Foundation Releases Projections Demonstrating that $1.2 Trillion in Reductions Do Not Solve Long-Term U.S. Debt Challenge
NEW YORK (NOVEMBER 2, 2011) –The Peter G. Peterson Foundation today released new information indicating that the Joint Select Committee on Deficit Reduction must “go big” and “go long” by exceeding its $1.2 trillion deficit reduction goal and reaching a bipartisan agreement on a long-term fiscal plan in order to restore strength to the U.S. economy and sustainability to the federal budget.
In a letter submitted today to the committee, the Peterson Foundation cited new projections which demonstrate that $1.2 trillion in deficit reduction that fails to address the fundamental drivers of our growing debt will not stabilize the level of debt relative to the economy, which is the real test of any long-term fiscal plan. Under CBO’s current policy baseline, the debt-to-GDP ratio in 2035 is projected to reach a staggering 187%. Under the Peterson projections, the savings outlined in the Budget Control Act would only reduce the projected debt-to-GDP ratio to 164% in 2035. In addition, the analysis shows that by 2038, just three years later, the federal debt nearly reaches the same 187% of GDP.
“The strength of the U.S. economy today and for decades to come will be influenced by the success of the Joint Committee,” said Foundation Chairman Peter G. Peterson. “The members of the Joint Committee have a historic opportunity to accelerate action on one of our nation’s most enduring problems. They need to find common ground on ‘big’ and ‘long’ solutions that improve America’s long-term budget outlook and build a foundation for a robust and competitive economy.”
The rapidly growing federal debt levels threaten the future of the U.S. economy in several ways, including the significant burden of interest costs which could crowd out important public and private investment in the economy. On the current U.S. fiscal path, interest expense alone is projected to reach $1 trillion in 10 years, and eventually exceed, by more than four times, the amount the federal government spends on education, R&D, and infrastructure, combined.
“The good news is that solutions – even bipartisan solutions – are possible,” Peterson said. “Organizations from left to right have put forward worthy plans that successfully rein in long-term deficits and stabilize debt-to-GDP.”
The letter referred to deficit reduction ideas generated by the Peterson Foundation’s bipartisan “Solutions Initiative,” in which six organizations from across the ideological and generational spectrum developed comprehensive plans for long-term fiscal sustainability. Researchers from the American Enterprise Institute, Bipartisan Policy Center, Center for American Progress, Economic Policy Institute, the Heritage Foundation, and the Roosevelt Institute Campus Network (representing younger Americans) each developed long-term fiscal plans that stabilize debt-to GDP. The plans, and more information on the Peterson Foundation Solutions Initiative, can be found here .
About the Peter G. Peterson Foundation
The Peter G. Peterson Foundation is a non-profit, non-partisan organization established by Pete Peterson – businessman, philanthropist, and former U.S. Secretary of Commerce. The Foundation is dedicated to increasing public awareness of the nature and urgency of key long-term fiscal challenges threatening America's future and to accelerating action on them. To address these challenges successfully, we work to bring Americans together to find and implement sensible, long-term solutions that transcend age, party lines and ideological divides in order to achieve real results. To learn more, please visit www.PGPF.org.