In 2011, the Peter G. Peterson Foundation launched the Solutions Initiative to demonstrate that comprehensive solutions to the nation’s long-term fiscal challenges do exist. This unique project convened policy organizations from across the ideological spectrum to put forward comprehensive plans for stabilizing America’s fiscal outlook in the decades ahead.
Once again, experts from five leading organizations—the American Action Forum, the American Enterprise Institute, the Bipartisan Policy Center, the Center for American Progress, and the Economic Policy Institute—developed specific, “scoreable” policy proposals to set the federal budget on a sustainable, long-term path for prosperity and economic growth. The groups then recommended their top policy priorities for congressional policymakers and the incoming presidential administration.
BPC has long been concerned with the trajectory of our public debt. From the time BPC started the Domenici-Rivlin Debt Reduction Task Force in 2010, BPC’s stance has been clear: the U.S. finds itself on an unsustainable fiscal trajectory because the cost of our entitlement programs—especially health and retirement—are not aligned with the revenue brought in by our tax code.
The health of the U.S. economy will be damaged if we do not fundamentally alter the current trajectory of federal debt. Attacking the ever-unpopular waste, fraud, and abuse in government programs will not be enough. The only way to get our fiscal house in order is for federal policymakers to weigh competing priorities and make difficult choices among them. Those difficult choices must include enacting structural reforms that reduce the growth in spending on our federal entitlement programs and significant structural reforms to our federal tax code. Such an agenda—structured in a prudent way that induces strong economic growth, increases revenues, and protects low and middle-income Americans—is what will bring the long-term budget outlook into balance.
Some have pointed to relatively low deficits over the past few years and the savings resulting from the Budget Control Act of 2011 as evidence that our nation’s fiscal problems are behind us. But they are mistaken—this is just the calm before the storm. Even with relatively slow cost growth in health care over the past few years, the retiring of the baby boomers will put ever-more pressure on Social Security and Medicare; the return to more normal economic times will bring higher interest payments as interest rates return closer to historical averages; and as we have repeatedly indicated, sequestration levels of discretionary spending are too low for our country to fund important investments in the future and protect our country in an increasingly dangerous world.
BPC believes that the plan offered here is one that will help the U.S. maintain international competitiveness, promote a level and fair playing field for all Americans, and ensure our country’s fiscal health into the future. It is a balanced plan that reduces projected spending by 7 percent while increasing revenues by 9 percent in 2040. It would reduce debt as a share of the economy in 2040 from a projected 108 percent of GDP to 76 percent. While policymakers may disagree with individual pieces of the plan, BPC believes that the hard choices of the type recommended here are the only way to make sure our country continues to prosper well into the 21st century.