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.
Source material can be found at this site.