Two more plans to cut the federal deficit and rein in debt landed Wednesday.
The strong economy that has made the United States the world’s leading power is gravely threatened. Federal debt will soar in the coming years under current policies, endangering our prosperity and our leadership. The national debt will overtake the economy itself, increasing our dependence on China and other foreign lenders, draining our resources and reducing our living standards. This risks economic crisis and threatens to turn America into a second-rate power.
The plans unveiled Wednesday focus more on growth than the proposal by Erskine Bowles and Alan Simpson, who head President Obama’s fiscal commission.
David Leonhardt of the New York Times explains why economic growth might be (part of) the answer:
If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears, based on my reading of budget data from the economists Alan Auerbach and William Gale.
To get a concrete sense for what this would mean, you can play around with the The Times’s online deficit puzzle. It asks you to find almost $1.4 trillion in annual spending cuts and tax increases by the year 2030. If growth were a half point faster than expected, the needed savings would instead drop to less than $700 billion. That would mean many fewer painful choices, be they tax increases or Medicare cuts.
Both the Domenici-Rivlin plan and one proposed by Rep. Jan Schakowsky, D-Ill., include efforts to spur short-term growth — through a payroll tax holiday and local government spending, respectively. Schakowsky explained the gist of her proposal to the Washington Post:
[T]he goal is $250 billion in cuts by 2015, which achieves primary balance (which is balance without interest on the debt), and my goal was to offer a proposal able to do it without taking from the middle class and lower-income people. And we managed to reach not only that number, but to actually raise $427 billion, with the idea that some of that money would be spent in 2011 and 2012 on more economic stimulus.
Rivlin and Schakowsky belong to the president’s fiscal commission.
You can read the latest proposals here and scroll down for more coverage and reaction to them.