WASHINGTON, D.C. – This week, the Peterson-Pew Commission on Budget Reform outlined a plan for Congress and the Administration to begin working now to significantly reduce the national debt, which is currently $7.6 trillion. Red Ink Rising, the Commission’s first report, calls on policy makers to enact both spending cuts and tax increases to shift our nation’s fiscal course.
The bipartisan group is comprised of former Members of Congress, including co-chairs Bill Frenzel, Tim Penny and Charlie Stenholm, as well as former heads of the Office of Management and Budget, the Congressional Budget Office, the Government Accountability Office, and other fiscal experts.
The group recommends that Congress and the White House:
• Adopt an ambitious, but achievable target that would reduce the public debt to 60 percent of GDP by 2018;
• Negotiate a specific package of spending reductions and tax increases that are gradually phased in to protect the recovering economy; and
• Create an automatic enforcement mechanism to keep revenues and spending on target.
“The public debt is an economic time bomb that must be addressed by Congress and the Administration,” said David M. Walker, president and CEO of the Peter G. Peterson Foundation. “In this year alone, the public debt rose by nearly $2 trillion, and it is headed much higher in coming years. That kind of dramatic growth is not sustainable and threatens the foundations of our economy.”
“We hope this report will be a rallying point for citizens and policy makers to restore the nation’s financial strength,” said Rebecca W. Rimel, president and CEO of The Pew Charitable Trusts. “Putting our financial house in order is a prerequisite to addressing the other challenges that confront us.”
Under reasonable assumptions, the public debt is projected to grow steadily from 53 percent of GDP in 2009 to 85 percent in 2018, 100 percent in 2022, and 200 percent in 2038. Such high levels of debt would jeopardize the American standard of living and weaken the economy. And, as more government resources are used to finance interest payments, less would be available for other priorities, such as tax relief or spending on popular programs.
Red Ink Rising makes clear that fiscal problems of this extent will take time to fix, especially in light of the current state of the economy, but it also emphasizes that creditors need to see that the United States is serious about stabilizing the federal debt over a reasonable timeframe.
“The biggest factor in pulling us out of this fiscal mess is political will,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which manages the Peterson-Pew Commission’s work. “Any meaningful effort to address these budget problems will have to be bipartisan, giving both major political parties cover to make the tough choices necessary. Leaders will need to come together and courageously confront these tough choices, including the significant spending cuts and tax increases required to shift our fiscal course. We believe the fiscal goal we propose of stabilizing the debt as a share of the economy will help focus this effort.”
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