Friday, February 19, 2010

Obama Establishes Bi-Partisan Commission on Fiscal Responsibility and Reform

President Obama signed an executive order yesterday establishing a bi-partisan commission to address federal spending and the federal debt.  The move comes after the Senate rejected bi-partisan legislation to create a similar commission.

Under the EO, President Obama will appoint the chairs (one from each party) and six members (no four of which may be from one party).  The Speaker of the House, the Senate Majority Leader, the Minority Leader of the House, and the Minority Leader in the Senate will each appoint three members (who must be sitting members of their respective houses).

President Obama appointed Erskine Bowles, President Clinton's Chief of Staff, and former Senator Alan Simpson (R-WY), the former Republican Senate Leader, as co-chairs.

Minority Leaders Senator Mitch McConnell and Representative John Boehner said they'll cooperate and appoint members next week.

President Obama gave the Commission the following task:

[I]dentifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.  Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. . . .  In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.

The Commission obviously cannot have authority to bind Congress.  Instead, it operates as an attempt to help solve a collective action problem--that every single member of Congress has an incentive to push for disproportionate spending in his or her home district, and therefore together the institution is ill-equipped to deal with a fiscal crisis.  The Commission's recommendations can provide political pressure on Congress, even if they do not legally bind Congress.  A model is the Defense Base Closure and Realignment Commission, the BRAC, which helps to solve a similar collective action problem by studying and making recommendations about military base closures and moves.  Unlike President Obama's Commission, however, the BRAC was created by Congress through legislation.  This difference is unlikely to diminish the influence of the Commission, however: If both parties participate, its recommendations will or won't be politicized, whether it was established by statute or by EO.

SDS

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