This is another in a series of posts as our elected officials in Washington lurch from one man-made budget crisis to another.
Our deficit and debt problems are serious, but solutions are within fairly easy reach.
From To Stabilize the Debt, Policymakers Should Seek Another $1.4 Trillion in Deficit Savings from the Center on Budget and Policy Priorities:
With the “fiscal cliff” deal in place, President Obama and Congress are now expected to seek more deficit reduction to replace the automatic spending cuts (“sequestration”) that are scheduled to take effect on March 1. Policymakers can stabilize the public debt over the coming decade, ensuring that it doesn’t grow faster than the economy and risk eventual economic problems, with $1.4 trillion in additional deficit savings over the next decade. Policymakers can achieve the $1.4 trillion with $1.2 trillion in policy savings — tax increases and spending cuts — because that would generate almost $200 billion in savings in interest payments. That $1.4 trillion in deficit savings would stabilize the debt at about 73 percent of Gross Domestic Product (GDP) over the latter part of the decade
Always be suspicious of comparing government budgets to household budgets, but simple experience tells us that households, governments, nonprofit organizations, and all sorts of businesses carry debt. They make payments on the interest on that debt without crippling their day-to-day sustainability.
Our level of public debt is about 73 percent of GDP right now, and it seems that that level is sustainable, even though a target of 60 percent or less would be much better. The U.S. is still viewed as a safe haven for investors around the world — that’s hardly a signal of a debt crisis. (For more, see a post at The Washington Post’s Wonkblog today.)
Check out this new graph from the CBPP:
The Budget Control Act (BCA) is in effect — that’s what solved the debt ceiling fight in 2011. The American Taxpayer Relief Act (ATRA) is what was just signed to raise income tax rates on a tiny sliver of Americans and to restore the historical payroll tax rates, which had been cut as a stimulus measure for the last two years.
So we need to find another $1.2 trillion in spending cuts and/or tax increases over the next decade to keep the debt stable. That would result in lower interest payments, for a total savings of $1.4 trillion.
Over the long term, we’ll need to raise even more revenue and/or cut spending further, but the $1.2 trillion seems a good target for sustainability over the next decade and beyond.
That’s a lot of money, but consider the fact that the 400 wealthiest Americans have a net worth of $1.7 trillion.
I don’t necessarily include that detail to argue that we need to soak the rich. But that detail is just one indication of the vast wealth in this country. Coming up with $1.2 trillion in spending cuts and/or tax increases will not cripple us over the long-term, although quick enacting of tough austerity measures will likely put us back into recession.
Right now, under current law, there will be a $1.2 trillion cut in discretionary spending — a sector dominated by military spending — that would take us to where we need to be.
If politicians don’t want those particular cuts to kick in, they need to find other cuts or revenues to offset them.
Hardly a crisis.