Obama’s Deficit Commission Appointments Raise Concerns

Published April 5, 2010

President Barack Obama’s decision to establish a national deficit commission by presidential decree is coming under fire from figures across the political spectrum as a gross example of crass politicking.

Alan Reynolds, an economist at the Cato Institute in Washington, DC, notes the president’s deficit commission is not bipartisan.

“President Obama could have appointed an even number of Democrats and Republicans but chose to have a panel of 10 Democrats and 8 Republicans, taking the ‘bi’ out of bipartisan,” he said.

Government First, Taxpayers Second
Congressman Mike Pence (R-IN) says the deficit commission will put the federal government’s needs first and the taxpayers’ needs second.

“I do not know what is in the president’s heart, but this is not a serious proposal,” he said. “It will probably not end up promoting the kind of reforms which are in the interests of the American taxpayers.”

Dean Baker, head of the influential left-wing Center for Economic and Policy Research in Washington, DC, likewise warns, “We should all hope the deficit commission will accomplish nothing.”

Budget Manipulation a Concern
Allan Meltzer, author of A History of the Federal Reserve and professor of political economy at Carnegie Mellon University’s Tepper School of Business in Pittsburgh, said he would prefer to see the Obama administration release to the country and Congress all the information relating to America’s future debt obligations. He would then want Congress to vote on accepting those statistics and obligations or not.

“Can we expect a commission to do the work that Congress is unable to do and get Congress to agree? I am very skeptical,” Meltzer said.

“There are really only two issues,” he added. “First, the commission must decide how to divide the adjustment between spending and taxes. Then it must decide on the composition of the spending cuts and tax increases. Easy to say, but hard to do. And it must avoid gimmicks. The best that could happen, I believe, is a proposal that moves the problem farther away in time but does not reduce the entire present value of future claims to zero.”

He added, “A good agreement would require the president to submit, and the Congress to approve, a budget that shows the present value of future obligations as well as current spending and revenue.”

Commission a Cover
Pence says the timing of the creation of the commission is questionable and is probably only a cover for a massive tax increase to come, as the commission will not report until after election day this year.

“By mid-century the government is set to consume 40 percent of the nation’s economy, and that is without any of the new spending the president proposing. Within 20 years our yearly government deficit level will be like Greece’s: 130 percent. We are facing a fiscal crisis of epic proportions, and that is why I have introduced a constitutional spending limit that would limit the federal government to 20 percent of the nation’s economy, which is the historical average over the last 60 years,” Pence said.

California Insurance Commissioner Steve Poizner, who is running for governor as a Republican, said he is particularly worried about the nation’s debt and notes the dire fiscal situation in California, where the state government is withholding tax rebates and has issued IOUs for service payments.
California a Cautionary Tale
“What is going on in Washington, DC is quite alarming,” Poizner said. “California is just a few years ahead of where President Obama wants to take the country. . . . We spend too much. We do not need a commission to study that. We do not need more commissions, expanding government programs, and more taxes.”

Reynolds said Obama has stacked the commission with unqualified people who will act as spoilers. He notes as an example the appointment of Andy Stern to the commission. Stern is president of the Service Employees International Union, which represents most government workers and has recently come under fire for defending government employee pay and pension packages.

Reynolds pointed to a deficit commission appointed by President Bill Clinton and said, “In 1994, Commission Chairman Bob Kerry and Vice Chairman John Danforth proposed reducing Federal Employee Retirement System benefits by up to 10 percent and Civil Service Retirement System benefits by up to 5 percent. [The cuts were not made.] Could anyone imagine Andy Stern signing up for that sort of reform?”

Special Interest Domination
Reynolds is more hopeful about some other commission appointees, but he said he expects party politics and other special interests to dominate.

“Business people on the panel are unlikely to master complex budgetary issues in such a short time, and they are therefore likely to be trumped by the experts,” Reynolds said. In addition, he noted, “They may ‘represent business interests,’ but that is not necessarily more constructive than having someone from the farming industry to defend farm and ethanol subsidies, or someone from the weapons industry to defend the military budget.”

Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.