The Wall Street Journal reports:

White House and congressional leaders reached a tentative deal aimed at establishing a bipartisan commission to tackle the soaring federal budget deficit, in what is likely to be a central element of President Barack Obama’s fiscal 2011 budget, people familiar with the talks said.

Meeting Tuesday night at the White House, Vice President Joe Biden, White House budget director Peter Orszag and Democratic leaders agreed the commission would report back at the end of 2010 with a path to bring this year’s projected $1.4 trillion deficit from about 10% of gross domestic product to 3% by 2015.

The commission would also submit recommendations on taxes and spending on entitlements, such as Medicare, Medicaid and Social Security. House and Senate Democratic leaders promised the recommendations would be submitted to Congress for an up-or-down vote after the midterm elections this year, these people said.

The 18-member commission will include six people appointed by congressional Democrats, six appointed by congressional Republicans and six appointed by the president. Of the president’s six, two will be Republicans and four will be Democrats.

Under the deal, the commission will be created by an executive order and laid out in the fiscal 2011 budget that Mr. Obama will submit to Congress Feb. 1.

Republican leaders weren’t part of the talks, and the panel can work only if GOP leaders select members to serve on it.

Let us assume this reporting is accurate. I will compare the rumored Administration proposal to the Conrad/Gregg legislative proposal, the Bipartisan Task Force for Responsible Fiscal Action Act. Senator Kent Conrad (D-ND) is Chairman of the Senate Budget Committee, and Senator Judd Gregg (R-NH) is the Ranking Republican Member of that committee.

I will highlight important differences in red.

Administration Conrad-Gregg bill
Created by President Congress & President
Created through Executive Order new law
Goal short-term long-term
reduce deficit to 3% by 2015 significantly improve the long-term fiscal imbalance
Scope taxes & entitlements taxes & spending
How many members? 18 18
Who serves? ??
SecTreas + 1 other Admin.
current Members of Congress, SecTreas + 1 other Admin.
Partisan balance 12 appointed by Ds, 6 by Rs 10 appointed by Ds, 8 by Rs
Chair structure ? bipartisan co-chairs
Executive Director ? chosen jointly by co-chairs
Voting 14 of 18 to make recommendations
14 of 18 to make recommendations
Reporting date In 2010 after Election Day Nov. 15, 2010
Fast-track process None.
Political commitment by Pelosi & Reid to have an up-or-down vote, but no rule changes mean they can’t bind Congress to that.
Majority vote and 60 Senate votes needed to pass a law.
limits Congressional rules to mandate up-or-down House & Senate votes by Dec. 23rd. 3/5 of House & Senate required to pass.

In my experience, there are four reasons to create a commission:

  1. You want to learn or investigate something: 9-11 Commission, Financial Crisis Inquiry Commission.
  2. You want to create an external credible body of “wise men” to produce consensus recommendations to build broader political support for politically painful policy changes: 1982 Social Security Commission.
  3. Elected officials want to give themselves political cover to implement painful policy changes, by delegating control of the details to someone else: Base Realignment Commission (BRAC).
  4. You want to duck an issue for a while and you need an excuse.

The Conrad-Gregg task force bill is trying to delegate control to change the law. The rumored Administration proposal is trying to provide an excuse while they duck a hard policy issue in an election year.

A commission that is trying to actually make changes to law must be credibly balanced and it must have formal authority to bind policymakers. The Conrad-Gregg proposal has both. The rumored Administration proposal has neither.

I am torn on whether to support the Conrad-Gregg proposal. I instinctively don’t like it. I fear that this structure would lead to huge tax increases. I lean against Congress delegating their authority, and generally abide by the maxim that “the problem isn’t the process, the problem is the problem.” But I do feel comfortable saying that Conrad-Gregg is an intellectually honest and credible commission proposal, albeit one that might lead to a policy outcome that I would hate. If you are going to create a commission like this, then this is the most balanced proposal I have seen so far.

In contrast, the rumored Administration proposal is not credible.

  • The President’s commission would duplicate his budget proposal from last year. The goal of the rumored new Presidential commission would be to reduce the federal budget deficit to 3% by 2015. But last year the President budget included specific policy proposals to hit that same goal! The President’s budget, proposed February 26, 2009, claimed to reduce the budget deficit to 3.0% by 2015 (Table S-1). (CBO says it misses this mark and would result in a 2015 deficit of 4.3%, but I’m focusing now on the Administration’s claim.) The Mid-Session Review, published August 25, 2009, falls back to only trying to reduce the deficit to 3.9% by 2015 (Table S-1). So the President would now propose a 12-6 commission to meet a goal that he argued his budget met 11 months ago with specific proposals?!? That makes no sense.
  • The President’s commission would address the wrong timeframe. The commission’s goal is to focus on the next six years, rather than the even bigger long-term fiscal problem. Since I arrived in Washington in 1994 there has been a consensus that the hard fiscal policy problem is the long-term one, not the short-term one.
  • The President’s commission would have a predetermined outcome. Since The President, Speaker Pelosi, and Leader Reid would appoint two-thirds of the members, and there appears to be no supermajority requirement, it’s easy to predict the final recommendations: huge tax increases, and only trivial entitlement spending reductions. Republican appointees would have no leverage and would be easily ignored. Update: 14 of 18 members are needed to approve recommendations.
  • The President’s commission does not create any binding fast-track process. Leader Reid cannot unilaterally bind 100 Senators to an up-or-down vote and no amendments. Even if a commission were to produce unanimous recommendations, Republicans should fear that a Democratic Senate majority would use those recommendations as a starting point, substitute even more tax increases for whatever spending cuts are in the recommendations, and then pass the bill. Scott Brown’s election as the 41st vote has little effect on this dynamic, since the changes would probably happen in committee. Any commission created by Executive Order has this weakness: it cannot bind Congress.Only Congress can tie itself to the mast.

The President’s commission does have a political advantage. If the press treats it as credible, he may get away with substituting it for real short-term policy proposals in his budget, and with completely ducking the even more important long-run fiscal policy debate. I am just guessing here, but if the upcoming President’s budget contains a large amount of deficit reduction and labels it “deficit reduction from bipartisan commission recommendations,” then we will have confirmed the commission’s true purpose. Look for the magic asterisk in the budget proposal.

The press should also ask the Administration if the commission’s mandate would allow it to recommend repealing all or part of (1) the stimulus, and (2) a potential new health care law. Whether or not the commission proposes such changes, are they allowable within the commission’s mandate?

Yes, CBO scores the health care bill as deficit neutral (with huge caveats), but enactment of that law would make future deficit reduction efforts much harder because the bill would use some of the easiest and biggest Medicare savings proposals to offset new government spending. If the Administration’s answer is, “No, the commission can propose changes to everything except the spending and tax changes we have implemented over the past year,” then it reinforces the true nature of this proposal.

If you’re concerned about the deficit, the place to start is by not creating a new trillion dollar entitlement program.

(photo credit: PSU punts by acaben)