Averting a Fiscal Crisis

Why America Needs Comprehensive Fiscal Reforms Now

-4%

-2%

0%

2%

4%

6%

8%

10%

12%1990-2012 Average Deficit: 3.1%

2012-2022 Average Current Policy Deficit: 5.0%

Deficit Projections

Note: Estimates based on CBO, Alternative Fiscal Scenario.

(Percent of GDP)

2

Likely Deficits

Current Law

19901992

19941996

19982000

20022004

20062008

20102012

20142016

20182020

2022

10%

12%

14%

16%

18%

20%

22%

24%

26%

Current Law Spending Current Law Revenues AFS Spending AFS Revenues

Gap Between Revenue and Spending(Percent of GDP)

Avg. Historical Spending (1972-2011): 21%

3

Avg. Historical Revenues (1972-2011): 18%

Surpluses Turning Into Growing Deficits…Spending and Revenues (Billions of Dollars)

4Source: Congressional Budget Office, Alternative Fiscal Scenario

What Debt Is Likely to Reach

RevenuesPrimary

Spending

Interest

Deficit

RevenuesPrimary Spending

InterestDeficit

RevenuesPrimary Spending

Surplus

Interest

$2.0T $2.4T

$4.6T

$1.4T$860B

$5.1T

$1.1T

$220B

$3.3T

$236B$233B

$1.6T

2000 2012 2022Interest Costs Will Reach $1 Trillion By 2024

Components of Revenue and SpendingRevenues and Financing Outlays

Total Outlays = $3.563 Trillion

2012

5

Total Revenues = $2.435 TrillionTotal Financing = $1.128 Trillion

Individual Income Tax27%

Corporate Tax5%

Social Insurance Taxes24%

Other6%

Borrowing32%

Medicare13%

Medicaid & Other Health

8%

Social Security22%

Other Mandatory16%

Defense19%

Non-Defense15%

Interest6%

Debt Projections

6

*Projections based on CRFB calculations of CBO Alternative Fiscal Scenario. Generally assumes current law, with the following exceptions: all expiring income and estate tax cuts and AMT patches are extended, scheduled cuts to Medicare physicians are waived, scheduled sequester cuts are waived, revenues and non-entitlement spending grow at the same rate as the economy after 2022, and cost saving measures from Affordable Care Act are only partially successful over the long-term.

Growing Entitlement Spending

7

1972 1978 1984 1990 1996 2002 2008 2014 2020 2026 2032 2038 2044 2050 2056 2062 2068 2074 20800%

5%

10%

15%

20%

25%

Social Security Health Care Other Entitlements Revenue

Historical Revenue Level

Actual Projected

(Percent of GDP)

Consequences of Debt

8

“Crowding Out” of private sector investment, leading to slower economic growth

Higher Interest Payments displacing other government priorities and investments

Intergenerational Inequity as future generations pay for current government spending

Unsustainable Promises of high spending and low taxes

Uncertain Environment for businesses to invest and households to plan

Eventual Fiscal Crisis if changes are not made

The Risk of Fiscal Crisis

9

“Rising Debt increases the likelihood of a fiscal crisis during which investors would lose confidence in the government's ability to manage its budget and the government would lose its ability to borrow at affordable rates.

-Doug Elmendorf, Director of the Congressional Budget Office

“Our national debt is our biggest national security threat.” -Admiral Mike Mullen (ret.), Chairman of the Joint Chiefs of Staff

“One way or another, fiscal adjustments to stabilize the federal budget must occur … [if we don’t act in advance] the needed fiscal adjustments will be a rapid and painful response to a looming or actual fiscal crisis.”

-Ben Bernanke, Chairman of the Federal Reserve

Debt Drivers

10

What the Debt Will Realistically Look Like

Short-Term Long-Term

Economic Crisis (lost revenue and increased spending on safety net programs like Food Stamps)

Economic Response (stimulus spending/tax breaks and financial sector rescue policies)

Tax Cuts (in 2001, 2003, and 2010)

War Spending (in Iraq and Afghanistan)

Rapid Health Care Cost Growth (causing Medicare and Medicaid costs to rise)

Population Aging (causing Social Security and Medicare costs to rise, and revenues to fall)

Growing Interest Costs (from continued debt accumulation)

Insufficient Revenue (to meet the costs of funding government)

Federal Spending and Revenues (Percent of GDP)

Growing Entitlement Spending

Note: Estimates based on CBO, Alternative Fiscal Scenario.11

19801985

19901995

20002005

20102015

20202025

20302035

20402045

20502055

20602065

20702075

2080

0%

10%

20%

30%

40%

50%

60%

70%

80%Actual Projected

RevenuesInterest

Health Care

Other Spending

Social Security

Why Is Federal Health Spending Increasing?

