“Daunting.” That was the word the Congressional Budget Office (CBO), an agency not known for hyperbole, used to describe America’s fiscal challenges in its recently released Long-Term Budget Outlook. Sadly, even this fails to truly capture the sheer enormity of the problems we face.
A better word may be terrifying. Our federal government is like a teenager who has been handed the keys to a high-performance sports car. Over the past several decades the car has been picking up speed, recklessly testing the limits of our nation’s credit, and now it’s careening toward a debt crisis.
The warning signs are there, but so far Washington hasn’t applied the brakes. According to CBO, the ratio between debt and our annual economic output (Gross Domestic Product, or GDP) has reached 69 percent – a 7 percentage-point increase in just one year. Under realistic estimates, CBO predicts that our debt will balloon to 101 percent of GDP in the next decade, well above what was forecast even last year. These figures only apply to “debt held by the public.” When categories like IOUs to so-called “Trust Funds” in Social Security and Medicare are accounted for, total national debt is already nearly equal to the size of our entire economy.
In response, Standard & Poor’s recently reiterated its warning that the United States is at risk of losing its prized triple-A rating if Congress cannot find a way to address this shocking instability. Should volatile bond markets revolt, the costs of financing the federal borrowing spree will go into overdrive, perhaps making a turnaround impossible without permanent damage.
In order to avert such a tragedy, nearly 200 conservative, libertarian, and tea party groups have joined together to remove Washington’s foot from the spending accelerator. This coalition believes that the debt limit discussions currently taking place between the President and congressional leaders of both parties are the perfect opportunity to push for the serious corrections needed to successfully navigate the treacherous fiscal course ahead.
While the president is demanding that hundreds of billions in tax increases be part of any deficit reduction deal, our coalition has focused on the true problem – excessive spending. We have proposed a comprehensive three-step strategy called the “Cut, Cap and Balance” Pledge. With signatures from 38 members of Congress, six presidential candidates, and more than 100,000 citizens across the country, this plan calls for substantial cuts that will reduce the deficit now. Given this year’s forecasted shortfall of $1.65 trillion in President Obama’s budget, plus an imbalance expected to reach $1.1 trillion next year, such a task is imperative.
While our fiscal deficit is challenging enough, it is Washington’s deficit of leadership that poses a potentially larger long-term threat. Spending restraint is often ignored or forgotten when the politics get difficult or the economy gets stronger, which is why enforceable statutory caps on federal expenditures must be put in place. If Congress finds itself unable to meet the levels laid out in the caps, then automatic spending reductions would kick in. This process would, over an implementation period of a few years, help move spending from its unsustainable 25 percent-of-GDP level to 18 percent, thereby reaching an equilibrium point with the modern historical average for revenues.
The centerpiece of the "Cut, Cap and Balance" approach is a strong Balanced Budget Amendment to the U.S. Constitution. Such an amendment would not only require the government to square its finances under most circumstances, it would also contain specific limits on tax and expenditure increases that Congress could not override without a two-thirds “supermajority” vote. These vital protections for taxpayers would not become law until ratified by 38 states, but the vibrant and necessary debate they’d engender about the very future of this country would provide a powerful check on Washington’s overspending.
Policymakers face a major question as we zoom ever nearer toward a fiscal breakdown. Do they continue to step on the gas, or steer clear of disaster? It is a question that will define a generation, and our coalition firmly believes that the best possible answer is Cut, Cap and Balance. After all, daunting problems require daring solutions.
Brandon Greife is Federal Government Affairs Manager for the 362,000-member National Taxpayers Union, a non-partisan citizen group founded in 1969 to work for lower taxes and smaller government at all levels.