Spending Cuts Needed Along With Higher Taxes

WASHINGTON – Former Sen. Pete Domenici of New Mexico – a battle-hardened veteran of congressional budget wars – has some advice for national leaders negotiating a long-term budget deal: Stay away from television cameras and do your work in private.

Domenici, a Republican who served as chairman or ranking member of the Senate Budget Committee throughout the savings and loan crisis of the 1980s and the economic recession of the 1990s, said a deal to avoid the so-called “fiscal cliff” is elusive and negotiating in public only makes agreement harder to reach.

House Speaker John Boehner, the GOP’s point man in talks with President Barack Obama, has stood before cameras several times this week to outline the lack of progress in working out a deal with the White House.

“We’ve had these kinds of budget agreements in the past, but never quite as complicated as this one,” Domenici told the Journal this week. “We negotiated behind the scenes and then got a bigger group together and finished the work. Never did we go public and talk so much about what should be done.

“I feel sorry for my friends (in Congress) because they have such a complicated thing to do,” the six-term Republican former senator added. “They have to save the country.”

Domenici is widely credited – or blamed – for persuading President George H.W. Bush to break his “Read my lips: No new taxes” pledge to balance the federal budget. Domenici also helped negotiate the Balanced Budget Act of 1997 with President Bill Clinton.

And this time around, Domenici isn’t simply sitting on the sidelines offering strategy critiques.

The 80-year-old Senate veteran has been working on a sweeping debt-reduction initiative for two years as a senior fellow at the Bipartisan Policy Center, a Washington think tank that aims to find common ground among Democratic and Republican lawmakers.

In November 2010 – well before the current “fiscal cliff” crisis that was triggered last year by a congressional dispute over raising the federal debt limit – Domenici and federal budget expert Alice Rivlin unveiled a plan to slash the national debt.

The plan, which called for a mix of new taxes, spending cuts and entitlement reform, was widely lauded by economic experts as a sensible – if politically unpalatable – way to get America’s finances under control.

Congressional Republicans and the White House are trying to reach an agreement to stave off so-called sequestration rules that would automatically reduce the federal deficit by $1.2 trillion if a broad, 10-year deficit reduction plan isn’t reached by Dec. 31. The cuts eventually could cost New Mexico 20,000 jobs, according to a University of New Mexico study.

“It’s going to be as tough as it can be on New Mexico,” Domenici said, referring to sequestration prospects and noting the state economy’s dependence on jobs at military installations, national laboratories and public land agencies.

A bill passed by Congress last year would force deep cuts to defense and nondefense spending in the coming decade if no other deal is reached. The sequester bill stemmed from the congressional stalemate on increasing the nation’s debt limit and avoiding a default.

Elusive spending cuts

In the Journal interview, Domenici and G. William Hoagland, his longtime Senate Budget Committee staff director, both voiced frustration with Obama’s reluctance to specify which spending cuts he would support to help meet the $1.2 trillion in reductions called for under the sequester legislation. The White House did not respond to the Journal’s requests this week for details on what spending cuts the president is willing to support.

Hoagland – widely viewed as one of Washington’s top experts on the federal budget and a senior vice president of the Bipartisan Policy Center – predicted that unless Obama makes some major concessions, the U.S. is, in fact, heading over the fiscal cliff.

“I don’t think there will be time to do major, fundamental structural changes (before Dec. 31) – it’s just not possible,” Hoagland said. “This is getting a little frustrating for those of who thought we would have an exercise to find a major reduction in the deficit over the next 10 years.”

Domenici warned that Medicare and Medicaid require major structural changes in coming decades. He said Obama does not appear willing to make those politically unpopular changes, although he is demanding tax hikes on the highest-income Americans.

“We see probably the taxes going up, but we still don’t see the spending cuts, and it’s likely that when they pass the law that raises rates on the upper income they will delay that sequester,” Domenici said, referring to the spending cuts. “There will not be any offsets to that by making any changes to entitlements.”

Domenici said he supports raising the tax rates on American families making more than $250,000 a year – Obama’s primary demand of Republican negotiators – but that they should be offset by spending cuts and Medicare and Medicaid reform.

Domenici and Hoagland said they think raising taxes on upper-income Americans is all but a done deal.

“I’d be for big tax revenue that could come from reform of the tax code to make it a growth-oriented code, including taxes on the 2 percent (the wealthiest Americans), but we need an equal amount that would come out of long-term reform measures in the entitlement programs,” Domenici said.
— This article appeared on page A1 of the Albuquerque Journal