Only Grand Bargains Are Going To Get Us Out Of Our Gigantic Fiscal Mess*

The Bigger Story

Campaigns and political party platforms provide limited policy details. That’s by design: especially in a campaign, politicians tend to accentuate what they will do for voters but seldom discuss who will pay for those efforts or how the programs will work. Too often, we root for one side or the other, assuming pesky details will be worked out after an election. 

Today, more than ever, we need much more comprehensive approaches to government policy that honestly assess trade-offs. Every government policy costs something—even those with positive net returns to society. The better we understand, anticipate, and accept trade-offs, the more likely we will end up with effective policies. 

How do we get there? Two recent efforts, one led by the Peter G. Peterson Foundation and another led by the Center for Collaborative Democracy, engaged a broad spectrum of research organizations to outline what broad—and, in my view, necessary—reform of our current laws might entail. (Full disclosure: I have been engaged either directly or indirectly in each—in the first as a co-founder of the Urban-Brookings Tax Policy Center, where my colleagues assessed the cost of the many tax proposals, and in the second, as one of the thirteen signers of the document and an informal adviser to the sponsoring organization.)

1. Through its Solutions Initiative 2024: Charting a Brighter Future, the Peter G. Peterson Foundation asked seven leading organizations— the American Action Forum, the American Enterprise Institute, the Bipartisan Policy Center, the Center for American Progress, the Economic Policy Institute, the Manhattan Institute, and the Progressive Policy Institute — to develop specific policy proposals and recommendations to address our fiscal situation. 
   
   As expected, divergent viewpoints emerge when one convenes organizations defined across the political spectrum. Still, each of the proposed solutions shared many common features: putting the budget on a sustainable track for the long run; making Social Security solvent or at least extending its solvency for a few decades; major health care reform; tax reform, including reduction in the size and number of tax expenditures; and allowing at least modest growth in revenues as a share of our national income. 
   
   Notably, as my TPC colleague Howard Gleckman reported, nearly all agreed that our fiscal situation requires new tax revenues, not just slower outlay growth.

2. The Center for Collaborative Democracy, in turn, sponsored a report, now reflected in Toward a Potential Grand Bargain for the Nation, on six major issues facing our society: growth and mobility; the educational system; climate change and other environmental concerns; the healthcare system; taxes; and the budget, particularly its scheduled unsustainable growth in national debt. 
   
   To address these problems, the Center commissioned subject matter experts—progressives, centrists, and conservatives—to develop a grand bargain encompassing all six issues. Dealing with these all at once is a more promising strategy than dealing with them individually because it allows for a broader range of efficient trade-offs. For instance, slower growth in health costs could reduce the need for higher tax rates and increase what can be spent on education. 
   
   Like the Solutions Initiative, the report calls for increasing tax revenue and reducing the growth rate of entitlement spending as a share of annual gross domestic product. While their methods differed, both reports reached similar conclusions about the need to pay for whatever the government does. 

We need to engage further in these types of efforts, irrespective of the politics of any election. 

Such pursuit faces a big hurdle—there is almost no long-term effort, outside or inside of government, for nonpartisan examination of the types of broad trade-offs that I believe are required to get us out of our current mess. By contrast, interest groups spend enormous sums on campaign contributions and analysis likely to reach their desired and more narrowly targeted conclusions. The two efforts noted here took person-months to complete, which pales in comparison to the many person-years required to deal with the details in trillions of dollars of tax revenue and spending, along with the nation's volumes of regulations. 

For now, please give these two reports at least a glance. Every participant in those two efforts, including myself, has caveats and objections, and so will you. But you will also discover how much opportunity to pursue more efficient and equitable policy is opened up when we face facts and embrace broad tradeoffs.

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*Largely reproduced from Tax Vox, September 20, 2024. Posts on Tax Vox are solely the opinion of the authors and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.