As President Obama and Former Governor Romney square off in the presidential debates, fiscal and economic issues top the agenda. How would each candidate fix the debt and put America on a more sustainable fiscal path? We asked experts on both sides of the aisle to weigh in on the challenges that must be addressed.
THE EXPERTS: FOUR VOICES
Given the fragile state of the economy, why focus on the long-term debt problem now?
We can't escape the long-term debt problem. The longer we wait to deal with it, the greater the uncertainty, with growing risks to financial markets. At the same time, we can't practically deal with the problems all at once, impacting the sluggish economy. What we can do — what we must do — as a matter of first priority, is agree on a plan that over time will bring our exploding debt under control. That will provide the strong signal we need that our political parties can work together to deal with the looming threat of unmanageable public debt.
Paul Volcker,
Former Chairman of the Federal Reserve Board |
Can the debt problem be solved without reforming Social Security, Medicare and Medicaid?
To solve the long-term debt problem, everything has to be on the table. Without changes, Social Security, Medicare and Medicaid simply aren't sustainable. Reforms can be made in gradual ways that protect the vulnerable. Because health-care costs are growing faster than the economy and consuming a larger and larger share of the federal budget, a comprehensive fiscal plan has to include reforms to federal health spending. These reforms should reduce spending across the entire health-care system, not simply shift the federal government's costs to individuals, employers or state and local governments.
Alice Rivlin,
Former Director, White House Office of Management and Budget |
Can the debt problem be solved by spending cuts alone, or do some type of revenue increases need to be considered?
Even with the necessary spending cuts, it will be hard to meet the demands put on federal spending by an aging population and rising health-care costs without more revenue. Over the next 25 years, the number of elderly Americans will surge by about 80 percent — and they will rely on programs like Social Security and Medicare. The best way to raise revenue is with tax reform that simplifies the tax code and improves economic efficiency by limiting tax deductions and loopholes.
Former Sen. Judd Gregg (R-NH),
Former Chairman of the Senate Budget Committee |
Can defense spending be reduced while still protecting America's military and global interests?
Absolutely. Reducing defense spending should be part of any comprehensive plan to stabilize the federal debt, which is essential to revitalizing our economy and putting it on a sustainable path. And the fact is we cannot afford a strong military without a strong economy. The key is to reduce the Pentagon's budget the right way. That means doing it with a strategy attuned to today’s threats and challenges, not yesterday's. It also means cutting waste protected by special interests. Done that way, the U.S. can maintain its military superiority and keep us secure.
Les Gelb,
President Emeritus, Council on Foreign Relations |
A LOOK AT THE NUMBERS
| 100% of the growth of non-interest spending in the federal budget will come from entitlements. Rapidly growing health-care costs are the main driver. |
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Sources: PGPF projections using data from the Congressional Budget Office, The 2012 Long-Term Budget Outlook, June 2012.
Note: Health-care programs include Medicare, Medicaid, Children’s Health Insurance Programs (CHIP) and the health-care exchange subsidies. |
| Stabilizing our national debt through spending cuts or revenue increases alone would require draconian and unprecedented policy changes. |
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Sources: Data from the Congressional Budget Office, The 2012 Long-Term Budget Outlook, June 2012. Compiled by PGPF.
Note: Spending refers to non-interest spending. The amounts shown are the spending cuts or revenue increases from projected levels required to keep debt-to-GDP no higher than the 2012 level over the next 75 years. |
| In 2011, the U.S. spent more on defense than the next 13 countries combined. |
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Sources: Data from Stockholm International Peace Research Institute, SIPRI Military Expenditure Database. Compiled by PGPF.
Note: Dollar figures are in billions of 2011 U.S. dollars. |
ADDITIONAL RESOURCES
State of the Union's Finances — A citizen's guide explaining the enormous fiscal challenges facing America, based on the official financial statements of the U.S. government.
Charts Archive: Fiscal Solutions by the Numbers — Illustrative graphics prepared by the Foundation that help to visualize many of today's pressing fiscal issues.
PGPF on Facebook — Join other Peter G. Peterson Foundation supporters to discuss America's fiscal and economic future.