TOPICS > Economy

Could a 3-Year Spending Freeze Help the U.S. Deficit?

January 26, 2010 at 12:00 AM EDT
Loading the player...
President Obama prepared to announce a proposal to freeze all non-defense spending over the next three years. Judy Woodruff speaks with the top Democrat and Republican from the Senate Budget Committee for more.

JUDY WOODRUFF: The flurry of interest and calls to cut spending came from both ends of Pennsylvania Avenue.

From the White House…

ROBERT GIBBS: We have to get our fiscal house in order.

JUDY WOODRUFF: … to Congress…

SEN. EVAN BAYH, D-Ind.: We can no longer afford to spend money we do not have.

JUDY WOODRUFF: … the focus in Washington today was on red ink and reining in spending.

MAN: This country’s going to have to pay the piper.

JUDY WOODRUFF: The president’s proposal to freeze outlays for three years is expected to come next week, when he submits his budget to Congress. It would take effect in October and leave untouched programs like Medicare and Social Security and national defense.

White House spokesman Robert Gibbs said the cuts would be strategic.

ROBERT GIBBS: The president will cut programs that are duplicative or serve what he believes is no important purpose, and instead invest in, as families do, investments for the future.

JUDY WOODRUFF: The proposal would freeze $477 billion out of the $3.5 trillion budget, or about 17 percent of federal spending. It’s designed to save $250 billion over the coming decade.

Republican Leader Mitch McConnell criticized the idea as too small.

SEN. MITCH MCCONNELL, R-KY: Freezing non-defense domestic discretionary spending would be a good idea. However, if you put into the baseline the stimulus, TARP, and you account for inflation, it’s not nearly as big a step as the American people are asking us to take.

JUDY WOODRUFF: The president is expected to address the deficit, among other economic issues, including unemployment, in his State of the Union message tomorrow night.

In an interview with ABC News’ Diane Sawyer, Mr. Obama acknowledged, some choices he will make are not politically popular.

U.S. PRESIDENT BARACK OBAMA: The one thing I’m clear about is that I would rather be a really good one-term president than a mediocre two-term president. I will not slow down in terms of going after the big problems that this country faces. I am not backing off the need for us to tackle these big problems in a serious way.

JUDY WOODRUFF: But new numbers out today from the Congressional Budget Office confirmed the magnitude of the challenge facing White House officials, creating jobs, while cutting spending.

The deficit for the year is predicted to be $1.35 trillion. Senators grappled with options to bring down that number. The top two members on the Budget Committee, Chairman Kent Conrad and Republican Judd Gregg, presented a bipartisan plan to create a task force to reduce the debt. But the plan was voted down.

Senators also faced a familiar proposal to increase the nation’s legal debt limit, this time by $1.9 trillion, enough new borrowing to cover the government’s bills through the end of the year. That vote could come as early as the end of the week.

For a closer look at all this, I am joined by the two senators who spearheaded the effort to create a bipartisan panel on the debt, from the Budget Committee, Chairman Kent Conrad, Democrat of North Dakota, and its ranking Republican, Judd Gregg of New Hampshire.

Senators, good to see you both.

SEN. JUDD GREGG, R-N.H.: Thank you.

JUDY WOODRUFF: And, Senator Conrad, let me start with you, your end of Pennsylvania Avenue. You know, you hear progressives say, right now, a recession is not the time to — to cut spending. The government should be spending, get the economy moving. The deficit will take care of itself when this is over.

Why is that wrong?

SEN. KENT CONRAD, D-N.D.: Well, the deficit won’t take care of itself. We are on cruise control to a debt that will be 400 percent of the gross domestic product of the United States if left unchecked.

So, look, I agree, you don’t raise taxes or cut spending in the midst of a downturn. What we proposed was to put in place a process to deal with the long-term debt bomb that overhangs this country, that threatens the economic security of the United States.

And progressives should support that effort, as many did today, because they understand, if you fail to act, Social Security is going broke. Medicare is going broke. It is not progressive to allow those programs to fail.

JUDY WOODRUFF: Senator Gregg, why is this bipartisan task force idea that the two of you were pushing, why was that the right way to go, or why is it the right way to go?

SEN. JUDD GREGG: Well, because these issues are so big, Judy, that you can’t address them in a partisan way. You have to have everybody at the table. Everything has to be on the table, entitlements and tax issues, or, otherwise, the American people don’t trust the results.

The American people inherently understand that, if it isn’t bipartisan, it’s probably not going to be fair. Somebody is probably going to be gaming. And, so, we set up this task force in a manner that not only was bipartisan, but also required supermajorities to report, 14 of 18, so that neither side could game the other.

And it required supermajorities to pass it in the House and the Senate, so that nobody could game anybody, and so the results of this task force would be seen as fair, honest and bipartisan, and would have popular support, which is very important to any initiative that affects these types of programs like Medicare, Medicaid, and tax reform.

JUDY WOODRUFF: And, Senator Conrad, if it was such a good idea, why did it — were you not able to persuade enough of your colleagues? You needed a supermajority to pass it. You didn’t get that.

SEN. KENT CONRAD: Well, we got a majority. We got 53. If all senators had been present and voting, we would have had 54. That is a remarkable move from where we have been in the past.

And, no, we didn’t have a supermajority. And part of the reason is left and right. Organizations on the left organized to oppose it. Organizations on the right did the same. And, still, we managed to get a majority in the United States Senate.

I think that says there is momentum building behind the idea we have got to deal with the debt threat facing this country.

JUDY WOODRUFF: Senator Gregg, what do you say to members of your own party who voted against this because they said it would have likely led to a tax increase?

