This week on What's at Stake, Bryan and Ylan are joined by Ben Ritz, director of the Center for Funding America's Future at the Progressive Policy Institute. Ben, Ylan, and Bryan have a great conversation on key fiscal policy priorities including the current state of U.S. government funding and America's national debt. Ben explains the current state of play and implications of the proposed Fiscal Stability Act, which would create a fiscal commission in charge of monitoring U.S. fiscal policy.
Ben details how the proposed fiscal commission would differ from the Bowles-Simpson commission of 2010, as well as the public appetite for such an initiative. The group also delves into the implications of the impending expiration of the Tax Cuts and Jobs Act tax cuts and President Biden's $400,000 tax pledge. Tune in!
This week on What's at Stake, Bryan and Ylan are joined by Ben Ritz, director of the Center for Funding America's Future at the Progressive Policy Institute. Ben, Ylan, and Bryan have a great conversation on key fiscal policy priorities including the current state of U.S. government funding and America's national debt. Ben explains the current state of play and implications of the proposed Fiscal Stability Act, which would create a fiscal commission in charge of monitoring U.S. fiscal policy.
Ben details how the proposed fiscal commission would differ from the Bowles-Simpson commission of 2010, as well as the public appetite for such an initiative. The group also delves into the implications of the impending expiration of the Tax Cuts and Jobs Act tax cuts and President Biden's $400,000 tax pledge. Tune in!
Welcome to another episode of what's At Stake. I'm Elon Mui, a managing director at Penta. I'm co-hosting with my friend and colleague, Brian DeAndralis, head of the Washington DC office and partner at Penta, and today we're talking with Ben Ritz, director of the Center for Funding America's Future at the Progressive Policy Institute. Ben, welcome to the show.
Speaker 2:Thanks for having me.
Speaker 3:Ben, it's a perfect time to have you on because yet again we're facing another government funding deadline in March. We just seem to keep getting more dire warnings about the unsustainable national debt from CBO, that's the Congressional Budget Office, and there is maybe a small but hopefully growing bipartisan interest in trying to solve these big problems. So let's start with the immediate issue Keeping the government open, avoiding a shutdown when the money runs out in March. What's the latest in your view there on negotiations? How worried are you about maybe a potential shutdown.
Speaker 2:I would say maybe mildly worried, but not seriously. I think what we saw that led us to the last deadline in Bringsmanship, a shutdown was there was a deal for funding levels for this next year that former Speaker McCarthy and President Biden cut in May. They had an agreement. That agreement passed both chambers with a majority of all four parties House Democrats, house Republicans, senate Democrats, senate Republicans and then, like a week later, house Republicans decided they didn't like the deal anymore and they spent several months trying to negotiate back down to lower levels and now finally, after many, many months of back and forth delay shutdown threats, speaker Johnson is now back on board with roughly those levels. There were a few changes to some side issues that they discussed, but ultimately now they are back on track for the total levels. They still have to agree exactly how they want to allocate the money up to that level, but I think that the major issues are less thorny than they were in the past.
Speaker 1:I think it's so funny to hear you say for political parties House Republicans, house Democrats, senate Republicans, senate Democrats because it feels like for political parties sometimes and I think that's one of the reasons why the agreement that you mentioned, that President Biden and Republicans were able to strike last year, was so notable is because they felt like you know, we want to make sure that this legislation is actually followed through with, and so they put some kind of poison pills in there so that if there's not an agreement by I think it is April 30th, then the stakes could be really high, maybe even worse than a government shutdown.
Speaker 2:Yeah, so if they don't reach an agreement by the deadline, then there's an automatic 1% across the board cut to discretionary spending. That goes into effect. The agreement was actually we actually already technically passed the deadline for that cut to take effect, but the way they structured it was the cut happens if we don't have a deal before, but they still have time to undo it before it goes into effect a little later. It's very convoluted.
Speaker 2:So it hasn't really taken effect yet, but it's just a vest. But yes, the consequences get worse the longer they wait.
Speaker 3:And Ben, maybe just a quick follow up there. That 1% that's defense funding going back to kind of pre-2023 levels. In a time of global conflict, that's 1% may sound small but that's a pretty significant deal.
Speaker 2:Yeah yeah, it's 1% across the board to pretty much everything. That's not the major entitlement spending programs.
