Two Major Reports Target Debt Reduction
In the past two days, at least two new voices have joined a growing chorus of organizations warning that our federal debt is growing at an unsustainable rate -- and calling for a plan to put it on a sustainable path.
Today, a committee established by the National Research Council and the National Academy of Public Administration released Choosing the Nation’s Fiscal Future, which delves into the ramifications of the federal budget where the gap between spending and revenues is growing increasingly wider, causing debt to explode to untenable levels. This comes on the heels of a Center on Budget and Policy Priorities report, The Right Target: Stabilize the Federal Debt, which has more of a focus on federal deficits.
As with the Peterson-Pew Commission, Choosing the Nation’s Fiscal Future recommends that federal debt be stabilized at around 60 percent of GDP -- although its budget horizon for doing so is slightly longer. CBPP recommends a path which would stabilize the debt at a little above 70 percent of GDP -- suggesting the goal should be to bring deficits down to below 3% of GDP (the levels associated with stabilizing the debt as a proportion of the economy) by 2019.
In general everyone seems to agree on a few principles:
- The debt-to-GDP ratio must ultimately be stabilized to prevent an economic and fiscal crisis.
- We shouldn't start too quickly or else we might undermine the economy's recovery -- but we should begin to put a plan in place now that can begin in the next couple of years.
- The short and medium term problems need to be addressed now, but the longer-term problem must also be part of the follow-on steps.
- Health care cost growth and population aging are forcing up the costs of the big three -- Social Security, Medicare and Medicaid -- and those costs must be contained.
- It will be impossible to close the fiscal gap without addressing the entire budget, and difficult, to say the least, to close the gap without revenue increases (although the Fiscal Future report does include four scenarios, one which includes very little revenue growth).
- Tough tax and spending choices are unavoidable, and are absolutely necessary.
We may not agree on all the specifics, but our message is the same. Our nation is in serious trouble, and we are running out of time to get our fiscal house in order.