The Goldilocks Fiscal Goal: 60%?
Picking a “fiscal goal” would be a great way to get the discussion started about what policies to enact to close the budget gap. It allows policymakers to engage in an apples-to-apples comparison of how best to fix the budget situation.
The Peterson Pew Commission recommends stabilizing the debt at 60% of GDP by 2018. (Though we also say that there is no one single “right” goal but that instead that the important thing is to credibly commit to a fiscal goal that is sufficient to reassure global credit markets.)
At yesterday’s House Budget Committee hearing on Perspectives on Long-Term Deficits, Bob Greenstein worried that the goal was too aggressive and could dissuade politicians from even trying. He instead suggests simply getting to deficits down to 3 percent of GDP.
An hour later, at NASI’s Annual Conference in the DeLong-MacGuineas debate on how to think about the debt, Brad DeLong argued that the goal wasn’t aggressive enough and that we need to go further than stabilizing debt in order to bring it back to much lower levels.
We’d be thrilled for Congress to pick any goal and start improving the fiscal situation, but in terms of specifics, it sounds to us like the Peterson-Pew 60% might be just about right.