Speaker 3:Let me ask you I think we've all been around Washington a long time, so maybe we've seen this movie before, but this keeps playing out every single year and there's now talk of a fiscal commission, similar to things we've seen before. But you're advocating for it and thinking about it a lot. So I'm very curious. I'd love to hear from you sort of how you're thinking about it, what it is, what it would do and even maybe how it might be different from some of the fiscal commissions Simpson, bulls, stuff we've seen in the past.
Speaker 2:Sure. So the fiscal commission proposal that's being considered right now is called the Fiscal Stability Act, and it would have the congressional leaders all four of them each appoint three sitting members of their conference plus one outside expert to a commission. So the commission would be 16 members total, evenly split between Democrats and Republicans, and they would weigh policies to improve our debt trajectory. They'd be tasked with getting us back to a sustainable fiscal path in the next 10 to 15 years and, if they came to an agreement on their proposals, those proposals would be fast-tracked for a vote in Congress.
Speaker 3:And I mentioned it a little bit, but we've seen similar models before we did the super committee, I guess about 12, 13 years ago. Now We've seen Simpson bulls. How will this be different? And, and if you can, I'm I could think of one big difference, which is how our politics have changed. But, guys, right direction.
Speaker 2:I let's say it might be. I mean, it will be different, because not no, two things are gonna be exactly the same, but you know how might it be different in the outcomes, and I'll really stress might. I think it definitely has the potential to not be successful. But the so bowl Simpson was Was created by executive order by President Obama. It had a big balance of outside experts and sitting members and it actually did reach an agreement. A majority of the commissioners from both parties, a supermajority even Voted to support the, the recommendations. But the Commission had a mandate that three-quarters of them had to vote for the proposal to be sent to Congress, and so, even though what was called the chairman's mark did have Sizable majority support, it didn't clear that threshold and so it didn't go directly to Congress Fast-forward.
Speaker 2:A few years later we have the super committee, and that is not, it's not an independent Commission in the same way that Bull Simpson was. It was a joint committee from both chambers of Congress, both parties. It was all met sitting members of Congress. There were no outside contributors and they did not. It Congress did not consider their recommendations because they didn't have any. They couldn't even get to consensus among themselves. So I think that this commission, having congressional buy-in, not having a supermajority threshold, it has a simple majority, but it requires two, at least two members of each party, so it'll still be bipartisan, but it it doesn't have quite the same hurdles as as bullsims it did and when you talk about the types of recommendations that they Would try to come up with in order to solve Our fiscal crisis.
Speaker 1:essentially is that is the floor wide open? I mean, could it be everything from Social security to cutting taxes, to raising taxes? What is the tax base? I mean, is it carte blanche here?
Speaker 2:Yeah. So one thing that I think is good about the the fiscal commission bill is it doesn't Prejudge the outcome. I think if they were to set up a fiscal commission and say you know, we want to, we want to get up to a sustainable budget track, but we're taking all taxes and 60% of spending off the table, or you know, taxes on any household making under $400,000 off the table and no changes to social security, manicure, you're not gonna get there. So I don't know how they would.
Speaker 1:What their package would ultimately look like, that's for them to decide, but they do have broad authority to look at pretty much everything and if they do Agree amongst themselves, if they do reach that simple majority threshold, to send their recommendations to Congress, what enforcement action is there, if any, to force Congress to actually consider it?
Speaker 2:Yeah, so I mean this gets into congressional procedure, which I'm not the world's foremost expert on, but essentially it creates privileged motions to bring it up for a vote In the Senate. It is not subject to a filibuster to start debate on it. It is still subject to a filibuster to end debate. So to actually pass the bill still requires 60 Senate votes, but a simple majority could begin the debate and start the conversation. So, and it gets expedited consideration in the House too. So it does have real teeth to at least encourage consideration of it.
Speaker 3:I love this idea in principle and I don't take this as criticism at all, but I'm very skeptical of the Congress having the fortitude to go through with this. So I've been thinking as I prepare for this like what is it going to take for Congress to actually kind of take this serious? And I was struck. A couple weeks ago Fed Chairman Jerome Powell was on 60 minutes. There's a man that does not say anything by accident and really made a big point at the end of that interview to put some emphasis on we've got to solve these issues. I mean, is it going to take more people like Powell and others in those positions really sounding the alarm to kind of wake up Congress and take ideas like this serious?
