Will the new debt commission be a saving grace?
The new debt commission, chartered by Congress, and required to come up with at least $2 trillion dollars in spending cuts in the next 10 years, may long term, in the forced absence of revenue increases, be an important positive result of the debt ceiling debacle in July and August of 2011.
Some revenue increases as part of the solution, which can be a combination of the closing of corporate tax loopholes and a general, even minor increase in tax rates, would have really significantly improved the country’s long term deficit problem, which would have provided long term fiscal stability, even in the face of a minor slowdown.
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While increases on the revenue side may have contributed to a minor slowdown in commerce, or total GDP in the short term, such a cost, as payment for a major, and real reduction in the nation’s deficit problem, probably would have been worth the price of halting continued deficits and increasing the national debt.
International investors and trading partners would have felt that the U.S. is getting it’s fiscal act together in a serious way. This can also still be accomplished with a balanced budget amendment, though this would be very difficult to accomplish in the current political environment.
In the absence of a probable “full solution”, the creation of a debt commission, which must come up with recommendations that meet the target cuts, otherwise face across the board cuts of equivalent amounts, will definitely help the country’s current fiscal problems.
Nevertheless, the current cuts, although helpful, will not be enough to solve the deficit and debt problem. Further significant action will be required.
Very few of the debt commissions recommendations in the past have been followed by either party. The recommendations are argued about for a week or so then the media shifts to other subjects and their work only lives in the history books. In the future, it may be come difficult to get respected individuals to participate on the panels.