The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform

The moment of truth is upon us. The national commission on fiscal responsibility and reform issued its report, aptly named, "The Moment of Truth". If you are not convinced that we are facing a fiscal crisis, here is something that will convince you. This is a quote from the report....

"Over the long run, as the baby boomers retire and health care costs continue to grow, the situation will become far worse. By 2025 revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity – from national defense and homeland security to transportation and energy – will have to be paid for with borrowed money. Debt held by the public will outstrip the entire American economy, growing to as much as 185 percent of GDP by 2035. Interest on the debt could rise to nearly $1 trillion by 2020. These mandatory payments – which buy absolutely no goods or services – will squeeze out funding for all other priorities."

By recommending some very tough choices, taken as a whole, the plan will:
␣ Achieve nearly $4 trillion in deficit reduction through 2020, more than any effort in the nation’s history.
␣ Reduce the deficit to 2.3% of GDP by 2015 (2.4% excluding Social Security reform), exceeding President’s goal of primary balance (about 3% of GDP).2
␣ Sharply reduce tax rates, abolish the AMT, and cut backdoor spending in the tax code.
␣ Cap revenue at 21% of GDP and get spending below 22% and eventually to 21%.
␣ Ensure lasting Social Security solvency, prevent the projected 22% cuts to come in 2037, reduce elderly poverty, and distribute the burden fairly.
␣ Stabilize debt by 2014 and reduce debt to 60% of GDP by 2023 and 40% by 2035.

This is a serious proposal. 11 of the 18 members including three Republican Senators voted yes for the plan. Considering how broken Washington is currently, this is an achievement. All three house Republican members voted no so did two liberal Democratic house members. I was surprised to find that Democratic senator Max Baucus, chairman of finance committee voted no and so did Andy Stern, former President of Service Employees Union, a Presidential appointee.

The questions is what now. I think it is another chance for Presidential leadership. President Obama should engage the Congress and the whole nation on a debate on how to implement the recommendations of this commission. If he does that and succeeds in implementing majority of the recommendations, he will leave behind a legacy similar to of some of our greatest Presidents like Abraham Lincoln or FDR.