As we see in the chart below, if current policies continue, the U.S. debt will nearly double in the next ten years. According to the CBO, the U.S. debt held by the public, which does not include securities issued by the Treasury to federal trust funds and other government accounts, will reach $18.3 trillion by 2021, or 77 percent of GDP (under more realistic assumptions, it will reach 92 percent of GDP). The compounding interest payments that it will require, and the debt itself, should remind us that remind us that action must be taken to restore fiscal order sooner rather than later.
It’s not a pretty picture, but it doesn’t have to be this way. Over at the Huffington Post (yes!), Reason’s Nick Gillespie and I lay out a process that can cut spending while building political consensus. Really. Here’s an excerpt:
David Osborne, the former head of Vice President Al Gore’s “Reinventing Government” task force, is a believer in what he calls “budgeting for outcomes.” As an advisor to various cash-strapped state and local governments, Osborne pursues a two-step strategy to fixing out-of-whack budgets. First, and most importantly, you set “the price of government.” That is, you figure out how much money you can spend in a given year. When it comes to the federal government, we have a strong sense of how much revenue will be available based on the past 60 years of experience and the CBO’s projection: It will be around 19 percent of GDP.
The next step is to clearly establish the top priorities of the government. In rank order, what are the most important things that the federal government needs to be doing and what are the things it can pull back from? For example, Sen. Rand Paul’s plan [to reduce spending by $500 billion this year] cuts federal education spending by 83 percent while cutting defense 6.5 percent. Do taxpayers share those priorities? The strength of Osborne’s approach is that it builds consensus even as it makes government decision-making more transparent.
Once the cost of government and its rank-ordered priorities are established, spending decisions become much easier both to make and to defend before a voting public. And the public isn’t shrinking from the conversation. Indeed, a January poll from CBS News found that 77 percent of Americans favor balancing the budget by cutting spending, compared to 9 percent who wanted to raise taxes. Majorities say they in favor of means-testing Social Security, reducing farm subsidies, and cutting defense spending. It’s time to those sentiments to the test. If we don’t, we’ll be facing higher taxes, higher spending, higher debt, and almost certainly higher interest rates and dollars that are worth less and less.
Read the whole thing, including a chart of the cuts needed to balance the budget over the next decade, here.