Speaker 2:But I don't think it's going to take more people like Powell or even us making that kind of argument. I think it's going to be. They're going to have to hear more of it from their constituents. Yeah, I think we have seen. I think one thing is really different now from 2011 is that back then, borrowing costs were much lower. Interest as a percent of gross domestic product was like something like half of what it is now. Now it's nearing historical highs. It's going to be the highest it's ever been next year and I think that, and on top of that, interest rates are higher, so that leads to higher borrowing costs in the private sector, and if constituents start complaining about these things more, I think that would hopefully get the politicians to pay more attention.
Speaker 2:To start to act yeah.
Speaker 1:Yeah, well, you did mention this is bipartisan, so it does have Republican and Democrat support. How is leadership thinking about this? Is Speaker Johnson on board, or you know what is the status of this idea on Capitol Hill?
Speaker 2:Speaker Johnson's on board. When he got elected he said that enacting a commission along these lines would be one of his top priorities. So House Republicans, in an unusual turn of events, are not the problem, at least to getting something like this enacted, although we are seeing, you know, starting to see some more pushback from some of the further right groups, like Americans for Tax Reform, who you know, the kind of folks who don't want to consider any tax change of any kind. But largely it has leadership support there. Democratic leadership has not been opposed. They just haven't really been in favor of it, and so there is a committed bipartisan group that wants to advance it. We have a good share of both conferences of all for being open to it but not clamoring for it in the way that that has pushed it to a vote yet.
Speaker 1:And there are a couple of different versions of this bill floating around there, right so?
Speaker 2:there were. There were a couple of different versions. For a while the House had a markup that basically produced a bill. That brought it close. That brought the House version and the Senate version pretty close together. So I think, for all intents and purposes, the current version of the bill is the fiscal stability act as reported by the House committees. But but yeah, there have been a couple other proposals floating around that have been considered too.
Speaker 1:What do you think it's going to take for constituents to really start caring? Do you think it's interest rates? Do you think it's Concern about their grandkids having to pay off our debt? Or what is your view on how to get the public to understand the crisis that we're facing?
Speaker 2:I think it's less a question of getting the public to understand and care so much as be vocal about it. There's been a lot of polling that shows they do increasingly care about it. We did a poll of working-class voters late last year and found that inflation and debt contribute. They see the debt is contributing to inflation and they, they. There was a broad desire for this to be one of the top issues Congress tackled. There's been polling from the Peterson Foundation that a few months ago found 60% of voters supporting a fiscal commission. Now it's up to 90% in both parties. So I think the public is increasingly there. It's just that this isn't the top issue they're calling about.
Speaker 3:Yeah, they'll need to be something, whether it's a Campaign or something that that agitates this to be the top issue for them. Because I think you're right, everybody cares about this. You ask anybody. It's a high issue, but when they get to a voting booth it tends to drop right to right.
Speaker 2:Six, seven, eighth priority yeah right and you think about like Donald Trump versus Joe Biden in the upcoming presidential election. You know, yeah, when you think of the list of differences between them, you know what they would do about. The debt is not, is, it's not in the top five. If somebody is right, yeah sure?
Speaker 1:Well, we're gonna talk about politics. You know a little bit more in depth than in just a few minutes. But do you think that if this is not the year for the fiscal commission, Do you think it has legs? I mean, do you think this is something that could come up again in 2025? 2026? How long will you all keep pushing for it?
Speaker 2:So I want to, I want to make a distinction between the fiscal commission and like actual action, like the what, what, what the commission would Would have produced. I'm I'm not convinced. I'm not convinced that this isn't the year for the fiscal commission. I think there is still a good chance, you know, especially of House Republicans. Insist on it being part of the final funding bill.
Speaker 3:Yeah.
Speaker 2:I don't think Democratic opposition is strong enough that would prevent it from from it happening. So I think I think there is still a good chance we got a fiscal commission now. Whether that commission deadlocks like in 20 in the super committee, or whether it does produce Recommendations but those still don't pass Congress, that's a separate question. I think that that I Don't know when the right time for action is gonna be. I mean, the right time is now, but but when the politics are gonna align for it? I see a couple.
Speaker 2:I see a couple action forcing events that could make make it more timely. The first one is the expiration of the Trump tax cuts and a lot of the IRA provisions in In 2026 or at the end of 2025. I think that's gonna be a big moment of reckoning for the the broader budget trajectory we're on. If we don't do Real action then, or if we just, you know, make most of the Trump tax cuts permanent and then just go on our way, I think we then have a few years until we're talking about the exhaustion of the Social Security, of Medicare trust funds, and that's probably the next one. If we blow past all of those, I don't know.
