Long-Term Fiscal Challenge: Comments on the Bipartisan Task Force for Responsible Fiscal Action Act
Published: 2007-10-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO has for many years warned that our nation is on an imprudent and unsustainable fiscal path. During the past 2 years, the Comptroller General has traveled to 24 states as part of the Fiscal Wake-Up Tour. Members of this diverse group of policy experts agree that finding solutions to the nation's long-term fiscal challenge will require bipartisan cooperation, a willingness to discuss all options, and the courage to make tough choices. Indeed, the members of the Fiscal Wake-Up Tour believe that fiscal responsibility and intergenerational equity must be a top priority for the new President. Several bills have been introduced that would establish a bipartisan group to develop proposals/policy options for addressing the longterm fiscal challenge. At the request of Chairman Conrad and Senator Gregg, the Comptroller General discussed GAO's views on their proposal to create a Bipartisan Task Force for Responsible Fiscal Action (S. 2063).
section_title: What GAO Found
paragraphs: Long-term fiscal simulations by GAO, Congressional Budget Office (CBO), and others all show that despite some modest improvement in near-term deficits, we face large and growing structural deficits driven primarily by rising health care costs and known demographic trends. Under any realistic policy scenario or assumptions, the nation's longer-term fiscal outlook is daunting. Continuing on this unsustainable fiscal path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our national security. Our current path also increasingly will constrain our ability to address emerging and unexpected budgetary needs and increase the burdens that will be faced by future generations. As the Comptroller General stated when the bill was introduced, the Bipartisan Task Force for Responsible Fiscal Action offers one potential means to taking steps to make the tough choices necessary to keep America great, and to help make sure that our country's, children's, and grandchildren's future is better than our past. GAO noted that the bill incorporates key elements needed for any task force or commission to be successful: (1) a statutory basis, (2) a broad charter that does not artificially limit what can be discussed and does not set policy preconditions for membership, (3) bipartisan membership, (4) involvement of leaders from both the executive and legislative branches--including elected officials, (5) a report with specific proposals and a requirement for supermajority vote to make recommendations to the President and the Congress, and (6) a process to require consideration of the proposals. GAO also made some suggestions it believes could enhance the likelihood that the bill will achieve its overarching goals. GAO suggested the sponsors consider (1) including a way for the next President to be involved in the process of proposal development, (2) permitting alternative packages to be voted on that would achieve the same fiscal result, and (3) eliminating the requirement for a supermajority in Congress. With the same aim, GAO also expressed some reservations about the current approach to specifying the Task Force Chairman.

section_title: Letter
paragraphs: I am pleased to be here today to talk about your proposal to create a  Bipartisan Task Force for Responsible Fiscal Action. The two of you are  to be commended for your leadership on the issue of fiscal sustainability  and intergenerational equity. As I have noted on numerous occasions, our  nation is on an imprudent and unsustainable fiscal path. The “baby boom”  generation must step up and make the tough choices needed to put us  back on a prudent path in order to ensure that our nation’s and families’  futures are better than the past. In my view, elected officials have a  fiduciary and stewardship responsibility that demands action on our large  and growing fiscal and other sustainability challenges sooner rather than  later. After all, doing what is right is what true leadership is all about.
My remarks are based on our previous reports and testimonies on our  nation’s long-term fiscal challenges, our review of several policy-oriented  commissions in the United States, and our review of the process leading  up to other countries’ entitlement reforms. These efforts were conducted  in accordance with generally accepted government auditing standards.
subsections: section_title: The Nation’s Long- Term Fiscal Challenge
paragraphs: Long-term fiscal simulations by GAO, Congressional Budget Office (CBO),  and others all show that despite a 3-year decline in the federal  government’s unified budget deficit, we still face large and growing  structural deficits driven primarily by rising health care costs and known  demographic trends. In fact, our long-range challenge has grown in the  past three years and the projected tsunami of entitlement spending is  closer to hitting our shores. The long-term fiscal challenge is largely a  health care challenge. Although Social Security is important because of its  size, the real driver is health care spending. It is both large and projected  to grow more rapidly in the future.
