Peters Introduces Constructive Budget Process Reforms
With the debt limit approaching and another showdown looming, the focus of some policymakers may naturally turn to how to avoid a similar potentially damaging impasse in the future. In that vein, Rep. Scott Peters (D-CA) has introduced a bill which addresses both the need to raise the debt limit and the need to put the debt on a sustainable path. The bill's reforms are similar to the reforms proposed by the Bipartisan Path Forward from Erskine Bowles and Al Simpson. As a result, the duo has endorsed Peters's package of process reforms.
Peters' plan consists of two bills. The first bill indexes the debt limit to GDP to ensure that lawmakers only need to raise the limit when debt is growing faster than the economy. The second bill requires lawmakers to consider policies to put the debt on a stable or downward path if it were projected to be growing. If a budget resolution does not contain instructions to fix the debt, any Member of Congress would be empowered to call up a vote on a budget proposal that has a minimum level of support.
In essence, the package changes the "pressure points" for deficit reduction built into the budget process. The debt limit would be less prominent, and the focus would be shifted to this new enforcement mechanism requiring Congress to address the sources of growth in the debt well in advance of a deadline. Congress would only need to vote to raise the debt limit if it had failed to stabilize the debt as a percentage of GDP, making the vote on raising the debt limit more meaningful as a reflection of fiscal policy.
In a press release, Peters' office explained the rationale for both bills:
The prolonged national debate over the debt ceiling two years ago led to a credit downgrade, added $18 billion dollars to future borrowing costs, and incited a 2,000 point drop in the New York Stock Exchange over a two month period. This ineffectual solution harmed and extended an already weak economic recovery. The package introduced today by Rep. Peters builds on his consistent advocacy to find an alternative to the current mechanism for raising the debt ceiling, which in recent years has led to paralysis on Capitol Hill.
As mentioned above, Erskine Bowles and Al Simpson released a statement of support for the package, saying:
The political fights over the past two years about raising the debt limit have severely harmed confidence in our government and created tremendous uncertainty. At the same time, debt cannot continue to grow faster than the economy without risking a fiscal crisis. The legislation introduced by Representative Peters would not only help avoid the dangerous political brinksmanship surrounding the debt limit, but also establish a mechanism to ensure Congress and the President act in advance of a crisis if the debt is projected to begin growing faster than the economy.
The Peters plan is a good mechanism for avoiding the kind of unnecessary brinksmanship that sometimes accompanies the debt limit while ensuring that lawmakers keep their eye on the path of debt. It is certainly a constructive budget process reform to help make the process less chaotic.