For the past eight months, PPI’s Center for Funding America’s Future has been developing a fiscal blueprint that would restore America’s commitment to public investment, rebalance the intergenerational compact for 21st-century demographics, and implement pro-growth tax reform that rewards work over wealth. We previewed the plan yesterday at the Peter G. Peterson Foundation’s 10th annual fiscal summit, which convenes economists and policymakers from across the political spectrum to discuss our nation’s fiscal challenges. Six other think tanks also presented their own budget proposals (which can be found here) at the summit: American Action Forum, American Enterprise Institute, Bipartisan Policy Center, Center for American Progress, Manhattan Institute, and Economic Policy Institute.
All seven groups produced plans that would put the national debt on a more sustainable trajectory than it is on under current law, with PPI’s plan achieving the second-largest amount of long-term debt reduction. But even more importantly, we created a unique and innovative blueprint that would once again make fiscal policy an instrument of economic and social progress.
When summarizing the plans, former Acting Director of the Congressional Budget Office Barry Anderson – who helped ensure the plans were being scored using similar methodologies – noted that PPI’s blueprint included the most funding for non-defense discretionary spending. NDD is the category of federal spending that includes most public investments in education, infrastructure, and scientific research. PPI’s blueprint increases funding for these investments that lay the foundation for long-term economic growth by more than 70 percent over current projections. This approach is consistent with a message echoed by the overwhelming majority of summit participants throughout the day: the United States is spending too much on consumption by the present generation and not enough on investment in the next.
The biggest difference among the groups was our approach to health care. Groups on the left proposed to put most or all Americans on government-run health insurance programs, which would give the federal government outsized ability to demand lower prices from providers. Groups on the right, meanwhile, proposed to bet on the private sector’s ability to contain health care costs through increased competition through reforms such as premium support for Medicare. PPI proposed to take the best of both approaches through a default-price health care system, under which the federal government would set benchmark prices but all allow private insurers to continue pursuing innovative ways to finance and manage care in a competitive market.
PPI also pursued a unique approach to reforming Social Security. Whereas most other groups proposed to raise payroll taxes on workers, PPI proposed to repeal the payroll tax entirely and fund the program through other revenue sources. Some groups on the right proposed to give everyone the same Social Security benefit regardless of their earnings history, while most other groups retained the current program structure (in which benefits are awarded based on a beneficiary’s 35 highest-earning years). Under a more egalitarian benefit formula developed by PPI, individuals would earn a flat “work credit” for each year they spent in the workforce regardless of what they were paid, meaning a low-skilled worker and their college-educated boss would receive the same benefit in retirement if they work hard for the same number of years.
Representatives from the other participating think tanks praised elements of this structure during a panel discussion, such as our decision to allow workers to earn up to five years of work credits for time taken out of the workforce to serve as a caregiver. We were also commended for our proposals to protect the economy from future recessions, which included automatic adjustments in spending on public investment and unemployment benefits when growth slows. Additionally, PPI proposed the creation of a dynamic value-added tax, which would be a consumption tax with a standard rate of 15 percent that automatically adjusts downward during recessions (and rises back up following recoveries). These policies together would stimulate demand and consumption when the economy needs it most.
Another PPI tax proposal that received praise was our recommendation to change the primary financing mechanism for highways in the United States from a tax on gasoline, which has been eroded by inflation and rising fuel efficiency, to a tax on vehicle-miles traveled. Nearly all groups, including PPI, agreed that the United States should adopt a carbon tax and repeal step-up basis for taxing inheritances, which allows wealthy investors to pass assets on to their heirs without anyone ever paying taxes on capital gains.
Next month, PPI will publish a full report with more-detailed recommendations than what we were able to present at the summit. In the interim, we thoroughly enjoyed this opportunity to discuss the ideas proposed by all seven participating organizations and promote our vision for a fiscally responsible progressivism that invests in our future without leaving the bill to young Americans. We also enjoyed hearing House Speaker Nancy Pelosi champion her commitment to a similar vision earlier in the day and hope she and the new majority can draw upon our recommendations to create a more prosperous and fiscally sustainable future for all Americans.