• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • The Debt Failsafe Trigger Danger

    What is the “debt failsafe” trigger that the President rolled out in his speech on April 13? This is an idea that may be introduced into the debt limit increase debate next month, and it is a dangerous idea.  If the Senate’s “Gang of Six” (a bipartisan group working to reduce the deficit) or the President’s bipartisan bicameral negotiating team lead by Vice President Joe Biden on reducing the debt adopt this idea, then conservative should object to it as a potentially unconstitutional delegation of power by the legislative branch.

    One incarnation of the idea would empower the Treasury Department to raise tax rates without a specific authorization from Congress.

    President Obama rolled out his idea for a “debt failsafe” trigger as a means to balance the budget The President explained it as “spending reductions in the tax code” and “spending cuts”:

    Now, in the coming years, if the recovery speeds up and our economy grows faster than our current projections, we can make even greater progress than I’ve pledged here. But just to hold Washington—and to hold me—accountable and make sure that the debt burden continues to decline, my plan includes a debt failsafe. If, by 2014, our debt is not projected to fall as a share of the economy—if we haven’t hit our targets, if Congress has failed to act—then my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code. That should be an incentive for us to act boldly now, instead of kicking our problems further down the road.

    The White House fact sheet describes the trigger as a mechanism for across-the-board spending reductions and includes taxes as part of those “spending reductions”:

    A Debt Failsafe that will trigger across-the-board spending reductions (both in direct spending and spending through the tax code) if, by 2014, the projected ratio of debt-to-GDP is not stabilized and declining toward the end of the decade. Consistent with prior fiscal enforcement triggers put in place by Presidents Reagan, George H.W. Bush and Clinton, the trigger should not apply to Social Security, low-income programs, or Medicare benefits.

    The Bipartisan Policy Center has put out a description of their trigger idea (called “SAVEGO”) to balance the budget.  President Obama’s idea is similar, yet the President has removed Medicare, some low-income programs, and Social Security from these automatic cuts to spending programs.  The SAVEGO idea is described as follows:

    The remainder of the shortfall could be eliminated by directing the Secretary of the Treasury to increase tax rates proportionately to reach the target; or, alternatively or in addition, to implement regulations that have the effect of capping, for the upcoming tax year, the revenue losses associated with any tax expenditure(s) set forth in the “Estimates of Total Income Tax Expenditures” in the Analytical Perspectives volume of the current “Budget of the U.S. Government,” provided that no individual tax expenditure may be reduced by more than 50 percent of its revenue cost in any single year.

    The Hill reports that the Bipartisan Policy Center is circulating this proposal to the Senate Gang of Six and other key budget members as a plan that could be added to an increase in the debt limit:

    It is unclear to what extent the center’s proposal could be woven into a proposal by the Gang of Six, but Alice Rivlin, former Clinton budget director, and former Sen. Pete Domenici (R-N.M.) have discussed the concepts with members in private meetings. If Congress adopted SAVEGO as law, it would set a goal of lowering the debt to a percentage of GDP. The center suggests that this goal be 60 percent of GDP by 2021, a threshold the group said is an international benchmark for financial stability.

    Both the SAVEGO and Debt Failsafe trigger are a means to increase taxes in the name of deficit reduction. The trigger would remove a specific vote of Congress for the tax changes and would give unelected bureaucrats in the Obama Administration the power to raise taxes. This is a terrible idea, because it will make it easy for politicians to pass tax increases then blame unelected bureaucrats for the decision.

    Posted in Economics [slideshow_deploy]

    6 Responses to The Debt Failsafe Trigger Danger

    1. George, CO says:

      Along with being an abdication of the right of Congress to levy taxes, it would be an enticement to Congress to increase spending knowing that taxes would be raised to “pay” for the spending. If Congress increased spending by $600 billion then cut it by 50% and taxes were increased by $300 billion, Congress would still get $300 billion of spending. It is not a constraint. It is another liberal method of using taxes to finance unwarranted spending.

    2. Dinah Garrison Fairb says:

      I cannot believe that anyone would seriously consider giving anyone in Washington this power. We have seen how they act when they have some bit of balance. How on earth could we trust them under these circumstances? We wouldn't do this kind of thing when trying to deal with our private budget. If one family member had been proven to be unable to control spending, we would not set them in charge of the whole budget. Talk about the fox guarding the henhouse!

    3. Barbara says:

      This kind of political gimmickry attests to the greed rather than the prudence of our elected federal officials. Their thinking belongs in a never, never land of "there's always more."

    4. Stirling, Pennsylvan says:

      Seems like a trend from this progressive administration to put anything out that bypasses congress, which is supposed to be a "Check" on governments abusive power. Sure looks like annother PayGo just named SaveGo, which Pelosi touted when the democrats had control of the house. As we all know PayGo was just a PR stunt that never had any intention of keeping the spending in-line.

    5. Wildcat from Dallast says:

      The failsafe trigger or any such concept that appears to have been designed by Progressives to circumvent the checks and balances inherent with our legislative process must NEVER even be proposed much less considered. I agree that it would simply create a system that enables the government to continually spend more than they have with a rather baseless fallback position of the “failsafe trigger” will take care of it.

      That false solution should be put in the circular file that flushes as well as the automatic pay raises our elected officials get. They should repeal that law and be made to have a full debate on specifically why they deserve a raise before that gets put on the ticket as a referendum. We the people need to decide such important matters.

    6. Brent Perkins -- San says:

      Heritages "Debt Fail Safe Trigger" article above is helpful and descriptive but falls short of adequate emphasis on the proposal's clear unconstitutionality and the deceptive language used by Obama. "Spending Reductions in the tax code"? Does the administration actually think this sort of Alice in Wonderland nonsensical language will actually go unnoticed? This is true Orwellian politics at work.

      Brent Foundation Member — San Diego

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.