Peterson-Pew Commission on Budget Reform Recommendations
This morning, the Peterson-Pew Commission on Budget Reform held a press conference, live on C-Span, that made six recommendations:
Step 1: Commit immediately to stabilize the debt at 60
percent of GDP by 2018;
Step 2: Develop a specific and credible debt stabilization
package in 2010;
Step 3: Begin to phase in policy changes in 2012;
Step 4: Review progress annually and implement an
enforcement regime to stay on track;
Step 5: Stabilize the debt by 2018; and
Step 6: Continue to reduce the debt as a share of the economy
over the longer term.
It makes a lot of sense to adopt a deficit reduction program now, but to wait to implement it until 2012 to make sure the recovery is well underway.
It also makes a lot of sense to avoid specifics that Congress will change anyway. By putting everything on the table and by focusing on the key economic variable, public debt as a percentage of GDP, it would hopefully enlist enough public support to hold political leaders accountable, so our kids don’t end up paying for our fiscal mess.
The Peterson-Pew Commission is composed of those who have long labored for deficit reduction. It is co-chaired by Former Representatives Bill Frenzel, Tim Penny, and Charlie Stenholm. They know first hand how difficult it is to craft deficit reduction legislation. They also know how important it is to tackle this problem now, before we end up struggling to maintain our standard of living as we pay enormous interest expense to China with dollars that are worth less and less. Former House Budget Chair Jim Nussle noted, “You don’t want a market-based event to force [a solution].” Former Congressional Budget Office Director Doug Holtz-Eakin noted the entitlement crisis is upon us on top of a weak economy: “What was a three-decade problem is now a one-decade problem” before Medicare and Social Security become insolvent.
If you watch the Q&A, you’ll notice yours truly ask the first question: “Would ending the wars in Iraq and Afghanistan help?” Alice Rivlin answered, “It would help, but that’s not the problem. Entitlements are the problem.”
When I’m asked how long it may take to restore a balanced federal budget, I note that we started trying to restore balance after the 1980 recession and the 1981 Reagan Tax Cuts in 1982, and it only took us 17 years to reach balance in FY98. That was when the deficit peaked at 6% of GDP. Now it’s at 10% of GDP. We’ll be lucky to reach balance in the next 30 years. Hopefully, I’ll live to see it.
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