Speaker 1:We're just in crisis mode, yeah, at that point I'm.
Speaker 2:I'm probably calling it but, but I think we have at least a few few upcoming ones over the next decade.
Speaker 1:I Well, let's take a quick break and when we come back we'll dive deeper into the Fed and interest rates, the impact on our debt and what this all means for the 2024 elections.
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Speaker 1:Welcome back to what's At Stake. We're talking with Ben Ritz of the Progressive Policy Institute and Ben, it feels like we actually have two different problems here. One is a spending and revenue problem, which we've been discussing, but also there's the problem of fast growing interest rates, that interest payments are one of the fastest growing parts of the national debt. How do you see that, factoring into all of these different budget considerations?
Speaker 2:Yeah. So the more of our budget that is going to interest payments, the less we have for everything else. Or, conversely, if we decide that we're going to continue spending the same amount on everything and more interest payments, that's leading to higher deficits, that leads to more debt and that leads to more interest costs. So I think in the coming years we're going to see increased pressure as we're trying to do more debt service. How are we going to pay for roads and bridges? How are we going to pay for health care benefits? I think these problems are going to become more and more pronounced as interest continues to gobble up a growing share of the budget.
Speaker 3:Ben, you alluded to this earlier, but to do this right, you have to put everything on the table, and that includes what's often known as the third rail of American politics, right Social security forum, and it is. It's a really hard one for candidates. It's always hard in an election year, especially like this one. You can see what happened when Nikki Haley proposed an increase in the retirement age for Social Security. But it also dawns on me that, no matter what happens in November, we have a lame duck president and we've got someone that may be given that they don't have to stand for reelection again may want to push something like this. So is this the time when Social Security gets on the table and we have a serious conversation about it?
Speaker 2:I think that every president, at least since Clinton, has envisioned or folks have envisioned well in their second term they can deal with it. I remember us having this conversation about President Obama. I mean, bush was a little, because of the privatization push it was a little more complicated. But Clinton Obama I know people in the Trump world said he would be in that mindset, but he himself does not seem like that. So is it possible that they'll be doing it? Sure, I mean, anything is possible and logically you would think that you could do it. But I think if we keep being in this mindset of maybe in the second term we've done it so many times where we've thought maybe in the second term they'll do it I'm setting my expectations accordingly.
Speaker 3:Yeah, I understand.
Speaker 1:What's your perspective on whether simply raising the retirement age is enough to make headway on the problem of funding the Social Security trust fund?
Speaker 2:I mean definitely raising the retirement age on its own is not enough, and this goes for almost any Social Security reform. What would have been enough 20, 30 years ago is not enough now, because we have less runway. We have more folks who could have contributed, but who are now either retired or going to be have been retired for longer, and so it's too late to ask something of them, and so I think things like raising the retirement age have to be on the table, but we also need to be looking at higher revenue. We need to be looking at things like cost of living adjustments, the base benefit levels, at least for higher earners. I think really we have to be willing to put everything on the table for it, because no one thing is going to solve the problem at this point.
Speaker 3:All right, one more everything on the table. Revenue has to be a big part of this. There's obviously a lot of talk in Washington around the corporate tax rate, getting companies to pay their fair share, but for years now, especially under Biden, there's been a cap on we're not going to tax households over 400,000. Does that need to be-.
Speaker 2:Under 400,000.
Speaker 3:Under 400,000. Excuse me, does that need to be reconsidered in any one of these models?
Speaker 2:Absolutely. We actually just put out a report on this last month. The problems with the $400,000 pledge, I mean number one. We're talking about 2% of households. About 2% of households have incomes over $400,000. So when you already take 98% of the country off the table from having to contribute, that creates both a math problem. There's a lot of income now off the table and it's not just the income for those households. There's a significant share of income earned by high-income households that is below the threshold. So you make $500,000. That's 80% of your income is below 400. That can't be taxed. So it takes a lot off the table. But then I also think it poses a lot of governance questions. If we're telling 98% of the country we have a problem and don't worry, you don't have to deal with it, that really makes balancing the trade-offs a lot harder and really approaching the question of is this worth it? That's a lot of folks who aren't engaged on it anymore.
