The budget agreement reached by the House and Senate this week is a small step forward in restoring some sanity and order to the process. By putting in place a bipartisan plan for the next two years, the agreement represents a much-needed improvement over the uncertainty of governing by crisis that has dominated fiscal policy the last several years. But the fundamental fiscal challenges we identified in the 2010 report of the National Commission on Fiscal Responsibility and Reform, and the need for reforms of entitlement programs and the tax code, go unaddressed.
The agreement will put in place a slightly more rational fiscal policy — by replacing a portion of the abrupt, mindless across-the-board cuts in discretionary spending resulting from
The deal also takes some modest steps in addressing long-term fiscal liabilities by adopting scaled-back versions of policies we recommended, such as reforming civilian and military retirement benefits and reducing the unfunded liability facing the federal Pension Benefit Guaranty Corp.
Perhaps most important, this agreement demonstrates that leaders in Washington can actually work together to reach some agreement on fiscal policy. The sad lack of trust between the two parties has been perhaps a greater obstacle to a "grand bargain" than the policy details themselves. We hope that this agreement can serve as a confidence-building measure that will lead to compromise on significant deficit reduction, as other lawmakers follow the good example set by
But the agreement also represents another missed opportunity to address our long-term fiscal problems. Doug Elmendorf, director of the
The small reforms in this agreement do not address the real long-term drivers of our debt, including the growth of healthcare entitlement programs and Social Security's funding shortfall. We still desperately need to reform the tax code, which is riddled with trillions of dollars in economy-distorting loopholes. The agreement also leaves in place sequester cuts that could have adverse effects on economic productivity and military readiness.
With this agreement,
Reforms to entitlements and the tax code need not wait for the next election.
Policymakers should take advantage of the need for legislation to fix the flawed
At the same time, Congress should follow the lead of
Policymakers should also go further in paring back the sequestration cuts. They should pay for that additional relief by eliminating unwarranted subsidies and low-priority spending, further reducing Medicare costs and improving the way we measure inflation in the federal budget and tax code.
Finally, we must reform Social Security to make the program financially sound for future generations.
We are pleased the two sides have proved they can find common ground on a small agreement. Now they have to "get crackin'" and come to grips with difficult challenges to solve our nation's grave long-term fiscal problems and put the budget on a fiscally sustainable course.