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Restoring Fiscal Sanity

The road to financial stability will be long and difficult

Now that the nation's debt ceiling has been raised and the United States' credit rating has been downgraded for the first time in history, it's time to recognize that our political process is broken and that much more needs to be done to restore fiscal sanity. Washington waited until less than 12 hours before a technical default before agreeing on a deficit reduction target of $2.4 trillion that was far short of the rating agency Standard & Poor's $4 trillion goal. In addition, the agreement did nothing to meaningfully reform Medicare, Medicaid, Social Security and our outdated tax system.

See also: Social Security cuts an option for super-committee.

It seems clear to most people that Washington has become a dysfunctional place where partisan battles, ideological divides and special-interest group pledges have created a stalemate in the face of large, known and growing challenges. This threatens America's future position in the world and the future standard of living for Americans.

The time has come to begin exploring seriously options needed to kick-start our economy while also pursuing the type of dramatic and fundamental reforms necessary to avoid a future U.S. debt crisis and put our nation's finances in order. We must do both at the same time in a way that improves economic growth, creates more jobs, strengthens our competitive posture and ensures our security while providing a solvent, sustainable and secure social safety net.

The nonpartisan Comeback America Initiative issued a "Restoring Fiscal Sanity" report in July. It includes two illustrative fiscal frameworks. First, a "preemptive framework" is designed to avoid a U.S. debt crisis and reduce the debt-to-gross domestic product ratio to a reasonable and sustainable level by 2035 while allowing for $500 billion in short-term investments to help the economy and generate jobs. It would result in balancing the primary budget (federal spending excluding interest paid on the debt) in 2014 and every year thereafter.

The second is a "reactive framework" that includes more dramatic reforms that would have to be implemented in the event of a U.S. debt crisis. It would eliminate any additional short-term investments and completely balance the budget by 2015 as well as greatly reduce debt-to-GDP ratios in 2035.

Both frameworks put everything on the table with transformational reforms in all major areas: Social Security, health care, defense, taxes/revenues, interest and budget controls.

This report can be useful in several ways. First, to help launch a much-needed citizen education and engagement effort. AARP should be part of this effort. Second, to help facilitate more meaningful and credible compromises in connection with future debt ceiling increases. Finally, to provide ideas for the legislative reforms that will have to take place to restore fiscal sanity after the 2012 elections. Hopefully the report will help identify some nonpartisan solutions that can garner bipartisan support to help ensure a brighter future for our country, our children and our grandchildren. The time has come to promote progress over partisanship and the interests of the country over special interests. We all need to do our part to make this a reality.

Also of interest: Medicare, Medicaid on the table. >>

David M. Walker is the founder and CEO of the Comeback America Initiative and former comptroller general of the United States.