Choosing the Nation's Fiscal Future (2010) / Chapter Skim
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MacArthur Foundation, to carry out a comprehensive study leading to a set of plausible scenarios for the federal budget, to put it on a path toward a stable fiscal future. Members of the committee have quite varied backgrounds and perspectives on the budget.
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Increasing debt also may contribute to a loss of international and domestic investor confidence in the nation's economy, which would, in turn, lead to even higher interest rates, lower domestic investment, and a falling dollar. As shown in Figure S-1, the current trajectory of the federal budget cannot be sustained.
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The committee believes that the debt that will result if the United States continues with current tax and spending policies will be at a level that poses too great a risk to the economic welfare of the current generation and would impose an unfair and crushing burden on future generations. (The debt, which was about 40 percent of GDP just 2 years ago, is now above 50 percent and rising rapidly.)
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Options for putting it on a sound fiscal footing range from sizable reductions in currently projected benefit growth to sizable increases in payroll taxes, with many possible intermediate combinations. Spending growth in many other areas of federal activity can be moderated, in part by curtailing or reforming less effective programs.
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And it would allow spending on all other federal programs to be higher than the level implied by current policies. 40 Percentage of Gross Domestic Product 30 High Intermediate-2 20 Intermediate-1 Low 10 0 2012 2019 2026 2033 2040 2047 2054 2061 2068 2075 2082 FIGURE S-3 Projected federal spending under the committee's four scenarios.
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The growth rates for Social Security, Medicare, and Medicaid would be slower than under current policies. This path reflects the view that the federal government should make selective new public investments to promote economic growth, preserve the environment, and build for the future.
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The President and Congress share accountability for putting and keeping the federal budget on a sustainable path. The Office of Management and Budget and the Congressional Budget Office -- as well as private organizations -- can make major contributions to the needed reassessment of the nation's fiscal course by regularly publishing projections of the long-term effects of the President's budget and of major alternatives.
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If action is taken soon, the country has a wide choice of options to help achieve fiscal sustainability. All are difficult; but if action is postponed, the options will be fewer and the choices will be even more difficult.
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