‘Line’ Items: October Surprise Edition

Surprises We Want to See – With pivotal mid-term elections next week that will decide control of Congress, observers are awaiting this year’s “October surprise” – the breaking news that could change the course of the election. We at The Bottom Line have our own ideas for surprises we would like to see.

Candidates Move Beyond Rhetoric – Those running for office have been quick to decry the large federal budget deficit, but few have offered detailed plans on how they will address the mounting debt and put the country on a sustainable fiscal course. CRFB has endeavored to move the campaign rhetoric from sound bites to solutions by providing ten questions voters should ask their candidates on fiscal responsibility last week. We also are leading the way with a Let’s Get Specific series of papers and recent event. Our Stabilize the Debt budget simulator provides everyone the opportunity to see how numerous specific ideas can contribute to closing the fiscal gap.

U.S. Devises a Fiscal Plan – CRFB has been calling for the creation of a credible plan now to be implemented as the economy recovers. Some recent events provide hopeful signs this may occur. U.S. Treasury Secretary Tim Geithner sent a letter to G-20 ministers supporting the setting of medium-term fiscal targets consistent with sustainable debt levels. The Peterson-Pew Commission on Budget Reform recommended a goal of a 60 percent debt-GDP ratio by 2018 in the report, Red Ink Rising. The United Kingdom also announced a comprehensive plan to reduce its debt.

A Rational Budget Process is Created – Congress will return for a lame duck session beginning November 15. One of the reasons it must reconvene is to complete its work funding government operations. The new fiscal year began on October 1 without any of the annual appropriations bills enacted, requiring a stopgap funding measure to prevent a government shutdown. Congress was also unable to adopt a budget blueprint this year, for the first time since the 1974 Budget Act the House was unable to approve of a budget resolution. The U.S. cannot properly address its fiscal challenges with a dysfunctional budget process. The Peterson-Pew Commission on Budget Reform will soon unveil its recommendations for creating a more effective, transparent, and accountable budget process.

Fundamental Tax Reform is Tackled – Congress will also address the matter of the expiring 2001/2003 tax cuts as well as other expiring tax provisions in the lame duck. The debate over extending all or a portion of the tax cuts has overshadowed the need for comprehensive reform of the tax code. Creating a simpler tax system with a broader base will be essential to tackling our fiscal challenges. CRFB made some recommendations for reforming tax expenditures in a recent paper.