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Tags: National Debt | deficit | balanced budget | austerity | Maya MacGuineas | congress

GOP Told $5.5 Trillion in Cuts Needed to Balance Budget by 2025

Thursday, 12 March 2015 08:45 AM

The GOP has been warned that it will take $5.5 trillion in deficit reductions over the next 10 years to bring the government into balance — but without restraining economic growth.

The financial warning came from Maya MacGuineas, president of the Committee for a Responsible Federal Budget, when she testified on Wednesday during a hearing of the Senate Budget Committee, according to Politico.

"It will be about $5.5 trillion to get us to balance in 10 years," MacGuineas told the panel. "Just to put that in perspective, that's eight times the size of the [2012] fiscal cliff deal and it's 65 times the size of the [2013] Ryan-Murray deal which, you recall, we didn't stick to for very long."

Next week Republicans are facing the difficult task of setting up their fiscal 2016 spending and tax plans in the House and Senate, Politico reported.

Senate Budget Chairman Mike Enzi of Wyoming and his House counterpart, Rep. Tom Price of Georgia, are being pressured by their colleagues to draw up a 10-year plan to balance the books by 2025, a massive undertaking in light of the division in the party over defense spending and the reticence to agree to additional revenues.

MacGuineas called on the committee to push for aggressive annual savings to stabilize the level of debt or at least reduce the figure each year as a percentage of the economy, according to the political news website.

Another economy expert, Mark Blyth, of the Watson Institute for International Studies at Brown University, warned that Republicans must beware of what happened in certain European countries, where excessive financial austerity held back growth and widened the budget gap.

"The more they tightened, the more debt they got because the underlying GDP got smaller," Blyth said. "And the same constant stock of debt got bigger rather than smaller."

Blyth noted that the problem is made worse by the fact that the U.S. tax code is geared toward income and does not incorporate the more stable value-added tax base of foreign nations.

"You don't really have a spending problem — you have a revenue problem," he said. "The United States' tax revenues are particularly susceptible to the economic cycle.

"What that means is that in the late 1990s, global interest rates fell. A lot of countries did well in that period, not just the United States. And because of that, money was cheaper and that opened a lot of bubbles, first in tech stocks and then it went into mortgages and the housing market.

"And when we have these bubbles, revenues go up but they are unsustainable revenues because the base rate of revenue collection is so low."

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The GOP has been warned that it will take $5.5 trillion in deficit reductions over the next 10 years to bring the government into balance - but without restraining economic growth.
deficit, balanced budget, austerity, Maya MacGuineas, congress
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2015-45-12
Thursday, 12 March 2015 08:45 AM
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