Deficits and Debt

A Preventable Crisis: Exploring Fiscal Crisis Scenarios for the United States

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In this policy paper released by CRFB's Fiscal Roadmap Project, CRFB argues that unless we change course, "a fiscal crisis in one form or another will surely ensue." The paper discusses six realistic crisis scenarios the U.S. could face if debt continues on its upward trajectory. A crisis could be gradual or it could be sudden.

CBO's Analysis of the President's FY2011 Budget

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In its Analysis of the President's Budget, CBO estimates that the FY 2011 budget proposals would cause public debt levels to rise to 90 percent of GDP, above the 68 percent projected in CBO's baseline. It is clear that the President's Budget continues to place the country on an unsustainable fiscal path. The Administration must address the issue of excessive borrowing in the event that the fiscal commission does not get the country back on sustainable fiscal footing.

Fiscal Turnarounds: International Success Stories

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The U.S. is not alone in facing massive budget deficits and an exploding debt, nor is it the first country to face this type of situation. There are important lessons we can learn from other countries' fiscal turnarounds. In this paper CRFB discusses the experiences of Canada, Denmark, Finland, Ireland, and Sweden in successfully bringing their debt under control.

CRFB Reacts to the State of the Union Address

CHAIRMAN
Bill Frenzel
Tim Penny
Charlie Stenholm

 
PRESIDENT
Maya MacGuineas
­­­
 
DIRECTORS
Barry Anderson
Roy Ash
Charles Bowsher
Steve Coll
Dan Crippen
Vic Fazio
Willis Gradison
William Gray, III
William Hoagland
Douglas Holtz-Eakin
Jim Jones
Lou Kerr
Jim Kolbe
James Lynn
James McIntrye, Jr.
David Minge
Jim Nussle
Marne Obernauer, Jr.
June O'Neill
Rudolph Penner
Peter Peterson
Robert Reischauer
Alice Rivlin
Martin Sabo
Gene Steuerle
David Stockman
Paul Volcker
Carol Cox Wait
David M. Walker
Joseph Wright, Jr.
 

SENIOR ADVISORS
Elmer Staats
Robert Strauss


CRFB Reacts to the State of the Union Address
January 27, 2010



The Committee for a Responsible Federal Budget commends President Obama for his focus on deficit reduction in his State of the Union address, and hopes that he will follow through by pressing Congress to enact medium- and long-term deficit reduction policies over the next year.

As the President remarked tonight, we find ourselves in a “massive fiscal hole… a challenge that makes all others that much harder to solve.” And he argued, rightly so, that “if we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery.”

The President offered three proposals, in particular, which would be promising steps in the right direction:

  • A three-year non-security discretionary spending freeze, beginning in fiscal year 2011, and enforced by a veto, if necessary;
  • A bipartisan fiscal commission – created by executive order and fashioned after the Conrad-Gregg proposal – to provide a specific set of solutions to our fiscal problems;
  • The reinstatement of statutory pay-as-you-go laws (although as we’ve mentioned before, we are concerned about the large number of exemptions).

“We are thrilled that President Obama understands the threat of ever-rising debt, and is making some concrete proposals to begin to address it,” said Maya MacGuineas, President of the Committee for a Responsible Budget. “But actions speak louder than words. In the coming weeks and months, we urge the President to bring together members of both parties and begin taking concrete actions to stabilize the debt once the economy recovers.” 

 


Click here for a pdf version of this release.

For press inquiries, please contact Kate Brown at (202) 596-3365 or brown@newamerica.net.

 

Op-Ed: Obama's Freeze Is a Good First Step

CNN | Jan. 27, 2010

 

When the president unveils his 2011 budget next week, he will propose capping "non-security" discretionary spending at its current level of about $450 billion for three years, saving roughly $250 billion over ten years.

The freeze does not include defense, veterans' affairs, homeland security and some international programs.

Let's start by putting these numbers in context. The Congressional Budget Office's new baseline numbers show that deficits will be $6 trillion over the next decade -- under highly unlikely assumptions that Congress will stay true to current law, where the tax cuts and other popular policies expire -- or more than $12 trillion under more likely assumptions.

So $250 billion, while obviously a large number, is a very small share of the amount Congress is poised to borrow -- and add to the debt -- in the coming decade.

It would be fair, then, to say that this is a baby step -- OK, it's a teeny-weeny tiptoe of a step -- in the right direction. But there have been so many steps in the wrong direction in recent years, such as extending tax cuts, that anything that it can legitimately be argued would help bring down future deficits should be heralded as an important move.

And frankly, it is a courageous one too for this administration; there are going to be an awful lot of members of the president's own party who are none too happy with the plan.

But remember, the president's budget for the fiscal year that begins in October isn't actually a law. It is more like a polite suggestion to Congress. Given that Democrats run the House and Senate, they won't declare the budget dead on arrival, as so often happens when the budget season begins with a president of one party delivering his budget to a Congress run by the other.

But in this highly charged election year, where legislators will talk about being tough on spending but not necessarily back that claim with real spending cuts, it will be extremely difficult to get them to stick to this freeze.

Therefore, the president is going to have to back up his promise with more than words for it to be seen as credible. What it needs is teeth.

First, he should promise to veto any appropriations bills that exceed the limits he has put forward for spending. Otherwise, there's little question that appropriators will find all sorts of ways to bump up spending beyond what he has proposed -- everything from budget gimmicks to simply ignoring his proposal.

If he chooses to look the other way, the spending freeze will prove to be little more than a cynical political talking point at a time when real action is needed. Shepherding the budget from blueprint to law is part of the heavy lifting the president will have to lead on.

Second, he should support statutory spending caps that enforce his limits. This is an idea that is gaining momentum in the Senate and House, and it is the ideal companion piece to his suggested freeze. From Sen. Jeff Sessions, R-Alabama, to Sen. Evan Bayh, D-Indiana, to Sen. John McCain, R-Arizona, he need not look far to find a host of good ideas.

Finally, there is the issue of the rest of the budget. Non-security is only a small sliver of discretionary spending, and discretionary is only a small sliver of total spending. All told, we are talking about less than one-sixth of the budget. It would be more sensible to cap all discretionary spending and force policymakers to make tradeoffs between defense and other security parts of the budget as well, not just within the relatively small non-security category.

And then there are still the big enchiladas -- Social Security, health spending, and taxes -- to be dealt with. When this fight gets going, remember, it will only be working its way down from the tip of the iceberg. Nonetheless, a discretionary freeze is a sensible first step. Let's hope when the rest of the budget is released on Monday, it will take that first tiny sensible step much further.

Copyright 2009, CNN

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