GAO’s current long-term simulations show ever-larger deficits resulting in  a federal debt burden that ultimately spirals out of control. Figure 1 shows  two alternative fiscal paths. The first is “Baseline extended,” which  extends the CBO’s August baseline estimates beyond the 10-year  projection period, and the second is an alternative based on recent trends  and policy preferences. Our “Alternative simulation” assumes action to  return to and remain at historical levels of revenue and reflects somewhat  higher discretionary spending than in Baseline extended and more realistic  Medicare estimates for physician payments than does the Baseline  extended scenario. Although the timing of deficits and the resulting debt  build up varies depending on the assumptions used, both simulations show  that we are on an imprudent and unsustainable fiscal path.
The bottom line is that the nation’s longer-term fiscal outlook is daunting  under any realistic policy scenario or set of assumptions. Continuing on  this unsustainable fiscal path will gradually erode, if not suddenly damage,  our economy, our standard of living, and ultimately our national security.  Our current path also increasingly will constrain our ability to address  emerging and unexpected budgetary needs and they serve to increase the  burdens that will be faced by future generations.
Although Social Security, Medicare, and Medicaid dominate the long-term  outlook, they are not the only federal programs or activities that bind the  future. The federal government undertakes a wide range of  responsibilities, programs, and activities that may either obligate the  government to future spending or create an expectation for such  spending. In fact, last year the U.S. government’s major reported  liabilities, social insurance commitments, and other fiscal exposures  continued to grow. They now total approximately $50 trillion—about four  times the nation’s total output (GDP) in fiscal year 2006—up from about  $20 trillion, or two times GDP in fiscal year 2000. (See fig. 2.) Absent  meaningful reforms, these amounts will continue to grow every second of  every minute of every day due to continuing deficits, known demographic  trends, and compounding interest costs.
GAO, Fiscal Exposures: Improving the Budgetary Focus on Long-Term Costs and  Uncertainties, GAO-03-213 (Washington, D.C.: Jan. 24, 2003). leadership. In addition to the proposal that both of you are offering, I’m  pleased to say that several other members on both sides of the political  aisle and on both ends of Capitol Hill are also taking steps to answer the  call for fiscal prudence by proposing bills to accomplish similar  objectives.
section_title: The Bipartisan Task Force
paragraphs: I was pleased to join you when you announced this proposal. As I said at  the time, I believe it offers one potential means to achieve an objective we  all should share: taking steps to make the tough choices necessary to keep  America great and to help make sure that our country’s, children’s and  grandchildren’s future is better than our past. Senators Conrad and Gregg,  thank you for your leadership.
I was especially pleased to see that the task force that would be created by  your legislation was informed by GAO’s work on the key elements  necessary for any task force or commission to be successful. Last year we  looked at several policy-oriented commissions. (See app. I for a summary  table on that work.) Our analysis suggests that there are a number of  factors that can increase the likelihood a commission will be successful.  Examples of those factors—and elements your proposal encompasses— are     a broad charter—don’t artificially limit what can be discussed and don’t  set policy preconditions (like “must support individual accounts”) for  membership,  involvement of leaders from both the executive and legislative  branches—including elected officials,    a report with specific proposals and a requirement for supermajority  vote to make recommendations to the President and the Congress, and    a process to require consideration of the proposals.
A few of these points deserve elaboration. Having a broad charter and no  preconditions is very important. This means that “everything is on the  table”—and that is critical in order for the effort to be credible and have  any real chance of success. But let me be clear what we mean by  “everything is on the table”—it means that everything is open for  discussion and debate. It does not mean advance agreement to a specific  level of revenues or benefit changes. The only precondition should be the  end goal: to put the nation’s fiscal outlook back on a prudent and  sustainable path for the future.
I believe that having true bipartisanship and active involvement by both  the executive and the legislative branches is important. If any proposal is  seen as partisan or the product of only one branch, it is unlikely to fly with  the American people. Candidly, based on my interactions with thousands  of Americans from across the nation during the past two years, there is  little confidence in the ability of elected officials to rise above partisan  battles and ideological divides. As a result, I believe that any related  commission or task force should also involve knowledgeable professionals  from selected nonpartisan institutions who have significant expertise and  experience.
