–Failure of Simpson-Bowles, Gang of Six, Grand Bargain Exact Toll
–Experts Lament Failure of Obama, Boehner To Secure Grand Bargain
–Analysts Criticize Obama For Not Backing Simpson-Bowles

By John Shaw

WASHINGTON (MNI) – It’s increasingly rare for Treasury Secretary
Tim Geithner to speak about U.S. fiscal issues without lamenting the
“broken politics” that pervade Washington.

Few who follow Washington closely would dispute Geithner’s
assertion. But there is another phrase that Geithner and other key
policymakers might ponder to explain collapsing confidence in Washington
both domestically and around the world.

Missed opportunities.

As confidence in Washington’s ability to solve fiscal problems
plunges to all-time lows, it’s instructive to reflect on several missed
opportunities this year that might have changed the long-term trajectory
of American fiscal policy and stabilized consumer and business
confidence.

At a minimum, seizing any of these opportunities might well have
prevented the Standard & Poor’s downgrade of long-term U.S. debt in
August.

Budget experts cite several critical turning points in this year’s
fiscal debate: President Obama’s decision not to embrace the
Simpson-Bowles report in his State of the Union Address and fiscal year
2012 budget; the inability of the Senate’s so-called Gang of Six to
reach a bipartisan budget agreement this spring; and the failure of
Obama and House Speaker John Boehner to negotiate a Grand Bargain this
summer during the high-staked debt limit negotiations.

“There have been several important opportunities that have been
lost this year, but I think the one that we will regret the most is
the failure of the president and the Speaker to reach a grand bargain,”
says Bob Bixby, the executive direct of the Concord Coalition.

“They were not that far from a significant deficit agreement. If
they had reached it, there would have been some real political and
substantive strength behind it. That agreement had the most potential to
so something important to put us on a different fiscal path,” Bixby
says.

Obama and House Speaker John Boehner explored this summer in
private talks a nearly $4 trillion deficit reduction agreement which
would have involved major entitlement reforms and additional revenues.
Obama has accused Boehner of walking away from an historic opportunity
to fix American fiscal policy. Boehner has said that Obama was unwilling
to commit to specific entitlement reforms and was too insistent that
major revenue increases be part of any package. Boehner has said that he
was open to about $800 billion in additional revenues over a decade, but
Obama was pressing for more than $1.2 trillion.

Bixby also says that Obama’s failure to embrace the Simpson-Bowles
package in his State of the Union speech in January or in the February
release of his 2012 fiscal year budget was a serious mistake.

“It’s hard to know for sure, but if Obama had gotten behind
Simpson-Bowles early in the year it might have changed the entire tone
of the budget debate this year. We don’t know that, but it seems
possible,” he added.

“By not embracing Simpson-Bowles, which was his own commission, the
president left a lot of people wondering if he was really interested in
serious deficit reduction,” Bixby says.

Bixby believes the Gang of Six talks, while interesting, were
unlikely to have led to a broad fiscal agreement because they involved a
small number of lawmakers whose negotiations were viewed skeptically by
Senate leaders.

The Gang of Six was a bipartisan group of six senators who tried
for many months to use the Simpson-Bowles report as the framework of a
specific legislative proposal.

The group announced in late July that they reached an agreement on
a $3.7 trillion deficit reduction package, but by this time the debt
ceiling talks had entered their endgame and congressional leaders were
not interested in considering a new proposal.

Bill Frenzel, a former Republican congressman who is a guest
scholar at the Brookings Institution, agrees with Bixby that the failure
of the Obama-Boehner talks were very consequential.

“A deal between Obama and Boehner would have been huge. That had
the chance to be a game changer. It might have been tough to get it
passed in the House, but it had the potential to change the fiscal
debate in a big way,” Frenzel said.

“We’re going to lament their failure for a long time, I fear,”
Frenzel said.

Budget experts agree that the next opportunity for major deficit
reduction is the new congressional panel for deficit reduction.

The Joint Select Committee on Deficit Reduction is charged to
submit a report to Congress by Nov. 23, 2011 that reduces the deficit by
$1.5 trillion between 2012 and 2021.

The final package, if one is agreed to by the majority of the
panel’s 12 members, must be voted on without amendment by the House and
Senate by Dec. 23, 2011.

If the panel fails to agree on a spending cut package or Congress
rejects its plan, a budget enforcement trigger would secure $1.2
trillion in budget savings through across-the-board cuts.

The cuts would be equally divided between defense and non-defense
programs but would exempt Social Security, Medicaid and low-income
programs.

Despite the huge fanfare surrounding the panel, there is
considerable uncertainty among budget experts and lawmakers that it will
reach its goals of securing $1.5 trillion in savings, let alone craft a
comprehensive deficit reduction plan that reforms entitlements and
overhauls the tax code.

Frenzel of Brookings said he is not optimistic that this panel
will accomplish its goal.

“They face a huge challenge and we wish them well. But it’s hard to
see how they will succeed,” says Frenzel. “The fact that we need such a
group shows how broken our normal budget process is,” he adds

Bixby of the Concord Coalition also believes the so-called Super
Committee faces a formidable challenge, but adds that even incremental
progress is of value.

“I’m a strong proponent of the idea that the committee should “Go
Big” and put together a large deficit reduction plan,” Bixby says.

“But if they can’t “Go Big” I hope they at least “Do Something.”
It’s important we get the largest deficit reduction package we can–and
then go back next year and keep trying. This is a problem that is
serious enough that it should keep Congress and the White House busy for
a long time,” he adds.

** Market News International Washington Bureau: (202) 371-2121 **

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