July 26, 2014 SIGN IN | REGISTER

Ornstein: No Budget, No Pay Is No Solution

It may be different now, of course. The Senate is likely to pass a budget, under reconciliation to avoid a filibuster, that includes a substantial increase in revenue from oil companies, other corporations and wealthy individuals, along with some cuts in the growth of programs, as a counter to House Budget Chairman Paul D. Ryan’s budget. Maybe that will bring House and Senate leaders together, and maybe it will lead to what we need: a third $1.2 trillion to $1.5 trillion in deficit reduction over the next 10 years that would stabilize the debt-to-gross domestic product ratio at a sustainable level. It would involve compromise between the parties and chambers; $400 billion to $600 billion in revenues, most of it from reducing deductions and credits, and $600 billion to $800 billion in program reductions, most of it from entitlements, and it would alter the sequester formula to provide a more rational formula of cuts in discretionary spending than mindless, across-the-board ones.

There are relatively easy ways to get the right kind of balanced package. A formula to cap all deductions, except for the charitable ones, that can raise $400 billion over 10 years, combined with the promise of more substantial tax reform, is just that — easy. On Social Security, changing the cost-of-living formula to chained consumer price index, if combined with a more generous minimum benefit and some protections for disabled individuals, can work. I could also see a gradual increase in the retirement age — but only if there were a significantly more generous minimum benefit and reasonable early retirement option to enable those with back-breaking or mind-numbing jobs to opt for retirement and Social Security benefits at age 62. I would combine these changes with Sen. Al Franken’s idea to use a “doughnut hole” formula for Social Security taxes, leaving the current ceiling on wages subject to the Federal Insurance Contributions Act up to, say, $500,000, and then applying the FICA tax to incomes higher than that.

On Medicare, I would both strengthen the cost-cutting measures included in the Affordable Care Act and give them a chance to work — but with benchmarks every two years for the coming decade to reach the desired levels of cost reduction and automatic increases, means-tested, in premiums and co-pays if they are not met under the ACA. Another option is to have automatic cuts in doctor and other provider pay if the benchmarks are not met, adding a powerful incentive for providers to find ways to make the cost control measures work.

If the budget resolutions lead directly to this kind of compromise, I will happily eat my words about the “no budget, no pay” provision. Far more likely, of course, is that the budget resolution will not much matter; any deal, if we get one, is going to come from extra legislative negotiations between the White House and congressional leaders.

Norman Ornstein is a resident scholar at the American Enterprise Institute.

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