Finally, the task force or commission will need to move beyond diagnosis  to prescription. We know the path must be changed. What we need now  are credible and specific legislative proposals that will accomplish that.  Furthermore, these should come from a supermajority of the task force or  commission members with a mechanism to assure a vote on a majority  basis by the Congress.
At your request, we are looking at how other countries have reformed  their entitlement programs—not the substance of their reforms but rather  the process that led up to the reform. As countries have sought to reform  entitlements such as pensions and disability, they have often used  commissions as a means to develop reform proposals that became the  basis for legislation. For example, the 2003 Rurup Commission in  Germany, composed of experts, public officials, and others, made  recommendations for reform of public pensions that were enacted in 2004  and 2007. In the Netherlands, the 2000 Donner Commission composed of  respected public figures representing the major political parties developed  recommendations that became the basis for major disability reform  legislation enacted in 2005. In the early 1990s, a working group of  parliamentary members in Sweden developed the concept of a major  structural reform of their public pension system that was worked out in  detail in succeeding years and enacted in 1998. In addition to these types  of commissions, several countries also have permanent advisory bodies  tasked with periodically informing the government on pension policy  challenges and reform options.
Our related work is not yet complete, but some of what we have found to  date would not surprise you. These special groups—whether commissions  or task forces—can and do fill multiple roles including public education,  coalition building, “setting the table” for action, and providing a means for  and cover to act. Leadership is key and public education is also important.
You asked that we comment on some particulars—and on areas where we  think further refinements would increase the chances of success. Let me  now turn to three areas:  timing and how to ensure involvement of the newly-elected President,    congressional action: whether—and if so how—to permit amendments  to or substitutes for the commission’s proposals, and the supermajority  vote requirement, and   the chairmanship of the commission.
subsections: section_title: Timing and Involving the Newly-Elected President
paragraphs: A great strength of your proposal is that it calls for the task force or  commission to deliberate throughout 2008. As you know, members of the  Fiscal Wake-Up Tour believe that fiscal responsibility and  intergenerational equity must be a top priority for the new President. We  all agree that finding solutions will require leadership, bipartisan  cooperation, a willingness to discuss all options and courage to make  tough choices. For example, those who argue that spending must come  down from projected levels should explain which programs they would  target and how the savings would be achieved. Those who argue for higher  taxes should explain what level of taxation they are willing to support, the  manner in which the new revenue would be raised and the mechanisms  that will help to ensure that any additional revenues will be used in a  manner that will help rather than hinder our effort to be fiscally  responsible. Those who are unwilling to do either should explain how  much debt they are willing to impose on future generations of Americans.
Indeed, we have suggested a number of key questions we believe it is  reasonable to ask the candidates. These include the following:    What specific spending cuts, if any, do you propose and how much of  the problem would they solve?
What specific tax increases, if any, do you propose and how much of  the problem would they solve?
What is your vision for the future of Social Security and what strategies  would you pursue to bring it about?
What is your vision for the nation’s health care system, including the  future of Medicare, and what strategies would you pursue to bring it  about?
These questions and others should be addressed by all the (presidential)  candidates so the public can assess whether he or she appreciates the  magnitude of the problem, the consequences of doing nothing (or making  the problem worse), and the realistic trade-offs needed to find real and  sustainable solutions.
Although I believe the candidates should recognize the seriousness of this  challenge, I also believe it is unrealistic to expect candidates to offer  coherent, fully comprehensive proposals at this point in the campaign. In  that sense the task force or a similar commission performs a great service:  candidates could promise to take seriously any information or proposals  and to engage in a constructive manner with the group after the election.  They could agree that for the task force or commission to have a chance of  succeeding “everything must be on the table” at least for discussion.
