Fiscal-Cliff Showdown

To Solve Debt Crisis, GOP Should Put Obama on a Reward Program

What House Republicans can learn from credit-card companies in dealing with our debt. By Stan Veuger.

House Republicans should devise a scorecard that keeps track of the progress made by President Obama in his efforts to help our government avoid a debt crisis.

The scorecard would keep track of the progress made on entitlement reform and award points accordingly. The president raised the Medicare eligibility age by two years? Fantastic. Here are 20,000 points for you, Mr. President. The president could then use these points to “buy” continuing resolutions—5,000 points for a month of spending, for example. Think of it as a credit-card reward program, except that you earn points not by spending, but by cutting spending.

There is no more effective way to force a serious overhaul of entitlement programs. Jeopardizing the nation’s standing in the eyes of its creditors this summer did not work: the Supercommittee agreement reached then (under the Budget Control Act) has not helped House Republicans to obtain any meaningful concessions, in spite of the threat of sequestration. Giving that strategy a second try by accepting the tax hikes that will automatically kick in on January 1 and then picking a highly risky debt-ceiling fight with possibly devastating economic consequences is a very unattractive option. It has an enormous potential downside both in terms of politics and in terms of policy.

Realizing that, House Republicans now seem ready to accept a deal that is large enough to hand the power of the purse to President Obama for the next two years, yet small enough to ensure that America’s long-term fiscal position remains frighteningly bad (PDF). Even Grover Norquist seems to be willing to support such a deal, in spite of the tax hikes that would inevitably be an important component of it.

Fortunately, House Republicans do not have to follow Norquist’s example and cave to President Obama’s wishes by accepting tax hikes in return for mostly symbolic spending cuts. There is a savvier way to go about it—they can exercise their power of the purse without risking default.

This is where the scorecard reward system comes in. Once current appropriations run out, House Republicans should demand serious fiscal consolidation in exchange for continuing resolutions. Without the threat of a debt-ceiling dispute backfiring against Republicans (as it did last summer), President Obama would be forced, time and time again, to show his willingness to make serious concessions, cut spending, overhaul entitlements, and put America back on a sound fiscal path. Only then would he receive more funding for discretionary spending.

Some may be concerned that a system along these lines would be inflexible. This concern is misplaced. Speaker John Boehner and his fellow Republicans could follow the example of credit-card companies and award bonus points for particularly desirable actions, such as agreeing to spending cuts in the near future as opposed to 2045, or to measures that are particularly hard to stomach for some of his fellow Democrats.

A setup along these lines is also not radical or untested. The International Monetary Fund has long followed a similar strategy in helping program countries find their way back to sustainable fiscal conditions. In addition, it brings a clear advantage over the current practice of backroom dealings: Speaker Boehner could bring new levels of transparency to the federal government by installing a physical scoreboard outside the Capitol for the people to see. If Boehner makes it big enough, Obama can keep track of his own performance without ever leaving the house. If Boehner makes it bright enough, no one but Obama will be blamed for failing to meet the challenge of his time.

Such a strategy would allow Republicans to distance themselves from accusations of unnecessarily provoking a crisis that would jeopardize America’s creditworthiness while forcing President Obama to put American on the path to solvency. A win for all involved, as it appears to be only way to finally make serious inroads in curbing spending and reforming the nation’s ballooning entitlement liabilities.