12

The Population Is Aging due to increased life expectancy and retirement of the baby boom generation, adding more beneficiaries to Medicare and Medicaid

Per Beneficiary Costs Are Growing faster than the economy in both the public and private sector. Causes of this excess cost growth include: Americans Are Unhealthy when compared to

populations in similar economies Americans Are Wealthy and Willing to Pay More Fragmentation and Complexity among insurers,

providers, and consumers make normal market competition difficult

Incentives Are Backwards by hiding true costs of care through insurance and by hiding costs of insurance enrollment through employer sponsorship, incentivizing overspending

Health Care Spending by Country

13

Percent of GDP (2008)

36%

64%

Mexico

Turkey

Korea

Luxe

mbourgChile

Poland

Czech Republic

HungaryIsr

ael

Slova

k Republic

Slove

nia

Finland

Norway

United Kingdom

Ireland

Spain

Italy

Sweden

New Zealand

Canada

Austria

Switz

erland

France

United St

ates

OECD Average

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Public Private

Source: 2008 Data from the Organization for Economic Cooperation and Development.

Number of Workers for Every Social Security Retiree is Falling

14

36%

64%

1950 1960 2012 2035

16:1 5:1 3:1 2:1

Source: 2012 Social Security Trustees Report.

Living Longer, Retiring Earlier

15

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

45

50

55

60

65

70

75

80

85Average Life Ex-

pectancy

Average Age of Retirement

Normal Retirement AgeEarly Retirement

Age

5 year gap13 year gap

Source: Social Security Administration, U.S. Census Bureau, and OECD. Figures show data for males.

Looming Social Security InsolvencySocial Security Costs and Revenues (Percent of GDP)

Source: 2012 Social Security Trustees Report.16

19701975

19801985

19901995

20002005

20102015

20202025

20302035

20402045

20502055

20602065

20702075

20802%

3%

4%

5%

6%

7%

Payable Benefits

Revenues

Scheduled Benefits

Interest as a Share of the Budget(Percent of GDP)

Note: Estimates based on CBO, Alternative Fiscal Scenario.17

Total Spending = 24% of GDP Total Spending = 32% of GDP Total Spending = 44% of GDP

2010 2030 2050

Interest6%

Primary Spending

94%Interest

21%Primary Spending

79%Interest

37%

Primary Spending

63%

Insufficient Revenue

18

Unpaid for Tax Cuts in 2001, 2003, and 2010 lowered revenue collection without making corresponding spending cuts or tax increases to offset the budgetary effect

Spending in the Tax Code Costs Over $1 Trillion annually in lost revenues through so called "tax expenditures," which make the tax code more complicated, less efficient, and force higher rates

Excessive Spending Through the Tax Code (Tax Expenditures)

19

In order to stabilize Debt at 60% of the economy by 2021:Tax Expenditures as a Percent of Primary Spending if Included in the Budget

Large Tax Expenditures and Their 2011 Costs (billions)

Employer Health Insurance Exclusion $110

Special Rates on Dividends and Capital Gains

$91

Mortgage Interest Deduction $78

401(k)s and IRAs $60

Earned Income Tax Credit $60

Child Tax Credit $56

Charitable Deduction $30

Tax Expenditures24%

Health Spending17%

Other Mandatory12%

Social Secutity16%

Non-Defense Discretionary

14%

Defense Dis-cretionary

15%

Source: Joint Committee on Taxation.

Corporate Tax Rates by Country

Note: Estimates based on 2010 data from the OECD and AEI.20

Australia

Austria

Belgium

Canada

Chile

Czech

Repub

licDen

mark

Finlan

dFra

nce

German

yGre

ece

Hunga

ryIre

land

Italy

Japan

Kore

aLu

xembou

rgM

exico

Nether

lands

Norway

Poland

Portu

gal

Slova

k Rep

ublic

Spain

Swed

enSw

itzer

land

Turke

y

United

Kingdom

United

State

s

0%5%

10%15%20%25%30%35%40%45%

Average Effective Rate Marginal Rate

How Much Do We Need to Save?

