Meanwhile, the national debt is approaching record levels and growing at an unsustainable pace, with interest costs representing an increasingly large share of the budget. is experiencing its highest inflation rate in over four decades. The United States faces several overlapping fiscal and economic challenges. About 40 percent of the deficit reduction comes from revenue and 60 percent from changes in spending.Ĭonfronting Our Fiscal and Economic Challenges This blueprint puts forward a framework to achieve these goals through a combination of revenue and spending changes – with savings from health care, tax reform, discretionary spending caps, energy reforms, Social Security solvency, and other changes to the budget. There is no single correct way to achieve this goal, though any comprehensive plan should stabilize and reduce debt as a share of the economy, support the Federal Reserve’s efforts to fight inflation, secure trust fund solvency, promote long-term economic and income growth, and improve fairness and efficiency in government. Given political constraints, we suggest at least stabilizing the debt at its current level within a decade, requiring roughly $7 trillion in savings. Ideally, debt should be gradually reduced to its half-century historical average of about 50 percent of GDP. Though there is no one single “correct” fiscal metric, the higher the debt-to-Gross-Domestic-Product (GDP) ratio and its growth trajectory, the more vulnerable the U.S. In order to help the Federal Reserve fight inflation, reduce interest costs, and support economic growth, policymakers should put forward a plan to put the national debt on a sustainable long-term path. The United States faces numerous economic and fiscal challenges, including surging inflation, rising interest rates, trust funds heading toward insolvency, a broken budget process, and an unsustainably rising national debt.
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