Transition Tasks: Solve the Debt Question and Move On

Oct 26, 2012Bo Cutter

President Obama has three big transition tasks ahead of him. First up: get past the heated deficit debate with a real solution.

As I write this in mid-October, it is not at all clear that President Obama will have a second term. There are structural factors giving the president an advantage, largely that so many states are basically determined one way or the other.  And there has been a slight tendency for all of the polls to settle into to a pattern suggesting a narrow Obama win. But there is no question that the botched first debate, coupled with Paul Ryan's draw with Joe Biden in the vice-presidential debate, even given President Obama's win in the second debate, have put this election in play and clearly given Governor Romney more momentum in the race. 

But I do not have a clue how Mitt Romney thinks. Nor do I know how the Republican Party is going to move from being an opposition party with the sole goal of defeating President Obama to a governing party that actually has to do something. So I have to write this from the perspective of a Democratic president preparing for a second term. From this point of view, President Obama has three major rethinks to undertake as he considers his second term. First, he has to move immediately after election day to break the enervating debt and deficit deadlock or it will eat his whole second term. Second, he should rethink the goals of his presidency and, in so doing, begin the historically necessary process of redefining what being a progressive should mean in the first half of this still new century. And third, he should rework his approach to being president. There is a fourth task, which is to take the lead in defining America's next economic growth model. That's the biggest task of all and is touched on in task two, but I'll write about it more after the election. 

Let's start with what almost has to be the president's first major policy move. On November 7th, a re-elected Barack Obama should announce a committee composed of Alice Rivlin, Pete Dominici, Alan Simpson, and Erskine Bowles. He should tell that committee to produce in 10 days one integrated version of the economic and debt plans they have already written. (They all talk to each other and I am reasonably certain they know exactly what they would propose.) He should say he wants a plan that will (1) allow us to avoid the impending fiscal cliff and the true craziness of the upcoming lame duck session, (2) shore up near-term economic growth, and (3) credibly get us off our disastrous debt and deficit track of the next 10 years.

He should commit to supporting their unanimous recommendation. Then he should (1) tell the lame duck Congress that he wants them to end this fiscal cliff nonsense by postponing everything to June, (2) tell them not to name another useless special committee, but instead to give the permanent committees of Congress specific instructions to solve the debt/deficit plan, (3) state unequivocally that the Rivlin-Dominici-Simpson-Bowles plan is the default and will go automatically into effect if Congress fails to act, and (4) go home.

In early December, as he makes this plan public, he should appoint either Alice Rivlin or Erskine Bowles as Secretary of the Treasury, name the other three as senior advisors, and task the Secretary of Treasury-designee with accomplishing a full agreement by June 2013.

Why these four people? They're the only four in America who have put themselves publicly in the line of fire and dared to create genuinely bipartisan, credible plans. They all have years of public service experience. Their mamas taught all of them to read and count. And not one of them gives much of a damn about the inevitable hysteria that will emanate from the left or the right. 

The U.S. economy is limping along at roughly 2 percent growth and the unemployment rate is falling too slowly. The debt and deficit track we are on is not sustainable and is becoming more and more risky. We are headed into a post-election lame duck session in which the most polarized and gridlocked Congress in 100 years must accomplish more than has ever been done in a lame duck session. And then, at the end of this session, our current plan is to jump off a fiscal cliff consisting of tax increases and spending cuts of 6 percent of GDP, certainly triggering the recession of 2013.

We also have much more important tasks to accomplish as a nation than waste several more years bickering over a debt and deficit issue that we can actually solve without enormous pain - if we would just do it rather than choose to emit an endless chorus of ideological whines. We need a new economic growth model. We have to begin to correct the extreme inequality within our society. We have to figure out how to stop trashing the planet. I would think that this president - any president - would prefer taking on these tasks than another four years of mud wrestling.

But we have to act as close to now as we can get. And if the president does not take the lead, nothing will happen. No amount of strategizing, negotiating, or consulting can substitute for one clear direct act of presidential leadership immediately after the election. 

Isn't this risky? Of course it is. But there is no course available to President Obama, including doing nothing, that isn't risky. Assessing this risk demands that President Obama ask himself the following question: am I better off taking a risk now - that gives me the initiative - or waiting and being forced later into an undefinable "third best" decision? 

In my view, President Obama's choice is straightforward. He can temporize and wait, see our circumstances become worse, and fight a protracted battle throughout his second term on the same issues that bedeviled him throughout his first term. Or he can set in motion now a real effort to alter current debt and deficit trends and have a good shot at a successful second term.

A version of this piece will appear in the November issue of International Economy.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

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