That said, it is important to find a way to involve whoever is elected as our  new President. After all, it will be the person elected approximately 53  weeks from now who must use the “bully pulpit” and put their energy and  prestige behind the effort to help ensure success. Although I think having a  deadline is important, I believe that a December 9, 2008, deadline for the  commission’s report does not offer enough time for the kind of input and  involvement that will be necessary. Some way must be found to gain the  active involvement and buy-in of the incoming President. In any event, it  seems likely that the December 2008 deadline would need to be  replaced—perhaps with a January or February 2009 date.
section_title: Congressional Action on the Proposal
paragraphs: You also asked us to think about the current requirement for a “fast track”  up-or-down vote in the House and Senate and the requirement for a  supermajority in both houses.
As former Congressman and former Office of Management and Budget  (OMB) Director Leon Panetta has said, in any effort to change our fiscal  path “nothing will be agreed to until everything is agreed to.” This  statement also offers a warning about the dangers of picking apart any  package. Whatever process is developed for considering the task force’s  recommendations should protect the proposal from being picked apart  amendment by amendment. The task force is charged with developing— and agreeing to—a coherent proposal which, taken as a whole, will put us  on a prudent and sustainable long-term fiscal path. Presumably, to reach  agreement, the members will have made compromises—any proposal is  going to have elements that represent concessions by the various  members. In all likelihood those concessions will have been made in  return for concessions by others. If individual elements can be eliminated  by amendment, the likelihood that the package will achieve its goal will be  reduced. The very process of coming up with a coherent proposal means  that the package is likely to stand or fall as a whole. In that sense the  prohibition on amendments makes some sense.
At the same time, I believe it would make sense to permit alternatives. I  say alternatives not amendments because I believe it is important that any  alternatives achieve the same change in fiscal path as the task force’s  proposal. The SAFE bill proposed by Senator Voinovich and by  Representatives Cooper and Wolf does permit alternatives—but it holds  them to the same standards and criteria as the proposal from the  commission. Permitting alternative packages to be offered and voted upon  may increase the credibility and acceptance of the end result.
The Task Force bill requires both a supermajority to report out a proposal  and a supermajority in both houses to adopt the proposal. The  supermajority requirement within the task force (or commission) offers  assurance that any proposal has bipartisan support. It offers stronger  backing for a proposal that must reflect difficult choices. If a proposal  comes to the Congress with a two-thirds or three-fourths vote of the task  force, the necessity for a supermajority vote to enact the proposal in the  Congress is less clear. It is even possible that this requirement could offer  the opportunity for a minority to derail the process. Any package that  makes meaningful changes to our fiscal path is going to contain elements  that generate significant opposition. Therefore, although I think requiring a  supermajority within the task force makes sense, requiring a supermajority  vote for enactment of the task force or commission’s proposal by the  Congress is inappropriate. In my view, such a requirement puts too many  hurdles in the way of making tough choices and achieving necessary  reforms.
section_title: Chairmanship and the Role of the Outgoing Administration
paragraphs: Finally, Chairman Conrad, Senator Gregg, let me raise a question about the  role envisioned for the outgoing Administration. I believe you are correct  to include executive branch officials. In this regard, I have the utmost  respect for the current Secretary of the Treasury. I have met with him on  several occasions and am well aware that he has made several statements  about the need for action on our long-term fiscal challenge. At the same  time, I believe that designating a cabinet official in an outgoing  administration as the task force chairman presents some serious  challenges and potential drawbacks.
Both the strength and the weakness of having the Secretary of the  Treasury participate is that he will be seen as representing the outgoing  President. While participation by the executive branch at the highest level  will be important, having an outgoing Administration official serve as  chairman may serve to hinder rather than help achieve acceptance and  enactment of any findings and recommendations. Given the fiscal history  of the first 7 years of this century and the experience with the Commission  to Strengthen Social Security, I would question whether having the  Treasury Secretary or any other current Administration official serve as  chairman is the right way to go.
section_title: Common Ground and Commitment to Sustainability
paragraphs: Before concluding, I would like to say a few words about what I hope is a  renewed push to find a vehicle for addressing this very important  challenge. Senator Voinovich has proposed the SAFE Commission. Its  membership is different than your Task Force proposal but it seeks the  same goal—improving our fiscal path. As I noted, Congressmen Cooper  and Wolf have joined to introduce companion bills in the House: both to  the SAFE Commission and to the Conrad-Gregg Bipartisan Task Force. As  a result, both the Senate and the House have before them bills that seek to  create vehicles for executive-legislative bipartisan development of  credible, specific, legislative proposals to put us back on a prudent and  sustainable fiscal path in order to ensure that our future is better than our  past. We owe it to our country, children, and grandchildren to do no less.
