An important debate has begun over how much more deficit reduction (if any) is required. Some argue that only $1.4 trillion of additional deficit reduction over the next decade is enough because it will stabilize the growth of the national debt as a share of the economy over that period. Others believe that no more work at all is needed. While it would be nice to declare “Mission Accomplished” and pretend that we solved the problem, it is simply not the case.
A new paper from our partner, the Committee for a Responsible Federal Budget (CRFB), explains that an additional $1.4 trillion in savings will quite likely not prevent the debt from increasing in future decades. Aiming so low would also risk slower economic growth due to higher interest rates “crowding out” investment. Read a summary of the paper here.
We’ve enacted only about half of the deficit reduction necessary through 2022 and only one third of the savings needed through 2040 to achieve true sustainability. Enacting only $1.4 trillion in additional deficit reduction would still not bring our debt as a share of the economy down to the levels recommended by Simpson-Bowles and other bipartisan deficit reduction plans.
Temporarily stabilizing the debt at such a high level also leaves no fiscal room to do things like responding to disasters and economic downturns. The goal should be to put the long-term debt on a downward path.
There is still work to be done, whether we like it or not. As CRFB president and Fix the Debt Campaign head Maya MacGuineas said in a statement, “It seems like some people want to bring back the era of debt denial, but the facts just don’t support their view.”