Initial Draft of Deficit Commission's Report Released Earlier Today
On February 10th, 2010, President Obama signed an executive order that created the National Commission on Fiscal Responsibility and Reform.
The bipartisan "Deficit Commission" set out to "identify policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run".
The co-chairmen of the group are Senator Alan Simpson (former Republican Senator) and Erskine Bowles (Chief of Staff to President Clinton).
Over the last number of months, the "Deficit Commission" set off on the nearly impossible task of finding ways to reduce the deficit that might actually be passed into law.
Earlier today, the initial "Co-Chairs' Proposal" was uploaded to http://www.fiscalcommission.gov. Some of the proposed changes include:
-$100 billion cut to defense spending
-increasing social security age to 69
-increase gas tax by 15 cents
-lowering corporate tax rate to 26%
-cutting of the federal work force by 10%
According to the report, if all of the proposals were fully implemented, the United States would add $3.8 trillion to its debt load by 2020, down from the $7.5-$7.7 trillion that is currently being forecast right now. So, instead of a national debt load of $20-$21 trillion by 2020, the country would "only" owe about $17.5 trillion.
Here's the kicker - according to the report, the country would balance its budget by 2037 if these proposals were to be implemented.
We've often wondered on this site when the United States might be able to post a balanced budget once again.
From 1970 to 1997, the United States posted a string of 28 straight deficits. This was followed by four straight budget surpluses, the last of which came in 2001 ($127.3 billion surplus).
This streak looks almost certain to be eclipsed by the one that started in 2002. Let's assume for a second that the United States is able to post a balanced budget in 2037. This would mean that the country would have posted budget deficits in 35 straight years (2002-2036), easily eclipsing the old record of 28 straight years.
The thing is, given the decidedly negative reaction to the report from many in Washington (big surprise), there is basically a 0% chance that these recommendations would ever be implemented in full. No shock there.
So that leads to the question - when will the US government finally post a balanced budget? Can we really go from trillion dollar deficits to balanced budgets anytime soon, or is this all a pipe dream? Is the country now in perpetual deficit mode?
Most people would agree that some very harsh austerity measures need to be implemented in order for the country to balance its books.
-the majority of the population won't agree to these measures without a fight
-politicians don't want to come out in support of the measures because they are unpopular
Two pretty obvious statements there.
Is the country willing to swallow the foul-tasting medicine in order to cure itself of this ailment, or is the United States destined to keel over and collapse one day in the future?
Filed under: The Economic Meltdown