Last week, Rep. Paul Ryan, R-Wis., unveiled a plan to cut federal spending. Today, President Barack Obama presents his goals for long-term deficit reduction. Next up is a bipartisan plan to reduce the nation’s $14 trillion debt, led by Sens. Saxby Chambliss, R-Ga., one of the Senate’s most conservative members, and Mark Warner, D-Va., a former governor of Virginia.
Chambliss and Warner spoke to the AJC editorial board Monday and their comments are excerpted here:
Sen. Chambliss: "The issue that we are dealing with is the issue of this age, the $14 trillion debt and the mounting deficit we are looking at."
Sen. Warner: "The conventional wisdom in Washington is, well, none of this is going to be dealt with until after the presidential election. You know we may have that much time, but are we really willing to roll the dice on not just the American economy but the world economy with kind of a debt crisis we've seen now [in] three countries in Europe and probably more before it's over?
So what we’ve been willing to do in this group is say, ‘You know, everything’s on the table.’ I mean, how do we reform our tax code to make it simpler, lower rates, broaden the base and if the net effect of that is to raise revenue that will be part of the mix? As Democrats, we’ve got to get over the Rubicon that says entitlement programs are a third rail and you really can’t touch them.”
Q: What do you think about Paul Ryan’s proposal? It doesn’t go after defense spending. It doesn’t really talk about the revenue side.
A: (Chambliss) Nor does he deal with Social Security, and he makes a major reform in Medicare. ... Paul's a smart guy. You have to understand that he has to get a budget passed, and his guys want to see spending reduced. We want to see spending reduced.
That’s a major part of what we’re talking about, but he’s talking about nondefense discretionary spending, which is 12 percent of the budget. And you could cut out that whole 12 percent and you wouldn’t solve this problem of $14 trillion in debt. But you’ve got to have enough money to run the government. And then you’ve got to have excess on it to start paying down on that debt ...
The fact that he doesn’t add any reductions in defense spending, I just — it’s not that I disagree with him, but if you look at the amount of spending within the Defense Department, we’ve got a $700 billion discretionary defense budget that we’re looking at right now in the president’s budget.
We’ve got $118 billion of that for Iraq and Afghanistan. You can’t encroach on that, but that still leaves you almost $600 billion in defense spending. Now if we can’t find a place to probably reduce within that, then we’ve got no business being in Congress. So defense spending has got to be on the table. It’s got to share in the sacrifice just like agriculture’s got to share and housing’s got to share and every other federal agency has got to be a participant.
A: (Warner) When you do this plan by walling off defense and walling off revenues, it makes it much harder. ... I give him credit for putting a plan out, but I think it again shows even more so the reason why this kind of broader, everything-on-the-table approach that we're talking is going to, I believe, get more support.
The other thing that I find a challenge with Paul’s plan — you can’t tax your way out of this. You can’t cut your way out of this alone. You’ve also got to grow the economy. ... There’s three legs of this stool. You have to reform the tax code, look at revenue, and you have to cut spending dramatically, but you’ve still got to have a growth plan for your economy.
Q: If you had to write a bill today, what would be in it?
A: (Chambliss) I think it would mirror the [National Commission on Fiscal Responsibility and Reform] report recommendation where you, as Mark said, you've got three legs to this stool.
You’ve got reduction in discretionary spending. We’re spending way too much money. Where in 2010, we spent 25 percent of the GDP. We took in revenues 14.5 percent. It doesn’t take a rocket scientist to figure out that you’ve got to close that gap ...
Secondly, we’ve got to reform entitlements, and health care [costs] are going nuts in the private sector and the public sector. And we’ve got to reform entitlements.
And it’s an opportunity to reform Social Security even though Social Security doesn’t directly contribute to the debt in a big way, but it does from the standpoint that we’re writing checks out of the general funds to pay Social Security beneficiaries. And on every check we write, 40 cents of every dollar is borrowed. So we’re paying interest on that Social Security money. ... And then the third leg to it is the revenue side. And [what] the debt commission said is a very attractive proposal in that we took in, in 2010, $2.1 trillion in tax revenues. A little over a trillion dollars was not taken in because of tax reductions and tax credits.
The debt commission said you can eliminate all that and you can lower rates in a significant way to the lowest rates we’ve ever seen — as low as 8 percent on the low end to a maximum of 29 percent. Then when you start adding back some of these expenditures that we know are going to be added back — for example, home interest, mortgage interest deduction — you can modify it and make it reasonable and add it back without spending too much.