These are encouraging signs. I hope there is movement in this Congress. At  the same time I think we must recognize that achieving and maintaining  fiscal sustainability is not a one-time event. Even if a task force or  commission is created and succeeds in developing a proposal and that  proposal is enacted, it will be necessary to monitor our path. In that  context I note that the proposal by Senators Feinstein and Domenici for a  permanent commission would require periodic review and reporting of  recommendations every 5 years to maintain the adequacy and long-term  solvency of Social Security and Medicare. In our work looking at other  countries we note that reform is an ongoing process and that no matter  how comprehensive initial reforms, some adjustments are likely to be  necessary. Something like the ongoing commission suggested by Senators  Feinstein and Domenici may be a good companion and follow-on to the  Task Force/Commissions envisioned by either the Bipartisan Task Force  or the SAFE Commission bills. We will need to be flexible in our response  to early challenges and success as we move forward.
section_title: Conclusions
paragraphs: Changing our fiscal path to a prudent and sustainable one is hard work  and achieving reform requires a process with both integrity and credibility.  In our work on other countries’ entitlement reform efforts, we see that  reforms are sometimes the culmination of earlier efforts that may have  seemed “unsuccessful” at the time. For example, a 1984 Swedish  commission on pension reform did not reach consensus on a proposal but  its work helped set the stage for a process that resulted in a major reform.  Similarly, the recent reforms of public pensions in Germany and disability  in the Netherlands built upon a long series of incremental reform changes.  Each reform effort can move the process forward and each country must  find its own way.
Today we can build on previous efforts in the United States. In this  country we have been discussing Social Security reforms and developing  reform options since the mid-1990s. We have had two major commissions  on entitlement reform in the last decade—a Presidential commission on  Social Security in 2001 and a Congressional commission on Medicare in  1998. There have also been discussion, studies and commissions on tax  reform. As we said in our report on the December 2004 Comptroller  General forum on our nation’s long-term fiscal challenge, leadership and  the efforts of many people will be needed to change our fiscal path. The  issues raised by the long-term fiscal challenge are issues of significance  that affect every American. By making its proposal, this Committee has  shown the kind of leadership that is essential for us to successfully  address the long-term fiscal challenge that lies before us.
The United States is a great nation, possibly the greatest in history. We  have faced many challenges in the past and we have met them. It is a  mistake to underestimate the commitment of the American people to their  country, children, and grandchildren; to underestimate their willingness  and ability to hear the truth and support the decisions necessary to deal  with this challenge. We owe it to our country, children and grandchildren  to address our fiscal and other key sustainability challenges. The time for  action is now.
Mr. Chairman, Senator Gregg, members of the Committee, let me repeat  my appreciation for your commitment and concern in this matter. We at  GAO stand ready to assist you in this important endeavor.
section_title: Appendix I: Selected Commissions Summary
paragraphs: Restricted; required  revenue neutrality  and keeping  incentives for  homeownership  and charitable  giving, and  encouraging  savings; required to  consider equity and  simplicity too  32 (22/10)
17 (9/8)
10 (0/10)
16 (0/16);  Included 3  former Members  of Congress  9 (0/9); Chair and  Vice-Chair were  former Senators; 1  former House  Representative on  panel; also  included 4  professors and 2  “tax practitioners”
Yes, functionally;  technically  Breaux = Chair;  Thomas =  “Administrative  Chair”
No; proposed  recommendations  failed to gain  required 11 votes (Jan. 1995) (Dec. 2001) (July 2004) (Nov. 2005)
No; but  recommended 5  broad principles  for crafting  “solutions to our  fiscal problems” n.a.
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