Over the next ten years according to Congressional Budget Office (CBO) projections, the federal government will collect $59.8 trillion in revenue but spend $80.0 trillion, adding $20 trillion to the national debt. Spending will rise to 25 percent of the economy, with interest payments alone on the rising debt exceeding $1 trillion a year. This unsustainable situation needs an extraordinary response.
Thursday morning the House Budget Committee will mark up H.R. 5779, the Fiscal Commission Act of 2023 (FCA). The bipartisan legislation was introduced by Representatives Bill Huizenga (R-MI) and Scott Peters (D-CA) and has 21 other bipartisan cosponsors. This legislation aims to address the budget problem that has been festering during decades of federal spending above and beyond the historical average of tax revenues. Trillions of dollars in deficit spending during the pandemic and rising interest rates have dramatically worsened the country's fiscal position. Reforms are needed sooner rather than later to stop kicking the can down the road.
The FCA would establish a Commission to come up with bipartisan solutions to set a stable debt-to-GDP ratio and tame annual deficits. The Commission would have 16 members appointed equally by the Senate Majority/Minority Leaders, House Speaker, and House Minority Leader. However, one of the four selected by each must be an outside expert.
The Fiscal Commission would be tasked to hold public meetings and produce a report of recommendations by November 2024. The recommendations must aim to balance the budget, stabilize the debt-to-GDP ratio below 100 percent, and meaningfully improve the fiscal outlook within ten years. The report should also include a cost estimate from CBO and legislative language to carry out the recommendations.
Passage of the report from the Commission requires approval from a majority of its members including at least three members appointed by each political party. The recommendations would then be taken up in the House and Senate under expedited rules for an up or down vote.
House Budget Committee Chairman Jodey Arrington (R-TX) will take up the proposal with some amendments, including:
requiring the Commission to conduct a public awareness campaign about the country's perilous fiscal path;
requiring the Commission to hold at least 6 public hearings;
clarifying that the outside experts on the panel cannot vote on the report;
providing for an interim report due on December 15, 2024 and a final report by May 1, 2025; and
requiring the Commission to "consider the budgetary effects of changes in economic output, employment, capital stock, and other macroeconomic variables resulting from public and private investments and propose recommendations that meaningfully improve the long-term fiscal condition of the Federal Government."
This last point in particular is an important addition to the Fiscal Commission Act to guide the commissioners towards pro-growth policies in the package of recommendations it produces to close the fiscal gap. There are plenty of areas of waste and prioritization within the $6 trillion federal budget. The Biden administration has proposed several tax hikes with the intent of reducing the deficit but without regard to resulting harmful consequences on taxpayers' wallets, employment, and the broader economy. Ensuring that budget reform does not become an economic millstone is particularly important after years of high inflation and high interest rates that are squeezing consumers and businesses.
The current budget process is clearly dysfunctional. The Fiscal Commission Act provides a way for members from across the aisle, along with outside experts and an informed public, to meaningfully work together on budget reform to tackle the debt – $34 trillion and counting – that Washington has amassed. The clock is not just ticking, it's ticking fast.