Charitable deductions you can add back in — EITC [Earned Income Tax Credit], child tax credit, some of these things that are too popular to totally eliminate. But we can do that. You still are able to lower tax rates on the personal level as well as the corporate level in a significant way. That’s going to generate more revenue.
When it does, the issue then becomes what do you do with the revenue. The debt commission report says that somewhere between 80 and 85 percent of that money should go to tax rate reduction. The balance of it goes to retired debt. And that’s where the $4 trillion comes from over 10 years.
A: (Warner) It puts us on a path. This takes $4 [trillion] out of the $14 [trillion], so it's not like you do this and you're done. But what you've done is you've given us ... a doable plan over a 10-year time frame of $4 trillion in debt reduction. And moving forward, a tax structure that will allow America to be competitive in a global market.
A: (Chambliss) Mark referred earlier to the fact that we're talking some arrows, which is OK if you're going to do this in a major way, you're going to take your arrows.
Obviously, I’m taking some for raising taxes. Well, we’re lowering tax rates. Seventy percent of the people that go to the IRS to file tax returns file standard form without taking deductions. If we lower rates, 70 percent of taxpayers in this country are going to pay less in taxes. Sure, if you’re going to generate more revenue, somebody’s going to pay more in taxes, but that’s always been the case with every major reform of the tax code. Every time we do it, that’s what happens.
If you have the overall approach, you can achieve the end result of getting to this $4 trillion. If you don’t do it, you don’t have each one of these components addressed, you’re never going to get to it ...
A: (Warner) Any additional revenue generated would go towards rate reduction or deficit reduction, not to new spending.
A: (Chambliss) That is agreed to by all six of us around this discussion that that's got to be in writing in whatever plan comes out.
Q: So who would be paying more under this?
A: (Warner) You know we're talking about the question of phasing out health care deductibility. ...You know that particularly will hit higher-cost health care plans. ...The plan actually equalizes capital gains dividends and the individual rates.
Q: If you’re talking about cutting back on [the home mortgage deduction], aren’t you going to get a lot of push back from the middle class on that?
A: (Warner) You are. The whole sense here that you can do this without everybody having skin in the game just isn't the case. I've got to believe that there is — and this is kind of our premise, we aren't going to have a perfect plan. The one thing that we can guarantee, though, is that if we do nothing, we're going to end up in a crisis.
Q: Have y’all talked to the White House yet? Have they talked to you? And what would you like to hear from President Barack Obama on the topic?
A: (Chambliss) I haven't talked to him. ... We welcome him engaging in debate. ... I suspect he's going to be much further left of what we want, but I have no idea.
A: (Warner) We've had no talks with the president. ... I hope the president would be supportive of what we're trying to do.
Q: If the debt ceiling issue comes up, how can that be resolved in a way that moves the momentum forward on this long-term plan rather than setting up — sending people to their respective corners?
A: (Chambliss) We never had a goal in mind of completing our work by such and such a date so that we could be attached to the continuing resolution ...
Our goal has been to do it right, whatever time frame it takes to do it. We’re looking now at the May-June time frame on the debt ceiling. ... [House Speaker John] Boehner is my good friend, ... and he’s been very public about the fact that when it comes to the debt ceiling, something really big has got to be attached to it in order for his folks to pull for it. I don’t know what something big is. He doesn’t know what something big is.
A: (Warner) The danger here, though, is that the ramifications of going to [the 11th hour] on the shutdown caused a lot of psychic disruption in a lot of families across America. You go to even close to that in the deficit and you spook the bond markets. I mean you could light the fire that burns down the house if this isn't done in an intelligent way.
Q: So telling people the truth can sometimes be interesting for individual politicians. Are we really going to see that happen since politicians need to get re-elected?
A: (Chambliss) Well, it's going to have to happen, and these are hard and tough decisions that we're having to make with the votes that are going to have to be taken. They're going to be hard and tough votes.
People are either going to step up. They’re going to listen to the [Adm.] Mike Mullens of the world and be willing to take these hard and tough votes or be running the risk of leaving this country worse off than the country that we inherited. And that’s never been done.
A: (Warner) A little bit of truth can go a long way.
A: (Chambliss) I believe the American people are ahead of this issue. They get it better than the policymakers do. A lot of this is because people are out of work, they're struggling. Mortgages are underwater. There are a lot of reasons why, but I think the American people get it more so than Washingtonians.
