that raising the debt limit in itself will not provide an end to budget woes.
The most dire prediction of the event was made by Penner, who warned against fast growing interest payments and predicted that we won't solve our debt problem before a sovereign debt crisis. All three panelists agreed that the most likely scenario for appropriations would be a continuing resolution, as a deal addressing sequestration is unlikely to take shape over the next few weeks.
This summit highlighed the bipartisan consensus about the gravity of our long-term fiscal situation, which we have discussed many times. Most participants expressed dismay at the lack of even a continuing resolution vote and were skeptical about the state of negotiations. We've stressed that should lawmakers wish to appropriate above sequester levels, they should fully offset that increase with savings elsewhere. Ideally, lawmakers can use these upcoming fiscal negotiations to achieve a comprehensive deal to address the long-term drivers of our debt.
The full video of the event can be seen below.