Senator Reid In Favor of 'Deficit Cap' in Debt Limit Increase
Yesterday, Senate Majority Leader Harry Reid (D-NV), proposed adding a "deficit cap" to forthcoming legislation to increase the debt ceiling. While the details of this deficit cap are as of yet unknown, in theory, it sounds like a mechanism similar to the "debt failsafe" that President Obama proposed within his Budget Framework. A deficit trigger would presumably require deficits to be at or below a certain level, and, if not, would require automatic spending cuts and/or additional revenue. A deficit trigger corresponding to medium-term fiscal targets is something that CRFB has advocated for. A recent Peterson-Pew Commission report, Getting Back in the Black, and a briefing paper on debt triggers and targets (released today) include similar recommendations.
Fiscal targets and their enforcing mechanisms would be a helpful part of any deficit reduction package, as they would help nudge lawmakers into action to get control of our country's finances while also keeping fiscal discipline on track. While budget process reform should only be one piece of a fiscal plan and is no substitute for policy, it can help make a good fiscal plan better. Senator Reid's deficit cap could be just one way to implement some budget reforms to ensure lawmakers get serious about debt reduction.
We are encouraged by the Senator's words and hope he will continue to flesh out this idea in the coming days.