Speaker 3:Can I ask one final follow-up how do you think about it with balancing some of the tax credit agenda that the Biden administration has had to push for some of their other goals, like their sustainability and climate change goals, putting more EVs electric vehicles on the road by offering tax credits? Is there room for still that kind of approach to public policy, or is that leaving too much revenue kind of out of the equation?
Speaker 2:I think the vast majority of policy proposals I think are Affordable in some form. When you have something like, you know, universal basic income or Medicare for all that, you know really do struggle to make the math work. But I think any one thing is doable. You could do A bigger child tax credit, you could do the IRA provisions, you could do More generous healthcare subsidies, but the question is you have to be able to balance the tradeoffs and prioritize. You can do any of them, but you can't do all of them, and so I think there is a way to to fit the clean energy agenda into that. It's just we have to then figure out how to pay for it.
Speaker 1:What's your view on on the trump tax cuts that you mentioned? How politically difficult is that going to be to either change the structure or repeal them? You know when they expire next year?
Speaker 2:I mean it doesn't actually have to be complicated. It doesn't have to be complicated to repeal them. They're said to expire under current law. Always do is nothing and they go away.
Speaker 1:The budget math, not under, like household math right?
Speaker 2:yeah, I mean, I think it'll be so sorry. So the question is is how? How expensive would it be to how?
Speaker 1:expensive would it be to continue them? I guess I should put it that way. And then, just how politically difficult would it be to not continue them?
Speaker 2:yeah, so in terms of how expensive it would be, it would be more than three trillion dollars over the next decade, so that would be a lot more than those IRA clean energy tax provisions.
Speaker 2:How politically difficult would it be? I think it will be as politically difficult as members of Congress want to make it. I mean, I think Republicans will really double down on it. I think Democrats by. It used to be that the Biden four hundred thousand dollar pledge was just I'm not going to do any new tax policies that hit folks making under four hundred thousand. And the implication of that was he has not wedded to making the trump tax cuts that are currently there for people making under four hundred permanent. But he has since changed that position to he wants to make them permanent. So if Democrats are going in the approach of we want to make the under four hundred permanent and Republicans are saying we want to make all of them permanent, that leaves a much narrower band for negotiation and also means there's a better chance we get stuck with keeping most of them.
Speaker 1:Which would make our fiscal position that much worse, a lot worse, especially if they're paired and getting paired, with additional corporate tax cuts.
Speaker 2:I think it's less likely that they get paired with additional corporate tax cuts. I mean, we do have, we do have the tax, you know, the bipartisan tax bill that's working in some way Through Congress. That, I think, would make the problem a little bit worse if we then made those permanent without offset. But my actual bigger concern is that the trump tax cuts. Even though it was mostly a tax cut package, there were provisions that raised revenues, such as the salt cap, and we've seen a big effort, a bipartisan effort, to repeal some of those. Now those also expire automatically, and so my bigger concern would be Congress making permanent the things that cost money and letting the ones that actually save money expire. I think that would be the thing that makes it even more than three trillion.
Speaker 1:Yeah, and and politically difficult not to get rid of that as well.
Speaker 3:Curious, as you guys have, you know, started to socialize this plan as the members behind it start to push it out. Are you finding natural allies in this, whether it's from the business community or others? You know who's who else is kind of buying into this, if you will.
Speaker 1:There's a long pause.
Speaker 2:I think we're seeing some. I mean, I think the most obvious place we're seeing support is from a lot of economists, folks in the think tank space, people who are, you know, who look at these issues, and I really focused on solutions. I think we've seen some, some positive indications from folks like the ratings agencies, folks who look at the sustainability of our debt, who said they would respond positively to something like a fiscal commission being established. I do think we've seen less activism from the business community compared to 10 years ago and I think a big part of that is probably they have their tax cuts on the line, or some of their tax cuts on the line next year, and are are you know, wary of of what would happen to them under that circumstance. But I think there is again. I go back to, you know, the polling thing I said earlier. I think there is broad support, it's just not as vocal.
Speaker 1:Great Well, ben. Thank you so much for sharing your insights and for joining the show today To our listeners. Remember to like and subscribe wherever you listen to our podcast. You can also follow us on LinkedIn at Penta Group, and on X at Penta G R P, where your host Ilan Mui and Brian D'Angelo's and, as always, thanks for listening to what's at stake.