21

In order to stabilize debt at 60% or 70% of the economy by 2022:

(2013-2022 Savings )

Current Law Baseline

Current Policy Baseline Assuming Upper-Income Tax

Cuts Expire*

Current Policy Baseline Assuming

All Tax Cuts Continued*

Debt in 2022 w/ No Savings (% GDP) 58% 77% 81%

Required Savings to Stabilize Debt at 70% n/a $1.7 Trillion $2.8 Trillion

Required Savings to Stabilize Debt at 60% n/a $4.2 Trillion $5.3 Trillion

*Estimates based on current policy baseline (2001/2003/2010 tax cuts extended, AMT patched, doc fixes, war costs decline, and sequester waived.

Setting the Record Straight

22

UPDATES TO SLIDEAusten/Fission:1) Think about visual way to integrate

messages2) Think about way to better phrase last line

in growth section

Notes for Maya:

To put debt on a downward path toward safe levels, we need at least $4 trillion in savings this decade.

We can't CUT our way out Eliminating Congressional salaries, foreign aid, and earmarks would reduce the deficit by only

4%. Balancing the budget through spending cuts alone would require cutting all spending by a third.

We can’t TAX our way out To fix the debt by increasing tax rates on EVERYONE, the bottom rate would have to rise from

10% to 16% and the top rate from 35% to 55%. To fix the debt by taxing families making over $250,000, the top rate would have to exceed

100%*.

We can’t GROW our way out Faster growth means more revenue, but also higher spending on entitlement programs. Fixing the debt with growth alone would require record-high growth rates every year.

We Need a Comprehensive Solution That Cuts Wasteful Spending, Reforms Entitlement Programs, and Raises Revenues*Data from the Tax Policy Center.

We Can’t Inflate or Grow Our Way Out

23

Inflation Growth

An unexpected increase in inflation could temporarily reduce the real value of debt and federal interest payments to investors

However, higher inflation would prompt investors to demand higher interest payments, increasing the costs of financing new debt

Higher inflation would also push up spending for all inflation-indexed programs, including Social Security, food stamps, military pensions, veterans’ benefits.

Strong economic growth is a necessary but not sufficient condition for debt reduction

Many spending programs grow as the economy does, and would outpace revenue growth Social Security payments would

increase as wages and, thus, benefits grew over time

Health care spending would grow even faster, given that costs continually grow notably faster than the overall economy

The levels of growth needed to significantly reduce medium-term debts would be way above historical norms

The Benefits of Debt Reduction Done Right

Stronger EconomyHigher wages and faster economic growth down the road

Improved Confidence and Certainty about the FutureMore hiring and investment

Lower Interest RatesHelping businesses and households to save and invest

Avert a FISCAL CRISIS!

24

Income per Person

Source: Congressional Budget Office, Long-Term Outlook 2012.

UPDATES TO SLIDE

Austen:1) MJ would like more of your creative input with this slide in particular

Notes for Maya:

2010 2014 2018 2022 2026 2030 2034$40K

$45K

$50K

$55K

$60K

$65K

Growing Debt Declining Debt

The average person will earn $9,000 a year less if we don’t fix the debt.

$9K

Debt Reduction and Economic Growth

25

CBO studied the economic impact of an illustrative $2.4 trillion debt reduction plan and found that real output would be between 0.6% and 1.4% higher, depending on the magnitude of the effects.

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20211.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

CBO Baseline Growth Small Output EffectMedium Output Effect Large Output Effect

Real Output Growth (Percent)

*Estimates from CBO, “The Macroeconomic and Budgetary Effects of an Illustrative Policy for Reducing the Federal Budget Deficit.”

How to Reduce the Deficit

26

Domestic Discretionary Cuts

Defense Spending Cuts

Health Care Cost Containment

Social Security Reform

Other Spending Cuts

Tax Reform and Tax Expenditure

Cuts

Budget Process Reform

“Go Small”: Lots of Pain for Little Gain A smaller package would offer some

improvement to our fiscal situation, but it would not offer the benefits of a declining debt path

The public would see a package of tough choices and a debt burden that continues to grow. In essence, it would deliver political pain with not so much gain

Would leave in place considerable policy uncertainty, affecting businesses and markets

A smaller package and an incremental approach to debt reduction would not offer the political tradeoffs necessary to solve our fiscal challenges

27

What Could “Go Small” Look Like?

