Budget Enforcement Provisions in the Bipartisan Path Forward

Apr 29, 2013 | Budgets & Projections

As we have written before, key elements of the Bipartisan Path Forward focus on reducing the debt as a percentage of GDP over the long term.  Bowles and Simpson’s proposal notes that getting to a sustainable and stable level of debt will require lawmakers to make tough decisions, a sentiment that has been echoed by many leading economists including former Fed Chairman Alan Greenspan. But recent debate on Capitol Hill about replacing the sequester – such as Senate Majority Leader Harry Reid’s proposal to use a budget gimmick to eliminate or delay many of the most painful cuts – begs the question: how can a plan make sure that its deficit reduction isn't simply washed away? Bowles and Simpson’s new plan would enforce debt stabilization in several important ways, some of which have been put forward in other budget reform proposals.

Putting Debt on a Downward Path

Beyond 2015, A Bipartisan Path Forward would ensure that Presidential budget requests and congressional budget resolutions put the debt on a stable or declining path as a share of GDP. Likewise, if debt is projected to be growing as a percentage of GDP, Congress and the President would be required to consider legislation to reverse the trend.  Legislation to put the debt back on a stable or declining path would be fast-tracked to enable easier enactment. Congress would also be restricted from considering any legislation increasing the deficit if the debt is on an unsustainable path.

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Source: CBO, CRFB, MOT
Note: Graph of BPF's debt path shows only "Step 3," Scenario 1. For a fuller discussion of the plan's long-term debt, see here.

Having a 67-Vote "Escape Valve"

The plan would establish a 67-vote point of order for any legislation that would exceed the enacted proposal’s discretionary spending caps, circumvent statutory PAYGO requirements, or delay the tax reform enforcement mechanism. This provision would ensure that there be a very good reason to turn off any of these backstops, accounting for unforeseen economic circumstances while also encouraging Members to stay the course on keeping the debt on a sustainable trajectory.

Indexing Debt Ceiling to GDP

In an effort to avoid the need to regularly vote to raise the debt ceiling, which caused great economic uncertainty in 2011, Bowles and Simpson have proposed indexing the debt limit to GDP growth. That means if the debt does not remain on a stable path as a percentage of GDP -- whether because of an emergency, war, or other reason -- Congress will once again have to raise the debt ceiling.

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It is important to note that Simpson and Bowles recommend suspending these enforcement provisions under turbulent or uncertain economic conditions.  Congress could exempt certain situations as part of a comprehensive plan, including but not limited to stagnant GDP growth or an unforeseen major economic downturn.

The Bipartisan Path Forward's recommendations are another contribution to a number of other budget process reform proposals. The Peterson-Pew Commission proposed having lawmakers set a longer-term debt target with a glide path to hit it, enforced by across-the-board spending cuts and revenue increases which could not exceed one percent of GDP in any given year. Previous budget proposals from President Obama included a debt failsafe to hit a longer-term debt target enforced by automatic spending and tax expenditure cuts. Both of these proposals have escape valves in case of a recession or other emergency.

Similar to the intent of other budget reform proposals, the Bipartisan Path Forward's reforms will help ensure that a deficit reduction plan sticks, when there will be a lot of pressure for lawmakers to renege.