Getting our economy growing is our most pressing economic problem. But there can be no sustainable economic growth as long as we face America’s enormous debt overhang. If we don’t put our nation’s fiscal house in order, we face the most predictable economic crisis in history.
Solving this economic crisis the right way means avoiding the large, immediate, indiscriminate cuts and tax increases that are on the horizon, from the “sequestration” deal.
We should be careful not to cut too deep too soon. But failing to deal with the debt is the real risk we just plain can’t afford.
One of the key principles set out by the National Commission on Fiscal Responsibility and Reform, which I co-chaired with former Senator Alan Simpson, was that a debt-reduction plan must be phased in gradually so as not to disrupt a very fragile economic recovery.
Our commission’s plan would reduce the deficit by more than $4 trillion over the next decade, but would do so in a way that encourages, rather than hinders, economic growth and stability.
The real short-term risk to the economy isn't a carefully thought-out deficit reduction plan, but the mindless spending cuts and tax increases — known as the “fiscal cliff” — that are scheduled to go into effect at the beginning of next year.
Allowing those deep and abrupt measures to occur would put us into a double-dip recession. At the same time, continuing on our current path by punting these measures would send a dangerous message to the markets that America is not willing or able to deal with our debt.
The only responsible course of action is to replace the fiscal cliff with a gradual and thoughtful plan to save at least $4 trillion over the next decade and put the deficit on a clear downward path relative to the economy.
Such a plan can lay the foundation for sustained economic growth through a combination of debt reduction, comprehensive tax reform, and maintenance of important investments in education, infrastructure, and high-value research and development.
We should be careful not to cut too deep too soon. But failing to deal with the debt is the real risk we just plain can’t afford.
