The Hard Road to Fiscal Responsibility

Abstract

The paper describes the current fiscal problems of the United States showing that without significant changes in revenue and spending policies, the country is headed for a sovereign debt crisis similar to that afflicting countries in Southern Europe. Numerous committees and commissions have offered policy options that would stabilize the debt–GDP ratio in the long run. The proposals of the President's National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center's Deficit Reduction Task Force are described in detail. Elected politicians have not been enthusiastic about the work of these bodies. Only the House has passed a budget that would stabilize the debt and that proposal is analyzed as is the president's response. The paper goes on to describe the Budget Control Act that was passed after the debt limit debate in the summer of 2011.

Fiscal Rules and the Composition of Government Expenditures in OECD Countries

“…Fiscal problems are evident also in the United States Palmer and Penner (2012). show that without significant changes in revenue and spending policies, the country is headed for a sovereign debt crisis similar to that afflicting countries in Southern Europe.…”

A Payback Approach to Generational Inequity

“…In the U.S., recent challenges in federal and state budgeting reveal the deep‐seated obstacles to attaining fiscal responsibility. At the national level, the large ideological divide between the two dominant political parties makes finding common ground difficult (Palmer and Penner ). Analysis of state‐level budgeting challenges suggest similar challenges, as shown by Dautrich et al () for Connecticut, Lauth () for Georgia, Bunch () for Illinois, and Bifulco and Duncombe () for New York.…”

Who is Afraid of the Big Bad Debt? A Modern Money Theory Perspective on Federal Deficits and Debt

“…Common perceptions of the debt and deficit are that they are fiscally irresponsible and economically unsustainable. American budgeting scholars within the field of public administration have largely agreed, protesting against the “loss of fiscal discipline” (Rubin , 608), the “bleak” and “dismal” long‐term outlook (Joyce and Pattison , S24), the unsustainability of the federal government's fiscal imbalances (Palmer and Penner ; Posner ), and the inability of leaders to “make the hard choices necessary to bring about a sustainable fiscal future” (Posner and Sommerfeld , 32). Similar concerns have been raised by CBO (; ), mainstream economists (e.g., Reinhart and Rogoff ), and budget watchdog groups such as the Committee for a Responsible Federal Budget, leading to the conclusion that it is of vital importance to the country that the federal government brings its books more into balance, especially during good economic times.…”