The U.S. is perched on a treacherous fiscal ledge. The national debt held by the public has surged past $38 trillion, around 101% of GDP, and is expected to balloon to 120% a decade from now. The country has successfully sidestepped fiscal meltdowns before, but whether the current generation of leaders has the political will to dig itself out of its fiscal hole is up for debate.
While national debt was once made out to be a long-term issue, not necessarily as urgent as maintaining certain types of spending, it is no longer a distant threat. Earlier this month, the nonpartisan Congressional Budget Office published a sobering outlook for the country’s fiscal future. In addition to rising debt, the inflated interest that the U.S. will have to pay annually risks crowding out essential government spending elsewhere, including for Social Security, which could be left penniless within a few years.
“The debt crisis is already here. If left unaddressed, it will only continue to worsen,” researchers wrote in a report published this week by the Committee for Economic Development (CED), a public policy think tank associated with the Conference Board.
That report laid out the increasingly high stakes the nation is facing from its overindulgent borrowing, including risks of crowded-out spending, the diminishment of the dollar’s status as a global reserve currency, and persistently high interest rates that will inhibit long-term economic growth. But as the report noted, the U.S. has been in similar messes before, and history offers a helpful blueprint for what the country could do to navigate the current crisis.
Greenspan’s heroes
In the early 1980s, the United States faced a similar emergency when the trust fund that supports Social Security neared insolvency, a situation where benefits would have been automatically slashed once funds were depleted. At the time, Social Security running out was recognized as an “impending crisis,” according to the CED report. A similar urgency faces the trust fund now, as the CBO’s latest projections estimate Social Security might be insolvent as soon as October 2031.
In 1981, to save the trust fund, President Ronald Reagan appointed a 15-member bipartisan body, known formally as the National Commission on Social Security Reform but remembered by history as the Greenspan Commission, named after its chair: future Federal Reserve boss Alan Greenspan. Composed of lawmakers, outside experts, and business leaders, the commission was tasked with finding a way to save the program from collapse.
The Greenspan Commission initially deadlocked after a year of intense deliberation, missing its original deadline as Republican members protested proposed tax increases and Democrats did the same for recommended benefit cuts. But a “spirit of collaboration,” mostly arranged through behind-the-scenes handshakes and agreements, eventually broke through the impasse, according to the CED’s report. A small subgroup of senators and White House staff engaged in proxy negotiations that eventually bridged the partisan divide.
Central to this success was a “private pact” between Reagan and Tip O’Neill, the Democrat house speaker at the time, in which both leaders agreed not to publicly oppose the commission’s recommendations. This agreement provided the necessary political cover for lawmakers to support difficult changes to revenue and benefits. Furthermore, an informal rule in the Senate dictated that any senator opposing a recommendation had to propose their own alternative solution, effectively separating the reforms from standard partisan debate. These 1983 amendments extended Social Security’s balance by decades and remain the last major reform of the program.
The CED report called for a modern iteration of such a bipartisan commission, calling it a “promising solution that could break the political impasse” once again. Such a commission would provide a venue for lawmakers to focus on long-term sustainability and take the “difficult votes necessary to reset our fiscal trajectory.” By including cochairs from both parties and requiring a bipartisan majority for approval, a commission could lend more credibility to essential reforms, the report argued.
Bipartisanship was key to the 1983 amendments, as Greenspan himself called the private agreement between Reagan and O’Neill the “single most important factor” leading to the success of the reforms. But that spirit of collaboration might be much harder to forge today, and a body tasked with saving Social Security before 2031 would face significant challenges that the commission of the early ‘80s did not.
Working in a ‘broken’ system
Establishing such a commission today would risk replicating the unsuccessful efforts of the 2010 Simpson-Bowles Commission, the report warned. Established by executive order by President Barack Obama to tackle rising national debt, the bipartisan commission failed in part because it lacked complete support from both parties and because it did not have power to force a vote in Congress. The result was a relatively weak legislative impact and a rapid quieting of bipartisan political support.
The CED report referred to the current budget process as “broken,” owing to the erosion of Congress’s constitutional power of the purse and rising partisan alignment that makes it more difficult for lawmakers to cast votes that would complicate their party’s platform. With the legislature operating at historically high levels of polarization and partisanship, and only a minority of the American public trusting congressional Democrats and Republicans to cooperate, even a successful rerun of Greenspan’s commission might not be able to overcome the political hurdles that would now surround it.
“For a bipartisan fiscal commission to be successful, there must be sufficient political will, strong leadership, and a spirit of collaboration,” the report’s authors wrote. “Commissions provide structure for negotiations and legislative procedures for enactment, but by themselves, they cannot produce the political will for reform.”
