America’s Economy: Headed for Crisis: Realistic Approaches Are Essential

Source: Warren B. Rudman, J. Robert Kerrey, Peter G. Peterson, and Robert Bixby, The Brookings Institution, Opportunity 08: A Project of the Brookings Institution America’s Economy: Headed for Crisis 2, August 2007

From the summary:

An honest assessment of the nation’s long-term fiscal outlook almost makes one wonder why, in 2008, so many people are interested in being elected President. And why so little attention is being paid to a problem that budget analysts of diverse perspectives routinely describe as “unsustainable.”

One thing is clear: the status quo is not acceptable. The next President will inherit a fiscally lethal combination of changing demographics, rising heath care costs, and falling national savings. The public should take care not to buy the proposals of Presidential candidates that either ignore the magnitude of the long-term fiscal challenge or lock candidates into positions that make the problems insoluble. Improving the nation’s long-term fiscal outlook will require hard choices on spending and tax policy. Presidential candidates and their consultants might shy away from endorsing such choices on the campaign trail, but they should not rule them out.

The next administration must enter office with a mandate to act on this problem. Doing so will likely require a mix of options arrived at through bipartisan negotiations. The more options taken off the table through ironclad campaign promises, the more difficult it will be to find meaningful solutions once the campaigns are over and the time for governing begins. Candidates must acknowledge the magnitude of the problem, the need for trade-offs and the necessity for prompt action. Vague promises of “fiscal responsibility” give the public insufficient insight into how well candidates understand the task at hand.

Comprehensive solutions may take considerable time to develop, and once implemented, should be subject to periodic review. However, as a framework for action the next President should:

● Commit to a balanced budget

● Take every reasonable step to constrain the rising cost of heath care and retirement programs — Social Security and, most especially, Medicare

● Make clear to Americans that taxes cannot be cut over the long-term unless programs are cut commensurately, and

● Prevent total spending, taxes, or debt from reaching levels that could reduce economic growth and future standards of living.

Leave a Reply