28

Possible Policy Changes Savings

Government-Wide $250 billion from chained CPI

Discretionary $100-200 billion from modestly slower growth in BCA caps

Health Care Negligible savings

Other Mandatory$150-250 billion from farm

subsidies, federal civilian and military retirement and benefits, Fannie and Freddie, and others

Social Security Negligible savings

Revenues Negligible savings

Net Interest $100 billionTotal $600-800 billion

Without addressing health care reforms or revenues, it will be very difficult to achieve significant savings

And even then, there is no guarantee that significant savings in other areas of the budget could be agreed on

Adding Serious Entitlement Reforms and Revenues Pushes You into “Go Big” Democrats will only agree to serious

entitlement reforms if there are revenues

Republicans will only agree to revenues in the context of comprehensive tax reform

Democrats will only agree to a comprehensive tax reform that replaces the Bush tax cuts if it raises at least the $800 billion they would get if President Obama vetoes extension of upper income tax cuts

Republicans will not agree to revenues anywhere near that amount without health savings that go beyond the amount proposed by the President

29

Advantages of “Go Big” Debt stabilized and falling as a share of

the economy later in the decade, and all the benefits associated with a declining debt burden:

Less “crowding out” of private sector investment

Stronger confidence in businesses and markets

Greater certainty and stability Stronger economy over the long-term Lower interest payments and increased

fiscal space Intergenerational equity Reduced or eliminated risk of fiscal

crisis

30

Advantages of “Go Big” (cont’d) Increased chances of enacting a

comprehensive debt solution of at least $3 - $4 trillion in savings:

Political trade offs necessary to address entitlement growth and revenues

Shared sacrifice in Go Big approach Realize the gains of debt reduction by

stabilizing and reducing the debt, and not just making difficult decisions that solve only part of the problem

Restore America’s faith in the political system

31

The Announcement Effect Just announcing the adoption of a debt reduction

plan can provide a boost in confidence, aiding the economic recovery today

Businesses and investors frequently cite the uncertainty over if and how the U.S. might control its debt trajectory when holding back on investment

Prominent lawmakers, government officials, economists, and experts have reiterated the benefits of the announcement effect, including:

Ben Bernanke, Fed Chairman The International Monetary Fund Glenn Hubbard, former Chair of the President’s CEA Mark Zandi, Chief Economist, Moody’s Analytics Michael Bloomberg, Mayor of New York City Alan Blinder, former Fed Vice Chairman Larry Summers, former Director, NEC

32

Note: For more information on the “announcement effect,” see CRFB at http://crfb.org/blogs/announcing-announcement-effect-club

“Go Big”: Shared Sacrifice Expanding the size and scope of a package can promote a sense of shared

sacrifice on behalf of the American public and key interest groups, making it more likely that they would accept changes if everyone was contributing to the solution.

An incremental approach would allow advocates for parts of the budget to argue that they are bearing an unfair burden. A Go Big approach which achieves savings in all parts of the budget neutralizes that argument.

In a Washington Post op-ed, Fiscal Commission co-chairs Erskine Bowles and Alan Simpson highlighted this lesson from the Fiscal Commission deliberations:

“The more comprehensive we made it, the easier our job became. The tougher our proposal, the more people came aboard. Commission members were willing to take on their sacred cows and fight special interests — but only if they saw others doing the same and if what they were voting for solved the country’s problems.”

33

The Bowles-Simpson Fiscal Commission Plan

34

Discretionary Spending Cuts to defense and non-defense programs,

totaling an additional $400 billion over ten years [on top of the savings already enacted].

Social Security Progressive benefit changes, retirement

age increase, tax increase for high earners totaling $300 billion.

Health Care Spending Cuts to providers, lawyers, drug companies, &

beneficiaries totaling $400 billion.

Other Mandatory Programs Reforms to farm, civilian/military retirement, &

other programs saving $290 billion.

Tax Reform and Revenue Comprehensive reform to lower tax rates,

broaden the base, and raise $1.2 trillion.

Is There a Smart Path Forward?Deficit Projections as a Percent of GDP

35

Note: Illustrative plan loosely based on Fiscal Commission savings. Current policy based on CRFB Realistic Baseline.

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Current Law (CBO) Alternative Fiscal Scenario 9CBO)Illustrative Plan

Illustrative Tax Rates

36

Bottom Rates Middle Rates Top Rates Corporate Rate

Current Rates for 2012 10% 15% 25% 28% 33% 35% 35%

Scheduled Rates for 2013 15% 28% 31% 36% 39.6% 35%

Eliminate All Tax Expenditures 8% 14% 23% 26%

Keep Child Tax Credit and EITC 9% 15% 24% 26%

Fiscal Commission’s Illustrative Tax Plan 12% 22% 28% 28%

2012 Rates, Expiration of the Tax Cuts, and Fiscal Commission’s Illustrative Plan

Fiscal Commission’s illustrative tax plan would reduce or eliminate most tax expenditures and use the savings to reduce tax rates and reduce the deficit.

