IMO, the lack of support for a commission that would offer a potentially credible means for addressing the U.S. fiscal imbalances highlights the lack of willingness for political leaders to take difficult but necessary measures. Just this week, one saw:
- The CBO's projection of deficits running $600 billion or more per year through 2020 (assuming the 2001 and 2003 tax cuts are not renewed)
- New concern that Japan's debt will be downgraded from AAA and that the U.S. could follow without a credible fiscal consolidation approach
- The Senate's failure to adopt a debt commission
- "Free lunch" advocates seeking indecision by rejecting the possibility of benefit cuts on one hand and tax hikes on the other
IMO, Washington lacks the willingness to take credible fiscal consolidation measures at this time. Moreover, a non-defense, discretionary spending freeze would accomplish very little (savings would be tiny). Given Washington's lack of willingness to deal with its fiscal imbalances, the best chance for some progress might be a failure to gain consensus to renew the expiring tax cuts. Clearly, such a measure would be suboptimal, as a balance between more modest tax hikes, spending reductions, and entitlement reform would be far preferable. But in the face of inaction on an issue that poses a long-term threat to U.S. fiscal and economic vitality, even the suboptimal approach is preferable to inaction.