The House GOP “Pledge to America”

Today the Republican caucus of the House of Representatives released an agenda-setting document as a part of its strategy to take control of the House in November. The “Pledge to America” covers five broad topics: jobs and the economy; reducing federal spending and the size of government; repealing and replacing the health care reform law; congressional reform; and homeland and national security.

The prominence of fiscal policy in the document is a testament to how potent the issue of rising deficits and debt has become to voters. Pledges pertaining to fiscal matters are:

• Renew all the tax cuts that expire at the end of the year

• Allow small business owners to deduct 20 percent of their business income from taxes

• Require a vote in Congress of any new federal regulation that is determined to have an annual economic cost of $100 million or more

• Repeal the 1099 requirement in the health care reform law

• Cancel unused stimulus funds

• Reduce federal spending to “pre-stimulus, pre-bailout levels”

• Institute discretionary spending caps

• Reduce Congress’ budget

• Vote weekly on spending cuts

• Allow any legislator to offer amendments to cut spending in appropriations bills

• Cancel TARP

• Reform Fannie Mae and Freddie Mac

• Impose a net hiring freeze on non-security federal employees

• Adopt “sunset” provisions for federal programs

• Reform entitlements

• Repeal the health care reform law

• Enact medical liability reform

While there are not enough numbers to determine the overall fiscal effect, we are betting that on net, this would be a move in the wrong direction. Still, there are plenty of good ideas here that should be part of the discussion.

The document correctly points out that “[t]he lack of a credible plan to pay this debt back causes anxiety among consumers and uncertainty for investors and employers.” While there are several ideas in the document that should be pursued, it falls short of being the detailed, credible fiscal plan that the country needs to reduce the mounting debt. Although there is an unambiguous focus on cutting federal spending and a vague aim to “put government on a path to a balanced budget and pay down the debt,” no clear benchmarks are enunciated that will help chart a sustainable fiscal course.

In the pledge Republicans promise a national dialogue that will be vital to closing the fiscal gap.

We will have a responsible, fact-based conversation with the American people about the scale of the fiscal challenges we face, and the urgent action that is required to deal with them. We will curb Washington’s spending habits and promote job creation, bring down the deficit, and build long-term fiscal stability.

Not surprisingly, the pledge focuses on spending cuts. Ok, but those who support ideas like extending the 2001/2003 tax cuts and the small business income deduction proposed in the pledge will have to articulate how they will pay for them and how they fit within the fiscal targets that must be established to reduce the debt. Spending cuts to close the budget gap and more spending cuts to offset the cost of tax cuts is an awful lot of spending cuts – and though the policies laid out here are pretty vague, we are betting they don’t make it.

The call for discretionary spending caps is critical, and one that CRFB has repeatedly advocated [see here, here and here]. While the document notes that spending caps helped bring about budget surpluses in the 1990s, it fails to mention that those caps were coupled with strong “pay as you go” requirements. As we have noted previously, spending caps are most effective when paired with genuine PAYGO rules (not the current PAYGO law that contains massive exceptions).

The pledge also promises that:

Instead of pushing off our long-term fiscal challenges, we will reform the budget process to ensure that Congress begins making the decisions that are necessary to protect our entitlement programs for today’s seniors and future generations.

Budget process reform will indeed be essential to overcoming the long-term fiscal challenges. And entitlement reforms will definitely have to be a very large part of the equation. However, entitlement reform will require a lot more than reforms to the budget process (we say as a group running a commission on reforming the process). The pledge’s largest shortcoming is the massive punt on how to reform entitlements. In fact the 45 page document only mentions the word “entitlement” twice.

Additionally, there is much more to reforming the budget process than simply entitlements. Comprehensive reform of the budget process is required that will establish and enforce fiscal targets consistent with national priorities and make the process more efficient, transparent and accountable. The Peterson-Pew Commission on Budget Reform will issue a report next month that lays out a blueprint for improving the budget process.

The document does not mention tax expenditures, even though House Republican Leader John Boehner (R-OH) hinted recently that these tax breaks that often benefit relatively few taxpayers and are rarely reviewed should be addressed. Reforming tax expenditures could offer an opportunity for bipartisan cooperation.

The pledge is also silent on fundamental reform of the tax code. This is a vital issue that must be addressed. The complex and archaic tax system must be vastly improved to make it simpler while also broadening the tax base. Senators Ron Wyden (D-OR) and Judd Gregg (R-NH) have proposed a thoughtful reform plan that can help inform and move this debate.

It is time to get very specific about how we will address the growing fiscal gap. We need to develop a credible fiscal plan now with annual targets and triggers to meet those goals that can be implemented as the economy recovers. We need detailed policy proposals now and CRFB is committed to creating an environment conducive to advancing and discussing specific ideas. Senators Wyden and Gregg, and Representatives Paul Ryan (R-WI) and James Himes (D-CT) will participate in a September 30 “Getting Specific: How to Fix the Budget” policy forum sponsored by CRFB. CRFB will also kick-off a “Lets Get Specific” series of papers.

Ok, so it’s a political document. No surprise there. And we suppose we will have to wait until after the election for a real, specific, discussion of what to do to improve the debt situation.

Until then, you can work on coming up with your own plan – or pledge – using CRFB’s Stabilize the Debt online budget simulator.