01/21/2010 - Chairman Spratt, Congressman Ryan, and Members of the Committee, good morning and thank you for inviting me here today to share my views on bipartisan process proposals for long-term fiscal stability. It is a privilege to appear before this Committee.
I am the President of the bipartisan Committee for a Responsible Federal Budget. Our Co-Chairs are Congressmen Bill Frenzel, Tim Penny and Charlie Stenholm, and the Board is made up of past Directors of the Office of Management and Budget, the Congressional Budget Office, and the Government Accountability Office, as well as Chairmen of the Federal Reserve Board and the Budget Committees, and other budget experts. I am also the Director of the Fiscal Policy Program at the New America Foundation, a non-partisan think tank here in Washington D.C. Today, I am here to discuss the work of the Peterson-Pew Commission on Budget Reform, which, in December, released Red Ink Rising: A Call to Action to Stem the Mounting Federal Debt, which proposes a six-step plan to address the growing federal debt.
- What was once a long-term fiscal problem has become a medium-term problem that requires that we take action much sooner than was needed a few years ago.
- It is important to focus on stabilizing the debt, so that it declines to a reasonable level and is no longer growing as a share of the economy.
- Policymakers must balance the need to act quickly to avert a fiscal crisis caused by our growing debt with the need not to destabilize the economic recovery.
- The best approach would be to immediately commit to and develop a credible plan to stabilize the debt, and to start phasing it in gradually once the economy is strong enough—we suggest starting in 2012.
- The policies that will stabilize the debt in the medium-term and close the longer-term fiscal gap are somewhat different—both are needed.
- A credible plan will have to be aggressive enough to reassure credit markets.
- The economic risks of doing nothing are tremendous—likely leading either to a fiscal crisis or an ongoing deterioration in the U.S. standard of living.
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