America Is Teetering On The Edge Of A Fiscal Cliff
Congress and the President can lead us to safety by embracing compromise rather than gridlock. What we really need is a solution to the fiscal cliff that solves our growing long-term debt problem once and for all — a comprehensive bipartisan fiscal plan.
November 09, 2012
With the election over, Washington is back to work, trying to move away from the fiscal cliff. Going off the cliff would throw our economy into recession. But punting yet another opportunity to deal with our long-term debt is not an acceptable outcome either.
Now is the time for the President and Congress to seize this opportunity and agree on a long-term, comprehensive fiscal plan that stabilizes and begins to reduce debt as a share of the economy.
Getting to a grand bargain will require real leadership and bipartisan compromise, particularly when it comes to health care, Social Security and taxes.
Without changes, Medicare and Medicaid are on pace to consume an ever-growing share of the federal budget — and Medicaid is consuming a larger portion of state budgets, too. The U.S. simply cannot have a bright future if health care bills continue to skyrocket while critical investments in education, R&D and infrastructure are starved of funding.
Social Security, despite claims to the contrary, is not sustainable for the long term. The payroll tax dollars credited to the Social Security trust fund have already been spent. Between now and 2033, we will have to borrow trillions to pay promised benefits. Without reforms, benefits will have to be sharply cut beginning in 2033. We need to strengthen Social Security, so it is sustainable for future generations.
When it comes to taxes, one thing is clear: The current system is a mess. It's overly complicated, creates a raft of market distortions that reduce economic efficiency, and doesn't produce enough revenue to meet the needs of an aging society. (Remember, in the coming decades, nearly 80 million Baby Boomers will retire.)
The fiscal cliff offers an opportunity to finally do something about all these challenges — and put the entire federal budget, including defense and other discretionary spending, on a sustainable long-term path.
Democrats and Republicans, liberals and conservatives, will disagree about the optimal way to fix the debt. But it's time for both parties to work together and make the long-term good of the country a top priority. Without a little give and take, gridlock will prevail; our debt will continue to pile up; the economy won't grow as fast as it could; our children will inherit a weaker economy, much higher taxes, and a threadbare safety net; and we'll continue to invite disaster in the form of a major fiscal crisis.
If leaders in the White House and Congress are serious about putting America on a better fiscal path — for today and for decades to come — they need to call a truce in the ideological warfare, reach across the aisle, and find common ground.
America needs a long-term, comprehensive plan to solve our fiscal challenges. Congress and the President need to deliver. And the fiscal cliff gives them an opportunity to act.
"Post-Election: The Fiscal Cliff and Beyond" — The Peter G. Peterson Foundation will convene elected officials and leading policymakers, along with five of the country's most respected think tanks, to discuss pragmatic solutions to America's impending fiscal challenges. Watch the event webcast on Friday, November 16th, 2012, live from Washington DC.
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.
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