WH, Congressmen Hold Important Talks on Fiscal Commission and PAYGO

Senior congressional Democrats late Tuesday met with the White House to attempt to hammer out a deal that would create a fiscal commission and a strong statutory PAYGO plan.

The commission would be a key part of the FY 2011 budget and the PAYGO plan appears to be stronger than that passed by the House. The meeting Tuesday included VP Joe Biden, OMB Director Peter Orszag, Speaker Nancy Pelosi, House Majority Leader Steny Hoyer, House Budget Committee Chairman John Spratt, Senate Majority Leader Harry Reid, and Senate Budget Committee Chairman Kent Conrad.

The fiscal commission is likely going to be a central part of the Administration's FY 2011 budget. The agreement -- which is  tentative until Pelosi and Conrad approve it -- calls for President Obama to create a fiscal commission via executive order. It would serve as a replacement for the Conrad-Gregg commission, which which now appears to lack the votes to pass. But Conrad and others worry that a commission created by executive order would lack the authority to force action by Congress, although the White House is insisting that an Obama commission would have teeth. Only a commission created by statute would have the power to force Congress to act on the proposed recommendations.

Conrad and Senator Judd Gregg are still likely to offer their proposal for a Congressionally-created fiscal commission as an amendment to debt ceiling legislation. Senator Gregg, in response to the idea of a presidentially-appointed commission, called it "a fraud," and questioned whether it would lead to any real action.

This 18-member commission would be charged with putting together a package of fiscal reform proposals by the end of 2010.The goal would be to find a way to bring this year's projected deficit, around 10% of GDP, down to 3% of GDP by 2015. The commission would have the authority to propose changes in the tax code, as well as changes to federal entitlement programs such as Medicare, Medicaid and Social Security. Twelve members would be appointed by Congressional leaders (six from each party), and six from the Administration, with no more than four from the Administration allowed to be Democrats. On his blog, Keith Hennessey has a good post comparing a possible Administration's commission with a Conrad-Gregg commission.

CRFB continues to support the Conrad-Gregg commission as we stated in this December press release, even as other groups, such as the AARP, have voiced concerns against it. If an executive commission is chosen over the Conrad-Gregg commission, we are hopeful that it could work to come up with strong recommendations to improve the long-term fiscal balance. We recognize that any successful commission must have both executive and congressional support, as well as a realistic way to keep Congress from being able to simply ignore any proposed recommendations.

AIn addition to the commission, the deal also calls for the Senate to pass a PAYGO bill similar to one passed in the House last July, except in one area - the new bill would scale back the exemptions.

CRFB appreciates the acknowledgement by the Administration and Democratic leaders that high projected deficits for years to come are an economic threat to the country that needs to be dealt with. As the President prepares for his State of the Union address next week and the release of the budget in early February, it is essential that deficit reduction is a priority. CRFB would urge the administration and Congress to hammer out a deal creating PAYGO rules without exemptions (except emergency spending), as well as a strong commission with the power to make recommended changes to the tax code and entitlement programs that Congress will actually adopt. 

This agreement between the Administration and congressional leaders paves the way for Congress to work on increasing the debt ceiling, which they will be discussing today. The Senate began debate yesterday and will continue with discussion this morning.