What’s in the Fiscal Cliff?

At the end of 2012, the following is scheduled to occur:

All of the 2001/2003/2010 tax cuts will expire at once The “sequester” will immediately cut defense by 10%, non-defense

discretionary by 8%, and other spending across-the-board The payroll tax holiday and extended unemployment benefits will

expire The AMT will hit 30 million taxpayers instead of 4 million All the tax extenders will expire Physicians will see a 30% cut in their Medicare payments Tax increases from the Affordable Care Act will begin The country will once again hit the debt ceiling

37

Components of the Fiscal Cliff

38

Note: Defense reduction would be closer to 10% when compared to spending levels enacted last year, but war spending and unobligated balances on net push this percentage down. In reality, sequester cuts in all categories will be larger for 2013 given that they will be applied over nine months instead of a full fiscal year.

Source: Congressional Budget Office and Office of Management and Budget. Numbers are rounded.

Enacted in the 2011 BCA to pressure the Super Committee to enact a plan, the sequester would cut spending across the board in January 2013.

The Sequester

% Reduction in 2013(Budget Authority)

2012-2022 Cuts(Budget Authority)

Defense Spending 9.4% $550 billion

Non-Defense Disc. Spending 8.2% $360 billion

Medicare 2% $125 billion

Other Non-Exempt Spending 7.6% $45 billion

Interest N/A $170 billion

Total Cuts +$100 billion $1,250 billion

Components of the Fiscal Cliff

39

Other Policies Set to Activate or Expire

Jobs Measures 2% payroll tax holiday Extended duration for unemployment benefits

Annual Doc Fixes

Affordable Care Act Tax Increases 0.9% increase in HI tax for higher earners and applying the full 3.8% tax to net

investment income 2.3% tax on medical devices Other measures

Various “Tax Extenders” R&E tax credit Alcohol fuel tax credit Subpart F for active financing income Other extenders

How Big Is the Fiscal Cliff?

40

Policy 2013 Fiscal

Impact

2013-2022 Fiscal Impact

2001/2003/2010 Income and Estate Tax Cuts $110 billion $4.3trillion

AMT Patches (w/ Tax Cut Interactions) $105 billion $1.7 trillionSequester $55 billion $1.1 trillionDoc Fixes $10 billion $280 billionJobs Measures $115 billion $150 billionVarious “Tax Extenders” $30 billion $455 billionTaxes from the Affordable Care Act $25 billion $420 billion

Total Fiscal Impact ~$450 billion $8.1 trillion

Total Economic Impact (% GDP) ~3% N/A

Note: Congressional Budget Office estimates and CRFB calculations. 2013-2022 estimates include interest.

Budgetary and Economic Impact in 2013

41

Billions of Dollars

36%

64%

Source: Congressional Budget Office estimates and rough CRFB calculations.

Short-Term Economic Impact of the Fiscal Cliff

Expiring/activating measures will create a “fiscal shock” of about 4 percent of GDP, which could take about 2 percent out of the economy in the short-term and increase the unemployment rate by over 1 percentage point

CBO projects that the economic impact of the fiscal cliff would send the economy into a double-dip recession next year

42Source: Congressional Budget Office.

Long-Term Economic Impact of the Fiscal Cliff

The Fiscal Cliff could improve the long-term, BUT:

Savings in the Fiscal Cliff will not deal with the long-term debt drivers – growing health and retirement costs

Revenue will come largely from higher marginal rates, which will reduce incentives to work, save, and invest

Spending cuts will come from mindless across-the-board cuts instead of cuts to low-priority and anti-growth spending

43

Lawmakers Face a Fiscal Cliff and a Mountain of Debt

BAD CASE: A Fiscal CliffIf lawmakers allow all policy expirations and the sequester to proceed as scheduled, the economy could take a 2 percent hit next year, while not addressing entitlement spending growth or fundamental tax reform

WORST CASE: A Mountain of Debt If lawmakers waive or extend policies at the end of the year, they could add more than $8 trillion to the debt over the next ten years, compared to current law. Rising debt would reduce the size of the economy by about 1% later in the decade and by significantly more in future years

44

Is There a Smart Path Forward?

