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How SAVEGO Would Work

There is a growing consensus that the public debt – which will surpass the size of the economy within a decade – must be reduced and stabilized at or below 60 percent of GDP. Without action, our nation will face unsustainable interest payments of more than $1 trillion per year that will crowd out needed investments, lead to rising interest rates and a possible severe debt crisis followed by recession.

The best way to stabilize the debt would be for Congress and the President to agree immediately on spending cuts and revenue increases to be phased in gradually. However, some fear that Congress and the Administration cannot or will not agree to all of the tough choices up front, in one giant step.

As an alternative first step, therefore, we propose a “SAVEGO” mechanism that would set savings goals to put the nation on a path to fiscal stability, and mandate automatic budget cuts if Congress fails to achieve those goals. SAVEGO is a variation of the PAYGO and spending caps that helped lead the nation to budget surpluses in the 1990s.

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2011-04-20 00:00:00

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