Edward Lotterman

As the 2024 presidential election campaign nears its end, an eerie aura pervades public discourse: Our nation is sleep-walking towards an economic crisis, yet neither candidate mentions, much less explores, the key problems that imperil us.

Such studied ignorance is a measure of the brokenness of our nation’s politics. Perhaps it is time for a high-powered national commission that could break the deadlock.

The basic issue is that federal finances have been on an unsustainable course for 24 years. Annual federal deficits and the accumulated national debt grow larger and larger relative to what we produce.

Economic history and comparative politics, not to mention common sense, tell us that at some point our lenders will stop taking IOUs. Taxes will have to be raised sharply. If some of those to whom we have promised payments are stiffed, the national economy will be thrown into crisis. And, given its status as the center of the global economy, that would mean a worldwide economic debacle as that which ensued after 1929.

Yet politically, touching this third-rail could send shockwaves through markets. So we pretend it doesn’t exist. But it does.

There are two fundamental problems.

First, total federal tax revenue relative to the total value of our nation’s production are well below where they were in the last four fiscal years of the Clinton administration. That period, 1997-2001, was the last era in which our finances were comparatively sound.

Secondly, the retirement of baby boomers and increases in the costs and panoply of medical treatments are blowing up our biggest spending programs, Medicare and Social Security, whose universal benefits are mandated by statute.

How did we get here?

On the tax revenue side, after a dizzying decade of tax rate fluctuations during the Reagan years, Presidents George H.W. Bush and Bill Clinton asked for, and Congress passed, moderate tax increases. By 1997, these produced overall revenues greater than overall outlays. It seemed that sanity had returned to government. Not coincidentally, the eight Clinton years had the fastest average growth in inflation-adjusted GDP since the 1960s, a rate nearly twice as high as over the 23 years since. We threw that sustainability away with tax cuts in 2001, 2003 and 2017.

And on the expenditure side, growing outlays in mandatory spending for Social Security, Medicare, Medicaid and Supplemental Security income, along with defense spending for wars in the Mideast, caused budget deficits to spiral out of control.

Any solution to the deficits that have grown inexorably since then must include restoring taxes to the relative levels we had in the decade up to 2001 as well as overhauls of the big mandatory spending programs. Yet except for a few politicians from both parties who are bold enough to suggest raising the retirement ages for Social Security, no one advocates major overhauls of that program or Medicare or Medicaid. Most dangerously, no one dares mention the obvious need for taxes to go up.

Democratic Vice President Walter Mondale had done that in 1984 when running for president against Ronald Reagan. His stating the obvious in a speech killed his candidacy. George H.W. Bush, doing what clearly was needed, killed his reelection. So the subject has been political anathema for a third of a century.

Responsible GOP officials understand budget and deficit realities. They know realistic tax rates must return. But none will give voice to reality without any political cover.

That brings us to the tried and true political ploy of the blue-ribbon national commission.

When some issue is so fraught with controversy that elected officials dare not touch it themselves, a bipartisan set of safely retired public figures can read reports, hear testimony and hash over alternatives before issuing a useful compromise report. This is politically safe. It sometimes is effective.

Results are mixed. President Lyndon Johnson appointed such a commission headed by Chief Justice Earl Warren to investigate the killing of John F. Kennedy. Their report created as many questions as it answered.

In 1967, Johnson named another commission, headed by Illinois Gov. Otto Kerner, to investigate the causes of rioting and civil unrest. The Kerner Commission report was a definitive milepost in understanding racial discrimination, injustice and poverty. It remains a vital document for understanding our nation’s history.

Ronald Reagan asked his Attorney General Ed Meese to lead a panel investigating pornography and its effects. The report is largely forgotten.

But Reagan also appointed soon-to-be Federal Reserve Chair Alan Greenspan to lead another commission, one charged with putting Social Security on a sustainable footing in the face of the then-foreseen demographic stresses from the baby boom cohort. The results were generally good, even if subsequent Congresses perverted key recommendations, thus creating the problems we face now.

George W. Bush appointed a commission headed by New Jersey Gov. Thomas Kean to investigate the 9/11 attacks. Its 585-page report was generally good and fostered useful changes in government structure and procedures. But his later panel to look at partial or full privatization of Social Security was a dud.

So history is a mixed bag, but the option should be explored. There also is an economic argument for appointing such panels to supplement politics-as-usual.

Tangentially, it is one suggested by the work of Jon Elster, a Norwegian philosopher and political thinker. Starting as a Marxist theoretician, Elster’s thought broadened. He co-created “rational choice theory” and is one of the founders of behavioral economics, a discipline for which Israeli-American psychologist Daniel Kahneman got the Economics Nobel Prize in 2002.

One topic on Elster’s broad palette of work is that of creating constraints to motivate desired behaviors under stress. An example comes from the myth of Ulysses and the Sirens. Ulysses and his war-worn crew wanted to get home after years of war. But their course led them past Sirens, goddesses whose irresistibly beautiful singing lured mariners and their boats onto rocks. Ulysses yearned to hear their fabled singing. He had his crew lash him to the mast and then plug their own ears. Unable to hear the seductive music, they rowed and steered for home. Ulysses, roped to the spar, could not grab the helm to steer a suicidal course. So he enjoyed the chorus while the ship reached home safely.

Sensible politicians from both parties know that restoring U.S. federal finances to stability must include some tax increases as a key component. But political Siren songs tempt them to do otherwise. They need a mast to which they can be bound to resist resorting to campaign demagoguery that dooms reform. A well-structured blue-ribbon commission could provide such a mast, such a prudent restraint.

Who would be on it? Health permitting, how about retired New Jersey Republican Gov. Christine Todd Whitman and retired Oklahoma Democratic Gov. David Boren as co-chairs? Martin Feldstein and Alan Greenspan as Republican government finance economists with Joel Slemrod and Len Burman as Democrats. Former Senate majority leaders Democrat Tom Daschle and Republican Bill Frist? Former Treasury Secretaries Larry Summers and Henry Paulson? Nebraskan ex-senators Bob Kerry and Chuck Hagel? Retired Judges J. Michael Luttig and Richard Posner? Politicos can go on with pairings of respected and experienced moderates roughly balanced between the two parties including politicians, administrators and scholars.

Make the panel large enough so that there can be working groups tasked with taxes, Social Security, Medicare, Medicaid and so on. Give them an ample budget for full-time researchers and open hearings around the country. Ask them to report back in 18 months. The goal? Providing political cover for the inevitable recommendations that tax increases or restorations plus cuts in spending must play a part in avoiding consequential fiscal disaster — coupled with the very real conclusion, with examples, that without action, disaster is unavoidable.

It is impossible to say if such a commission would be fruitful and the Kerner and Greenspan commissions were, or duds like those tasked with pornography and Social Security privatization. But open hearings and interim reports to Congress might create space for more honesty and less demagoguery on the part of people still holding elective office. There is little to be lost and possibly much to be gained.

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St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.