Instead of a Fiscal Cliff or Mountain of Debt, we should enact a comprehensive and thoughtful plan which would:

Go Big A plan must stabilize and reduce the debt relative to the economy A go big plan would make bipartisan compromise more likely by

allowing for the necessary tradeoffs

Go Smart Replace mindless, abrupt deficit reduction with thoughtful changes

that reform the tax code and cut low-priority spending

Go Long Enact gradual reforms that address the long-term costs of growing

entitlement spending

45

Benefits of Replacing the Fiscal Cliff with a Go Big Plan

Achieves long-term growth without short-term contraction

Avoids both a double-dip recession and a potential downgrade from credit rating agencies

Allows for sensible policy decisions to make the tax code more competitive, reform entitlement programs, and eliminate wasteful spending

Reduces market and public uncertainty over future tax and spending policies

46

What Savings Have Lawmakers Enacted So Far?

47

(Billions of Dollars through 2021)

Note: Simpson-Bowles figures represent original recommendations, updated based on baseline changes in Cooper-LaTourette proposal. Estimates based off of realistic budget projections.

Discretionary

Health Care

Socia

l Secu

rity

Other Spending

Revenue

Interest

Sequeste

r$0

$500

$1,000

$1,500

$2,000

$2,500

Simpson-Bowles RecommendationsEnacted Savings

The bipartisan Simpson-Bowles Commission recommended more than $4 trillion in deficit reduction

So far, policymakers have enacted $1.3 trillion in deficit reduction and $1 trillion in mindless across-the-board spending cuts

It’s Time for a Fiscal Reform Plan

48

Reasons to Enact a PlanSooner Rather than Later

Size of Adjustment to Close 25-year Fiscal Gap, Depending on Start Year (Percent of GDP)

Allows for gradual phase in Improves generational fairness Gives taxpayers businesses, and

entitlement beneficiaries time to plan

Creates “announcement effect” to improve growth

Reduces size of necessary adjustment

Source: Congressional Budget Office

2025

2020

2015

2013

0% 2% 4% 6% 8% 10% 12%

9.7%

6.8%

5.2%

4.8%

It’s Time for a Fiscal Reform Plan…Now

49

We Can’t Wait Until After the Election

Every month and year that passes, the debt grows larger and larger and the solutions become more difficult

Elections can take policy options off the table and back candidates into positions that make bipartisan solutions more difficult

Addressing the fiscal situation as soon as possible would make governing easier – not harder – after the election

Who Supports Fixing the Debt?

50

Calls for a $4+ Trillion, Bipartisan Solution to the Debt

47 Members of the Senate 102 Members of the House of Representatives 200 Business Groups, including the Chamber of Commerce, National

Association of Manufacturers, and Business Roundtable Other groups: Partnership for New York City, American Business

Conference, National Conference of State Legislatures 60+ former government officials, business leaders, and experts Editorial boards and other outside experts Over 170,000 concerned citizens

Principles of Fiscal Responsibility

51

For the 2012 Campaign

1. Make Deficit Reduction a Top Priority

2. Propose Specific Fiscal Targets

3. Recommend Specific Policies to Achieve the Targets

4. Do No Harm

5. Use Honest Numbers and Avoid Budget Gimmicks

6. Do Not Perpetuate Budget Myths

7. Do Not Attack Someone Else’s Plan Without Putting Forward an Alternative

8. Refrain from Pledges That Take Policies Off the Table

9. Propose Specific Solution for Social Security, Health Programs, and the Tax Code

10. Offer Solutions for Temporary and Expiring Policies

11. Encourage Congress to Come Up with a Budget Plan as Quickly as Possible

12. Remain Open to Bipartisan Compromise

Note: Principles as taken from CRFB’s U.S. BudgetWatch Project.

The Time For Action Is Now

52

“If not addressed, burgeoning deficits will eventually lead to a fiscal crisis, at which point the bond markets will force decisions upon us. If we do not act soon to reassure the markets, the risk of a crisis will increase, and the options available to avert or remedy the crisis will both narrow and become more stringent.”

- Erskine Bowles and Sen. Alan Simpson, Former co-chairs of the National Commission on Fiscal Responsibility and Reform

Useful Resources

The Committee for a Responsible Federal Budgethttp://crfb.org

The Campaign to Fix the Debthttp://www.fixthedebt.org

Policy Papers:Between a Mountain of Debt and a Fiscal Cliff

Primary Numbers: The GOP CandidatesGoing Big Could Improve the Chances of Success

Congressional Budget OfficeJuly 16, 2011 report: The Macroeconomic and Budgetary Effects of an

Illustrative Policy for Reducing the Federal Budget Deficit

53