A dozen budget wishes for Congress

Article Highlights

  • Increasing discretionary spending this year by decreasing entitlement spending in the future is a good deal, as is using chained CPI.

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  • It is possible, though not probable, that chained CPI’s (Chained Consumer Price Index for All Urban Consumers) day has come.

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This week saw the start of budget negotiations between the House of Representatives and Senate. But as Republicans and Democrats sit down together less than a month after a government shutdown, will the two sides be able to find common ground? Global Public Square asked 12 commentators, analysts and policy makers for their take on what Congress should be discussing – and what an agreement should include. All views expressed are the writers’ own.

Major tax reform – Michael R. Strain, American Enterprise Institute

My wish list for the current round of budget negotiations is pretty easy to spell out: Structural reforms of Medicare, Social Security, and Obamacare to significantly slow their spending growth in the decades to come; major tax reform for households, including family-friendly reforms and severe curtailment of popular tax breaks like the exclusion for employer-provided healthcare and the mortgage interest deduction; corporate tax reform which significantly lowers the corporate rate (down to zero, ideally); and an increase in discretionary spending on socially valuable infrastructure, basic research, and other public goods.

Of course, if you think that will happen, then, to borrow from the metaphor, I’d like to sell you a major health insurance reform policy with the promise that if you like your current plan then you’ll get to keep it.

Since we won’t come close to a grand bargain, let alone to solving all our long-term budget problems, I’ll be happy if the current round of budget negotiations moves us in the right direction.

It is possible, though not probable, that chained CPI’s (Chained Consumer Price Index for All Urban Consumers) day has come. As a more accurate and lower measure of inflation, chained CPI would both slow the growth of Social Security spending by trimming cost-of-living adjustments and slow inflation adjustments to tax brackets, raising tax revenue without explicitly increasing taxes. It is also possible, and probable, that the GOP will be able to trade relief from this year’s sequester cuts to discretionary spending for entitlement spending cuts in future years. Conservatives should support such a trade, provided of course that there is an enforcement mechanism for the future cuts other than “we promise.”

Increasing discretionary spending this year by decreasing entitlement spending in the future is a good deal, as is using chained CPI. Conservatives and liberals alike should declare this “humble bargain,” if enacted, a success.

Michael R. Strain is a resident scholar at the American Enterprise Institute

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About the Author

 

Michael R.
Strain
  • Michael R. Strain is a resident scholar at the American Enterprise Institute, where he studies labor economics, public finance, and applied microeconomics. His research has been published in peer-reviewed academic journals and in the policy journals Tax Notes and National Affairs. Dr. Strain also writes frequently for popular audiences on topics including labor market policy, jobs, minimum wages, federal tax and budget policy, and the Affordable Care Act, among others.  His essays and op-eds have been published by National Review, The New York Times, The Weekly Standard, The Atlantic, Forbes, Bloomberg View, and a variety of other outlets. He is frequently interviewed by major media outlets, and speaks often on college campuses. Before joining AEI he worked on the research team of the Longitudinal Employer-Household Dynamics program and was the manager of the New York Census Research Data Center, both at the U.S. Census Bureau.  Dr. Strain began his career in the macroeconomics research group of the Federal Reserve Bank of New York.  He is a graduate of Marquette University, and holds an M.A. from New York University and a Ph.D. from Cornell.


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