Washington, DC -
04/15/2011 - A new report by the Pew Fiscal Analysis Initiative finds that the savings from recently proposed freezes would range widely, from $377 billion to $1.5 trillion over the next decade, depending on what they include and their timing. Capitol Freeze: Fiscal Effects of Discretionary Spending Caps also finds that without any action, the federal debt will continue to rise to unprecedented levels – up to 158 percent of gross domestic product (GDP) by 2035.
Approximately 40 percent of the current federal budget is composed of discretionary spending, including such areas as defense, education and transportation, and is voted on by Congress each year. If policy makers choose a cap, it could be an integral part of a plan to control the deficit and stabilize the federal debt over the next 10 years, while still providing policy makers the ability to change priorities within the spending allotted in each area.
“A discretionary spending freeze could have a positive impact on reducing the deficit and the federal debt, but would not solve the problem alone,” said Ingrid Schroeder, director of the Pew Fiscal Analysis Initiative and Subsidyscope. “However, if implemented today, there is a risk of negative consequences due to the fragile state of the economy. This and the potential impact on programs make it necessary for policy makers to carefully weigh the timing when considering such a freeze.”
Capitol Freeze calculates the 10-year effects of four prominent proposals currently being discussed in Washington. The discretionary freeze options include one based on the president’s FY 2012 budget proposal that saves $377 billion over the next decade; another is based on the Republican Pledge to America that saves $400 billion over 10 years; a third from the Bipartisan Policy Center, with $583 billion saved by 2021; and a fourth by the co-chairs of the National Commission on Fiscal Responsibility and Reform, with estimated savings of $1.5 trillion between 2012 and 2021.
The unsustainable level of debt facing the country could result in higher interest rates, less private capital investment and productivity as well as stagnant wages. This situation is untenable, leading policy makers on both sides of the aisle to propose discretionary spending freezes as one piece of a broader solution.
The Pew Fiscal Analysis Initiative does not provide recommendations on policies, but seeks to increase fiscal accountability, responsibility and transparency by providing independent and unbiased information to policy makers and the public as they consider the major policy issues facing our nation today and the alternative choices to addressing them.