SEN. JUDD GREGG: Well, I say you have to have more confidence in our membership. I mean, eight of the 16 members appointed from the Congress were going to be Republican members. And they were going to be appointed by — four by Senator McConnell, the Republican leader here in the Senate, and four by House member Boehner, the Republican leader in the House.

And I’m sure they wouldn’t put people on this commission who would undermine the basic Republican philosophy on how you approach tax policy, just like I don’t expect Speaker Pelosi or Speaker Reid to do that in the area of, say, Social Security.

That’s why this commission would have been successful, because you would have had people at the table first who understand the issues, which is very important, and who have a commitment to doing something about the issues, but also who carry their portfolios of their various constituencies of the two parties. And, so, any product they produced, I believe, would have gotten strong support. And I believe it would have been a — it wouldn’t have solved the whole problem. We couldn’t do that.

But it would have been a significant step down the road towards getting this problem under control. And, remember, this problem is undeniable. We are facing a fiscal bankruptcy of this nation within seven to 10 years if we do not step up and start to do something about controlling the size of the debt of our country.

JUDY WOODRUFF: And, Senator Conrad, now that it has gone down, for now, we’re told the White House says the president is considering appointing by executive order a group that would do something similar. Would that be effective?

SEN. KENT CONRAD: Look, the reason Senator Gregg and I fashioned the plan that we did, a statutory commission, is because that’s the only way you can get a guarantee that the recommendations of that group will be actually voted on by the members of Congress.

So, we have — we have proposed something we thought was the most effective way to go. Are there other alternatives? Certainly, there are. But I still believe a statutory commission that would require a vote on the recommendations of the group is the best way to go.

JUDY WOODRUFF: And, Senator Gregg, what’s your sense of the — what’s your take on the idea of the president appointing a panel to do something…

SEN. JUDD GREGG: Well, I don’t think it gets where we need to go.

There are four basic problems with that. First, it’s not bipartisan. To get a bipartisan product, you actually have to have something voted out of the Congress in a bipartisan way. Secondly, it is not fast-tracked and can’t be fast-tracked. It is not an up-or-down vote, and it can’t be an up-or-down vote.

And it’s — and it’s amendable. And we don’t — and that doesn’t work. So, you have to have the statutory structure in order basically to deliver a product to the floor of the Senate which can actually be voted on and can get something done. I don’t think an executive order can accomplish that.

JUDY WOODRUFF: So, meanwhile, Senator Conrad, what we were hearing today from the White House is, the president does plan to propose this spending freeze, three years, discretionary spending. Is this something that would be helpful?

SEN. KENT CONRAD: Yes, certainly. That is a move in the right direction.

I think we have to understand, when you’re talking about just 17 percent of the budget — and that’s what non-security domestic discretionary spending represents — a three-year freeze is useful.

But that’s not going to solve the problem. What the country faces is a tsunami of debt. What we have to understand is how, fundamentally, that threatens the long-term economic security of America. And that’s why Senator Gregg and I worked together. And, again, I’m delighted that 53 of our colleagues voted with us. But we need more.

And we need people across the country to send a message to our colleagues that this is something that must be done.

JUDY WOODRUFF: Senator Gregg, is the president’s freeze proposal a good start, or, as some of your Republican colleagues have said today, too little too late?

SEN. JUDD GREGG: Well, it is a good start, if it’s true. I mean, we haven’t seen the specifics of the plan. But, remember, it’s $25 billion on a $1.4 trillion deficit.

So, you can get a pretty good idea that it’s not going to move us very far down the road towards relieving the pressure that we’re going to feel as a nation. A very interesting thing happened today. It’s likely that the Japanese debt will be downgraded, because they’re about five years ahead of us in their problems relative to their debt. That’s coming at us.

We can’t afford to do that to our children. One generation should never pass on to another generation a less prosperous nation. That’s what we’re going to do unless we do something about all this debt we’re loading on our kids’ backs.

JUDY WOODRUFF: So, gentlemen, where do you go from here?

Senator Conrad, you didn’t get the 60 votes today. What do you do?

SEN. KENT CONRAD: You keep working, you keep fighting, and you keep proposing. And you keep searching for a way to accomplish the result.

I have said I will not support any long-term extension of the debt, absent a credible commission being put in place. And, by credible, I mean one that provides an assurance that there is a vote on the recommendations of the commission. I think that is essential.

JUDY WOODRUFF: And — and, Senator Gregg, the two of you are working together, a Republican and a Democrat, but are your colleagues, Republicans and Democrats, going to be able to come together on this?

SEN. JUDD GREGG: Well, I think Senator Conrad is right. I mean, we have 53 votes here. That was a pretty big vote. And it was bipartisan.

And I think we just have to keep pushing the ball up the hill. And, you know, one of the reasons I opposed this huge extension of the debt limit, $1.9 trillion, is, I think we should revisit this issue hopefully later in the spring. And the debt limit is the right vehicle to do it on.

So, I’m hopeful we will have another chance to come back to this issue later in the spring and take it up again, because I think the American people understand it. They understand that they can’t possibly manage their household if they were doing to their household what the federal government is doing to the federal finances.

And they want us to step up and do something serious. And this is the most serious proposal and really I think the only one that’s going to have any opportunity to be viable.

JUDY WOODRUFF: Well, we will come back and check on how that ball is moving up the hill.

Gentlemen, thank you both, Senator Gregg, Senator Conrad.

SEN. KENT CONRAD: Thank you.

SEN. JUDD GREGG: Thank you.